Concentra Operating Corporation Announces Changes in Business Segment Reporting

Business Wire, March 27, 2001

Business Editors

ADDISON, Texas--(BUSINESS WIRE)--March 27, 2001

Concentra Operating Corporation ("Concentra") today announced that it will change the way it reports its business segment results during 2001 to improve the manner in which operating results are disclosed in its financial statements. Previously, Concentra divided its financial results into "Health Services," "Cost Containment," and "Field Case Management" segments. Under the new approach, although the Health Services segment will remain the same, Concentra's other segments will be grouped to provide a "Network Services" segment and a "Care Management Services" segment. The Company believes this change will promote a better understanding of the underlying nature of its operations by providing a more consistent representation of similar business units within each of the two newly formed segments. Further, the Company believes that the enhanced segment reporting will more effectively communicate Concentra's current operating environment and business unit strategy.

Commenting on the revised reporting approach, Daniel J. Thomas, President and Chief Executive Officer, said, "I am pleased that our segment reporting will provide more clarity to our investors as to the underlying nature of our primary businesses. We have increasingly been managing the Company in a manner that differentiates between operations that seek savings from healthcare providers and those that facilitate returning patients to work. Our new segmentation will more effectively reflect this distinction." Thomas also noted that the Company currently plans to make no changes to its internal operating structure in connection with its introduction of this new financial statement segmentation approach.

Under the new segmentation, the composition of the Health Services segment will remain the same. The Health Services segment will continue to reflect the Company's revenues and business operations that provide specialized injury and occupational healthcare services to employers. Through 224 nationwide health centers, Health Services delivers primary and rehabilitative care, including the diagnosis, treatment and management of work-related injuries and illnesses. Health Services also provides a full complement of non-injury, employment-related health services, including physical examinations, pre-placement substance abuse testing, job-specific return to work evaluations and other related programs.

The new Network Services segment will reflect those businesses that involve the review and repricing of provider bills and which are routinely compensated based on the degree to which Concentra achieves savings for its clients. This segment will include Concentra's preferred provider organization, provider bill review business and out-of-network bill review operations. This segment will also include Concentra's first notice of loss operations.

Care Management Services will reflect the Company's professional services aimed at curtailing the cost of workers' compensation and auto claims through field case management, telephonic case management, independent medical exams and utilization management. These services are designed to maximize medical improvement and, where appropriate, to expedite the return to work. These services also concentrate on monitoring the timing and appropriateness of medical care.

As a result of the above changes, effective January 1, 2001, the Company will prospectively report segment performance on its Health Services, Network Services and Care Management Services groups. Had these segments been reported in this manner historically, the Company's Statements of Operations on a segment basis would have been stated as follows:

                                        Years Ended December 31,
                                  -----------------------------------
                                    2000         1999         1998
Revenue:                          ---------    ---------    ---------
  Health Services                 $ 399,660    $ 330,064    $ 259,481
  Network Services                  162,596      158,022      135,805
  Care Management Services          189,905      193,326      215,770
                                  ---------    ---------    ---------
                                    752,161      681,412      611,056
Gross profit:
  Health Services                    77,876       64,981       58,300
  Network Services                   61,855       62,288       54,431
  Care Management Services           19,006       19,654       29,028
                                  ---------    ---------    ---------
                                    158,737      146,923      141,759
General and administrative
  expenses                           66,491       65,291       45,326
Amortization of intangibles          14,628       12,960        8,119
Non-recurring charges                    --       54,419       33,114
                                  ---------    ---------    ---------
Operating income                     77,618       14,253       55,200

Interest expense                     68,932       35,779       18,021
Interest income                        (803)      (2,900)      (4,659)
Loss on change in fair value
  of hedging arrangements             9,586           --           --
Other, net                             (725)        (391)          44
                                  ---------    ---------    ---------
Income (loss) before income
  taxes and cumulative                  628      (18,235)      41,794
  effect of accounting change
Provision for income taxes            4,362        8,269       19,308
                                  ---------    ---------    ---------
Income (loss) before cumulative
  effect of accounting change        (3,734)     (26,504)      22,486
Cumulative effect of accounting
  change, net of tax                  2,817           --           --
                                  ---------    ---------    ---------
Net income (loss)                 $  (6,551)   $ (26,504)   $  22,486
                                  =========    =========    =========

                                       Quarters Ended
                                         (Unaudited)
                       ----------------------------------------------
                       March 31,    June 30,     Sept. 30,    Dec. 31,
                       ----------------------------------------------
Revenue:
  Health Services      $ 94,260    $ 103,004    $ 105,696    $ 96,700
  Network Services       40,919       38,862       39,078      43,737
  Care Management
   Services              45,917       48,482       47,990      47,516
                       --------    ---------    ---------    --------
                        181,096      190,348      192,764     187,953
Gross profit:
  Health Services        17,265       22,891       23,397      14,323
  Network Services       15,472       13,933       13,274      19,176
  Care Management
   Services               4,117        6,296        5,682       2,911
                       --------    ---------    ---------    --------
                         36,854       43,120       42,353      36,410
General and
  administrative
  expenses               16,919       16,246       16,149      17,177
Amortization of
  intangibles             3,566        3,658        3,689       3,715
                       --------    ---------    ---------    --------
Operating income         16,369       23,216       22,515      15,518

Interest expense         16,221       17,926       17,857      16,928
Interest income             (80)        (331)        (104)       (288)
(Gain) loss on change
  in fair value of
  hedging arrangements   (1,537)       2,483        1,818       6,822
Other, net                 (196)          73         (140)       (462)
                       --------    ---------    ---------    --------
Income (loss) before
  income taxes and
  cumulative effect
  of accounting change    1,961        3,065        3,084      (7,482)

Provision (benefit)
  for income taxes          893        1,921        2,279        (731)
                       --------    ---------    ---------    --------
Income (loss) before
  cumulative effect
  of accounting change    1,068        1,144          805      (6,751)

Cumulative effect
  of accounting
  change, net of tax         --           --           --       2,817
                       --------    ---------    ---------    --------
Net income (loss)      $  1,068    $   1,144    $     805    $ (9,568)
                       ========    =========    =========    ========