First Health Announces Largest Contract Ever

Contact: 
Edward L. Wristen
President and CEO
or
Joseph E. Whitters
CFO;
First Health
630-737-7003
Link to Webcast on this Topic

FOR IMMEDIATE RELEASE

DOWNERS GROVE, IL, April 16, 2002 - Edward L. Wristen, President and Chief Executive Officer of First Health Group Corp. (NASDAQ: FHCC), announced today that it has entered into the most significant long-term contract of its history. First Health and the National Postal Mail Handlers Union, the sponsor of the Mail Handlers Benefit Plan, have agreed that First Health will provide its comprehensive health plan services to the Mail Handlers Benefit Plan. The Mail Handlers Benefit Plan has nearly 400,000 federal employees and annuitants representing approximately 1 million members nation wide. It is one of the nation's largest health plans.

This agreement builds on the relationship which First Health developed with the Plan in August 1999 to provide The First Health® Network to the Mail Handlers Benefit Plan members. The agreement is valued at over $1.3 billion in service revenue over the initial five-year term. It calls for First Health to provide its comprehensive health plan services to the Mail Handlers Benefit Plan.

First Health will provide the Plan with services that will result in additional critical mass in numerous areas including:

• First Health’s health plan administration infrastructure including underwriting and pricing
• 24 hour 7 day a week comprehensive member services including member outreach and appointment setting
• Consumer and provider Internet services including Internet physicians visits
• The First Health® Network
• The First Health U&C fee schedule
• The First Health® Care Support and disease management including pharmacy management
• First Health Dental Programs
• EDI and EFT (Electronic Funds Transfer) initiatives with network providers
• National Advertising and Public Relations initiatives

Finally, this agreement ratifies First Health's strategy of building a national managed care system. Since its founding almost 20 years ago, First Health has pursued clients with a national presence; first with physician directed utilization management; then with directly contracted doctors, hospitals and ancillary providers throughout the country; and since the acquisition of First Health in mid-1997, a fully integrated managed care solution meeting the complex needs of clients with members located throughout the nation. First Health continues its practice of significant investing in the provider relationships and the technology necessary to continue to grow its business.

The Company expects to incur various startup costs associated with this contract in the third and fourth quarters of this year. When fully implemented, the Company estimates it will add approximately 1,000 employees to provide the various services required by this contract.

Rob McGinnis, President and Chief Operating Officer of CNA Group Operations, the present service provider, noted that CNA hopes to transition its operations and employees to First Health as part of the implementation of the new contract. Mr. Wristen responded that First Health is interested in pursuing this opportunity.

Additionally, Mr. Wristen noted that this contract increases the Company's estimate of 2003 revenue to the range of $850 million and earnings per share for the year in the area of $1.50.

A conference call on Wednesday, April 17 at 8:00 AM (CT) will be available on a live webcast from the Company's website (www.firsthealth.com).  The webcast is open to all interested parties on a listen only basis.

First Health, the nation's premier full-service health benefits company, specializes in providing large employers with one integrated source for group health and workers' compensation. By combining pioneering technology with expert industry knowledge, First Health delivers comprehensive, cost-effective solutions for its clients nationally. For more information, visit the Company website at www.firsthealth.com.