Foundation Health Corporation enters into agreement to acquire Managed Health Network, Inc.

RANCHO CORDOVA, Calif.--(BUSINESS WIRE)--Jan. 18, 1996-- Foundation Health Corporation (NYSE:FH) today announced that it has reached a definitive agreement to acquire privately held Managed Health Network, Inc. (MHN) in a stock-for-stock, pooling of interests transaction valued at approximately $45 million.

Completion of the acquisition is subject to certain closing conditions, including approval by the California Department of Corporations. Upon completion of the acquisition, the two companies will serve more than six million individuals in all 50 states.

Based in Los Angeles, MHN has branch offices in 12 states including Michigan, New York and Texas. MHN contracts through its subsidiaries with more than 350 corporate, government, union and health plan clients, providing employee assistance and managed behavioral health programs to more than 2.7 million covered lives. One of MHN's subsidiaries is a specialty behavioral health HMO in California. At Dec. 31, 1995, MHN had annualized revenues of approximately $44.4 million.

Operations of MHN will be consolidated with those of Foundation Health Corporation's existing behavioral health subsidiary, Foundation Health PsychCare Services, Inc. (FHPS). As part of the consolidation and integration of the two companies, FHPS is performing a best-practices evaluation of services provided by each of the companies to enhance service and efficiency.

As of Dec. 31, 1995, annualized revenues of MHN and FHPS on a combined basis would have been approximately $170 million, including approximately $75 million from various Foundation Health Corporation subsidiaries for which FHPS provides behavioral health services. Revenues from these inter-company sales are eliminated on Foundation Health Corporation's consolidated financial statements.

"With this acquisition, FHPS becomes one of the largest managed behavioral health care companies in the nation," said Daniel D. Crowley, President and Chief Executive Officer of Foundation Health Corporation. "Our customers will benefit as FHPS builds on opportunities to achieve economies of scale that come with market share leadership.

"MHN's strength in the employer and union managed care risk markets, coupled with their state-of-the-art technology for member intake, claims processing, provider profiling and clinical outcomes management, complements FHPS' acknowledged leadership in large employee assistance programs and innovative public sector delivery programs," Crowley added. "We anticipate that this acquisition will have no impact on Foundation Health Corporation's earnings for fiscal 1996."

FHPS' current operations include more than 1.3 million individuals in employee assistance programs, 1.3 million individuals in managed behavioral health and more than one million eligible beneficiaries covered under government-sponsored health benefit programs including CHAMPUS and Medicaid.

Foundation Health Corporation (NYSE:FH) is a multi-state, fully integrated managed care organization with headquarters in Rancho Cordova, Calif. Through its HMO, insured PPO and government contracts subsidiaries, the Company provides group, individual, Medicare, Medicaid and CHAMPUS coverage for more than 1.5 million individuals.

In addition, the Company's subsidiaries offer services related to workers' compensation, behavioral health, dental, vision and prescription drugs, and provide administrative services for medical groups and self-funded benefits programs. Foundation Health's government contracts subsidiary is currently operating or implementing five-year programs to manage health care benefits for beneficiaries of the Civilian Health and Medical Program of the Uniformed Services, or CHAMPUS, in eight states.

CONTACT: Foundation Health Corporation

Kurt Davis, 916/631-5288