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QUAL-MED AND PHN SIGN LETTER OF INTENT FOR MERGER

 QUAL-MED AND PHN SIGN LETTER OF INTENT FOR MERGER
 PUEBLO, Colo., Nov. 1 /PRNewswire/ -- Qual-Med Inc. (NASDAQ: QLMD)


and Preferred Health Network (PHN) have signed a Letter of Intent that would merge the two major managed care organizations. The proposed purchase price consists of $2,250,000 at closing and the remainder will be based on 1992 pre-tax earnings of PHN and other performance criteria up to a maximum price of $10,000,000.
 PHN is a for-profit company with corporate offices in Long Beach, Calif., and is California's largest Preferred Provider Organization (PPO) with a statewide network for managed health care and workers' compensation services. PHN is owned by 26 hospital systems and their affiliated physicians and is having their most profitable year in 1991. PHN has 27,000 participating physicians, 305 hospitals, 425 clinics and annually processes more than $200 million in claims. Qual-Med reported $142.2 million in revenue with a net income of $8.2 million for the first six months of 1991.
 Qual-Med has 231,000 HMO members as of June 30, 1991, while PHN has 1.5 million PPO and Workers' Compensation members and another 1.5 million eligible members under 14,000 employer agreements.
 Richard Mastaler, president and chief executive officer of PHN, stated that, "There were several other suitors for PHN, but PHN's board of directors selected Qual-Med because of their superior Medical Management System and wide array of products. The price was not the major consideration as it was more important that Qual-Med offers an excellent long-term working relationship for PHN's participating hospitals and physicians which will enable them to increase their respective market share." Under the terms of the agreement, PHN would be operated as a wholly owned subsidiary of Qual-Med.
 Qual-Med is a Delaware corporation that owns health maintenance organizations operating in six western states of California, Colorado, Idaho, New Mexico, Oregon and Washington. "The merger is a strong strategic move as Qual-Med's market in California is currently limited to the San Francisco Bay Area while PHN covers the entire state of California. PHN will allow Qual-Med to expand its HMO operations to all of California at relatively low costs," said Dr. Malik Hasan, Qual-Med's chairman and chief executive officer.
 PHN was advised by Michael Gallagher, general partner of Shamrock Investments, a California firm which specializes in mergers, acquisitions, leveraged buy-outs and divestitures in the health care industry.
 -0- 11/1/91
 /CONTACT: Malik Hasan, president, chairman and CEO of Qual-Med Inc., 719-543-4040/
 (QLMD) CO: Qual-Med Inc.; Preferred Health Network ST: Colorado, California IN: HEA SU: TNM CH -- LA009 -- 0062 11/01/91 08:02 EST
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Publication:PR Newswire
Date:Nov 1, 1991
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