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 NASHVILLE, Tenn., Oct. 25 /PRNewswire/ -- Surgical Care Affiliates, Inc. (NYSE: SCA) announced today that it has proposed to discuss with Medical Care America, Inc. a merger where each Medical Care share would be converted into 1.35 shares of SCA common stock, reflecting a premium of more than 40 percent based upon the closing prices of the two companies' common shares on Friday, Oct. 22. The proposed merger would be structured as a tax-free pooling of interests.
 The principal terms of the proposed merger were set out in an Oct. 14 letter from SCA's Chairman and Chief Executive Officer, Joel C. Gordon, to Donald E. Steen, President and Chief Executive Officer of Medical Care America, and followed a meeting earlier this month between Messrs. Gordon and Steen.
 Mr. Gordon stated: "We are disappointed that Medical Care America has been unwilling to discuss our proposal with us. Based on our record of superior performance managing outpatient surgery centers, we are confident that combining our two companies will better serve our physicians and their patients as well as add value for shareholders.
 "This transaction offers Medical Care America shareholders both a substantial premium and the opportunity to continue their investment in a stronger, combined entity. During this period of change in the health care industry, we believe we can build one of the preeminent health care providers in the United States."
 Mr. Gordon continued: "We are convinced this transaction makes sense for both companies and believe Medical Care America will concur once it agrees to meet with us to discuss our proposal.
 "We hope that Medical Care America's directors, when they fully consider the best interests of their shareholders, will conclude they have an obligation to explore the opportunities this presents for their shareholders and other constituencies," Mr. Gordon said.
 Surgical Care Affiliates is a major alternate site health care provider whose shares are traded on the New York Stock Exchange under the symbol SCA. The company has posted record quarterly earnings for the past 30 consecutive quarters.
 In addition to outpatient surgery centers in 55 cities, SCA has an HMO organization, HealthWise of America, whose previously reported spin off to SCA shareholders is anticipated in December 1993. HealthWise currently operates HMOs in Lexington, Kentucky, and Baltimore, Md. HealthWise also has a management contract in Toledo, Ohio, and recently has been licensed to operate an HMO in Tennessee and has applied for a license in Arkansas.
 The text of the October 14 letter follows.
 The following is the text of a letter sent Oct. 14, 1993, by Joel C. Gordon, chairman and chief executive officer of Surgical Care Affiliates, Inc., to Donald R. Steen, president and chief executive officer of Medical Care America, Inc.:
 Oct. 14, 1993
 Mr. Donald R. Steen
 President and Chief Executive Officer
 Medical Care America
 13455 Noel Road
 20th Floor
 Dallas, Texas 75240
 Dear Don:
 I would like to thank you for meeting with me last Tuesday to discuss combining our two companies. As we discussed during our meeting and as you and I have discussed on several occasions over the last few years, we at Surgical Care Affiliates and our advisors believe that a combination of Medical Care America and Surgical Care Affiliates would be of very substantial benefit to our two companies and our respective shareholders, employees, physician supporters and patients.
 I was disappointed in your response to our interest in a transaction involving our companies. I frankly do not concur with your decision that, given the extraordinary benefits that we believe would accrue to your company, shareholders and other constituents, you are not prepared to consider what we have to offer. As a next step, and before making a formal proposal, I thought it appropriate to summarize the terms and benefits of a possible merger and to specifically address the concerns you expressed at our meeting. Given the importance of the matters discussed in this letter, I ask that you share this letter with the members of your Board.
 Price. We would like to discuss with you a combination of Medical Care America and Surgical Care Affiliates in a merger in which each Medical Care America shareholder would receive 1.35 shares of Surgical Care Affiliates common stock for each Medical Care America share. We believe this price would be a very attractive one for your shareholders, representing a 51% premium over the closing price of Medical Care America common stock on October 14, 1993. We would be prepared to receive information which might justify a greater consideration.
 In addition to receiving a substantial premium, your shareholders would be able to participate in what we believe would be exceptional opportunities for growth and increased value through their ongoing interest in what we believe would be one of the preeminent health care providers in the United States.
 Benefits of Transaction. As we discussed last Tuesday, our desire to combine operations is based upon our view of the overall environment for health care providers. We believe a combination would greatly improve our ability to achieve economies of scale and negotiate attractive contracts with managed care and other payors, which will be critically important in the years ahead. Obviously, your Board recognizes the benefits of such a course of action, since your recently announced affiliation with Columbia Health Care appears intended to achieve similar results.
