FPA Medical Management, Inc. and Sterling Healthcare Group announce merger agreement.

SAN DIEGO/CORAL GABLES, Fla.--(BUSINESS WIRE)--May 20, 1996--FPA Medical Management, Inc. (Nasdaq:FPAM) and Sterling Healthcare Group, Inc. (Nasdaq:STER) an- nounced that they have entered into a definitive merger agreement pursuant to which FPA Medical Management will acquire Sterling Healthcare Group in a stock-for-stock merger.

The merger of these two companies will create one of the largest physician practice management companies operating in the U.S.

The merger will be accounted for as a pooling of interests and is expected to be tax- free to the Sterling Healthcare shareholders. Under the terms of the merger agreement, which has been approved by the Board of Directors of each company, each outstanding share of Sterling Healthcare Group's common stock would be exchanged for 1.4 shares of FPA Medical Management's common stock, subject to adjustment. In total, FPA expects to issue between 10.2 and 12.5 million shares of its common stock in the transaction valued at approximately $200 million, based on the closing price of the common stock of FPA Medical Management on May 17, 1996.

On a combined basis, FPA expects to record approximately $370 million in revenues for 1996 on a pro forma basis assuming consummation of the merger. Following are certain financial and operating data for the companies individually and on a combined basis.

          1995           Q1 1996   Q1   Contracted
          Revenues  1995 Revenues  1996 Primary Care   Operating
          (million) EPS  (million) EPS  Physicians     States

FPA         $ 52.7  $0.13 $39.8   $0.08   2,200          9
Sterling     112.0   0.69  33.3    0.17   1,000         19
Total       $164.7    N/A $73.1     N/A   3,200         28(a)

(a) FPA and Sterling operate in similar states making the total operating states 24.

Following the completion of the merger, FPA's management team will consist of Dr. Sol Lizerbram as Chairman, Dr. Seth Flam as President and Chief Executive Officer, Steven Lash as Executive Vice President and Chief Financial Officer, and Dr. Stephen Dresnick as Vice Chairman of FPA s Board of Directors and President and Chief Executive Officer of FPA's Hospital Services Division. In addition to Dr. Dresnick, Dr. Herbert Wertheim, Vice Chairman of Sterling Healthcare Group, is expected to join the FPA Board of Directors. FPA's headquarters will remain in San Diego, California.

Commenting on the merger agreement, Dr. Sol Lizerbram, Chairman and President of FPA Medical Management, stated, "We are excited about the opportunity to merge with a leading company in the management of hospital emergency departments. We believe that instituting managed care protocols into emergency departments will result in a highly efficient managed care system that is cost-effective while maintaining a high standard of quality care."

Dr. Seth Flam, FPA's Chief Executive Officer, stated, "The merger with Sterling assists FPA in rounding out its primary care delivery model by adding the emergency physician. Additionally, Sterling's presence in 91 communities in 19 states will facilitate FPA's entry and expansion into these markets. The merger will especially benefit HMOs as a result of improved patient satisfaction and the decreased use of out of network providers."

Dr. Stephen Dresnick, Chairman, President and Chief Executive Officer of Sterling Healthcare Group, commented, "The emergency department is expected to play a vital role as the healthcare delivery system shifts to pre-paid or capitated care. Working with FPA, we believe our emergency physicians will play a greater role in decreasing healthcare costs and increasing patient quality as a result of the collaboration of practice protocols developed between the emergency physicians and their primary care counterparts. FPA brings significant capitated managed care experience that many of our affiliated hospitals have been seeking."

Oppenheimer & Co., Inc. was the financial advisor for FPA Medical Management and Smith Barney was the financial advisor for Sterling Healthcare Group. The closing of the transaction is subject to the receipt of regulatory approval and certain other conditions, including the approval of the shareholders of both companies, and is expected to close in the third quarter of 1996.

FPA Medical Management, Inc. is a national healthcare management service organization that organizes and manages primary care physician networks to contract with HMOs and other pre-paid health insurance plans to provide physician and related health care services.

Sterling Healthcare Group is a national provider of clinical contract management and physician practice management services. The Company currently contracts with 91 hospitalemergency departments, manages 22 primary care physician practices and owns 6 healthcare centers.

Certain statements contained in this release are forward looking. Although FPA Medical Management, Inc. and Sterling Healthcare Group, Inc. believe that their expectations are based on reasonable assumptions within the bounds of their knowledge of their business and operations, there can be no assurance that actual results will not differ materially from their expectations. Factors that could cause actual results to differ from expectations include the difficulty in controlling healthcare costs and the possible negative effects of prospective healthcare reform. For other important factors that may cause actual results to differ materially from expectations and underlying assumptions, see reports by FPA Medical Management, Inc. and Sterling Healthcare Group, Inc. filed with the Securities and Exchange Commission.

CONTACT: FPA Medical Management, Inc., San Diego

Investor Contact: Steven M. Lash

Executive Vice President and

Chief Financial Officer

619-295-7005

or

Sterling Healthcare Group Inc., Coral Gables

Dr. Stephen J. Dresnick

Chairman, President and

Chief Executive Officer

305-665-1911

or

Morgen-Walke Associates, New York

Jennifer Cullis/Caroline Babbitt

212-850-5600

or

Media Contact: Miriam Adler

415-296-7383