Beverly Enterprises Finalizes Medicare Settlements.

Business Editors, Health &Medical Writers

FORT SMITH, Ark.--(BW HealthWire)--Feb. 3, 2000

Beverly Enterprises, Inc. (NYSE: BEV) today announced that it has signed agreements with the Office of Inspector General (OIG) of the Department of Health and Human Services and the United States Department of Justice (DOJ) finalizing Beverly's previously announced tentative settlements stemming from the government's investigation into the company's allocation of nursing labor costs under the Medicare program during the years 1992-1998.

The final written agreements resolve both civil and criminal matters, and include a corporate integrity agreement, providing for a reporting and compliance program to be overseen by the company and the OIG. The provisions of the settlements are consistent with the company's expectations as disclosed in July and August of last year and include the planned disposition of 10 nursing homes operated by a single Beverly subsidiary, which will continue to operate and staff the nursing homes until new owners are found.

&uot;There were no surprises in the terms of the settlements. We worked diligently to ensure that any agreements we reached did not impede our ability to continue providing quality care for our residents under a new government payment system,&uot; said David Banks, Chairman and CEO of Beverly. &uot;I want to reassure our family members and the provider community that the issues surrounding these settlements had nothing to do with resident eligibility under Medicare nor did they question the quality - or provision - of care at our nursing homes. We value our relationships in the communities we serve and want there to be no confusion; these settlements were in no way related to the quality of patient care.&uot;

Banks continued: &uot;Beverly continues to have a relatively strong balance sheet and positive cash flow, even after incurred and anticipated costs related to these settlements, and we expect to continue to be a viable force in the long-term care industry. We are relieved to put this issue behind us so that we can focus more sharply on the key factors that drive our business results and that continued to challenge us throughout 1999, including nursing home occupancy levels, labor cost and availability, patient liability costs and an increasingly punitive regulatory environment. It is difficult at this time to predict what impact, if any, the settlements will have on these factors.&uot;

In the criminal plea agreement, which will be entered late today in the United States District Court for the Northern District of California in San Francisco, Beverly Enterprises - California, Inc., an indirect subsidiary of Beverly Enterprises, Inc., will plead guilty to one count of fraud via inter-state carrier in connection with a cost report relating to one facility and 10 counts of making false statements to Medicare. In so doing, that company acknowledges that errors were made by individual employees in the submission of ten cost reports to Medicare. These 10 cost reports represent .8% of the 1,370 Medicare cost reports filed by Beverly subsidiaries in 1996 and 1997 and .2% of the 4,680 cost reports filed by Beverly subsidiaries for the period investigated by the government.

Under the settlements, as previously announced, Beverly will reimburse the government $170 million, of which $25 million will be paid within 30 days. Beverly will pay the balance over an eight-year period, interest-free, by accepting pro rata reductions in its periodic interim Medicare payments totaling $145 million. Under the criminal settlement, the Beverly subsidiary will pay a fine of approximately $5 million.

No individual, officer, director, employee or other agent or affiliate of Beverly Enterprises, Inc., or BE-California was or will be charged. All agreements are effective upon entering of the plea.