 In our meeting, you expressed concern that our two companies, together, would not have sufficient size and resources. We and our advisors believe that a combination of our organizations would create one of the largest, best capitalized alternate site health care providers in the United States, with an extremely strong post-merger balance sheet and cash flow. Our combination would represent the largest and most liquid "pure-play" investment opportunity among public alternate site providers and, thus, we would expect to achieve a premium value. We believe a key benefit of the transaction would be the opportunity to focus our combined resources on a part of the health care industry that we both know best -- and avoid the risks of diversifying into less known areas. Our combination would also result in a diversification for your shareholders away from your infusion therapy business by increasing their investment in the surgical center business.
 Favorable Tax and Accounting Treatment. This transaction would be tax-free to both our companies and shareholders. This would allow your shareholders to defer paying tax, or recognizing gain or loss, until they sell their shares at a time of their choice. Additionally, the transaction would be structured as a pooling of interests, which would avoid the creation of any goodwill and the resulting drag on future earnings.
 Although in our meeting you expressed the view that a cash sale might be preferable, we think that a stock transaction would be more attractive for several reasons. First, it would enable your shareholders to share in the significant upside potential of our combined entity, while still receiving a substantial one-time premium. Second, a cash deal would provide your shareholders with far less flexibility, since it would force the recognition of gain or loss, as well as create substantial goodwill amortization expense for the merged company. Certainly, your shareholders who desire cash could sell the Surgical Care Affiliates shares received in the merger at any time they desire.
 Continuity of Management and Operations. We envision that your management would have significant roles in the combined company. In fact, we believe that our larger, combined organization would present your employees with enhanced employment and promotion opportunities.
 In our transaction, Medical Care America's employment agreements, benefit plans and other commitments to its employees would be fully respected. It would also be our intention to structure management and employees' incentive plans to achieve a highly motivated, enthusiastic and productive work force for the combined entity.
 Representation on Surgical Care Affiliates' Board. We envision that certain members of Medical Care America's Board, including yourself, would be invited to serve on Surgical Care Affiliates' Board. We believe such participation would facilitate the integration and growth of the two companies.
 Litigation. As I mentioned in our meeting, we have reviewed all publicly available court filings regarding your shareholder litigation. Clearly, to proceed with any transaction, you and we must be comfortable with our ability to deal with this litigation, and we would want to review your non-public files on the litigation. We are confident that the litigation will not interfere with our consummating a transaction, or with the success of our combined companies.
 We have conducted an extensive analysis of Medical Care America based on publicly available information. While our proposal, when formally made, would be subject to confirmation, through appropriate due diligence, that our understanding of Medical Care America based on publicly available information is accurate, we expect that such due diligence will confirm our view of Medical Care America and its prospects. We recognize that you will want to conduct a due diligence examination of Surgical Care Affiliates and its operations.
 In summary, we strongly believe that our proposal represents an extraordinary opportunity for your company and your shareholders. I think we have an opportunity to build the best alternate-site health care services business in the United States and to provide significant immediate and long-term benefits for your shareholders. We look forward to meeting with you and the Medical Care America Board of Directors to discuss presenting our proposal at your earliest convenience. As I have told you, we at Surgical Care Affiliates are determined to take every appropriate action to explore this transaction.
 We have made no public announcement of this matter at this time, and we would hope to be able to discuss our ideas with you and your Board on a confidential, non-public basis. We and our advisors, Bear, Stearns & Co. and Skadden, Arps, Slate, Meagher & Flom, are prepared to meet with you at any time and place at your earliest convenience. In view of the importance of this matter, we request your response by no later than October 21, 1993.
 I will be available by telephone at my office or home. Clearly, this matter has the highest priority for me and the other members of the Surgical Care Affiliates Board of Directors and we look forward to hearing from you.
 Joel C. Gordon
 -0- 10/25/93
 /CONTACT: Tarpley B. Jones, chief financial officer of Surgical Care Affiliates, Inc., 615-385-3541, or Tim Metz, managing director of Abernathy/MacGregor/Scanlon, 212-371-5999/

CO: Surgical Care Affiliates, Inc.; Medical Care America, Inc. ST: Tennessee IN: HEA SU:

PS -- NY060 -- 6368 10/25/93 13:18 EDT
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Date:Oct 25, 1993

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