America Service Group Announces Contract Improvements; Will Drive Improved Cash Flow in Second Half of Year.

Business Editors & Health/Medical Writers

America Service Group, Inc. (NASDAQ: ASGR) today announced modifications to two of the Company's contracts to provide correctional healthcare to the City of Philadelphia and the State of Maine, resulting in improved financial performance for the Company.

The City of Philadelphia and the Company's operating subsidiary, Prison Health Services, Inc., (PHS) jointly announced today they have mutually agreed that the current contract for PHS to provide correctional healthcare will expire at the end of its current term on June 30, 2002. The City plans to release a Request for Proposal for correctional healthcare within the next month. In the interim, PHS will continue to provide healthcare to the Philadelphia Prison System through September 30, 2002, under the terms of a Transitional Services Agreement.

"PHS has performed according to the City's standards and has gone the extra mile to meet our requirements," stated Estelle B. Richman, Managing Director of the City of Philadelphia. "Now we have the common goal of assuring continuance of patient care during the transitional period while a new Request for Proposal is developed to reflect the changing circumstances of correctional healthcare for the City."

"PHS values its longstanding relationship with the City of Philadelphia," commented Bruce Teal, Chief Operating Officer for PHS. "Unfortunately, the contract had been losing a substantial amount of money and such losses were projected to continue. However, we are proud of the caliber of our local clinicians and the quality of healthcare provided by our dedicated employees."

America Service Group also announced today that the terms of the PHS contract with the State of Maine have been extended from June 30, 2002 through December 31, 2002. During the six-month extension period, PHS will be reimbursed for all costs associated with the contract and will be paid a fixed monthly management fee.

In the fourth quarter of 2001, the Company recorded a charge to establish a reserve for future losses under five contracts, including the Philadelphia and Maine contracts, under which the Company anticipated continuing losses through June 30, 2004 and June 30, 2002, respectively. With the avoidance of further losses on the Philadelphia contract and the new "cost plus fee" structure for the Maine contract, the company anticipates improved cash flow for the second half of the year.

In consultation with its independent accountants, the Company will evaluate a reduction in the previously recorded reserve for future losses. Results of this evaluation will be announced when second quarter results are issued.

America Service Group Inc., based in Brentwood, Tennessee, is the leading provider of correctional healthcare services in the United States. America Service Group Inc., through its subsidiaries, provides a wide range of healthcare and pharmacy programs to government agencies for the medical care of inmates.

This press release may contain "forward-looking" statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. As such, they involve risk and uncertainty that actual results may differ materially from those projected in the forward-looking statements. A discussion of the important factors and assumptions regarding the statements and risks involved is contained in the Company's filings with the Securities and Exchange Commission. These forward-looking statements are made as of the date of this release. The Company assumes no obligations to update or revise them or provide reasons why actual results may differ.