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Medical Assistance Managed Care Plan, U.S. Government Agree To Voluntary Settlement

Agreement Ends Dispute Over Interpretation of Contract

October 26, 2006
Philadelphia, PA - Keystone Mercy Health Plan, a Medicaid managed care organization managing the health care services of Medicaid recipients in southeastern Pennsylvania under contract with the Pennsylvania Department of Public Welfare (DPW), issued the following statement today concerning a settlement reached with the United States:

Keystone Mercy Health Plan has entered into a Settlement Agreement with the United States Government, the Pennsylvania Department of Public Welfare, and other parties regarding resolution of coordination of benefits (COB) claims recovery issues during 1997 and 1998, and DPW-imposed time limitations on such recoveries.

The Settlement Agreement does not include any finding of wrongdoing or any admission of liability. The company believed it was in full compliance with the DPW contract and regulations, and had a right to retain the recovered monies. This was a dispute over interpretation of our contract with DPW almost ten years ago. Under the terms of the Settlement Agreement, Keystone Mercy has agreed to pay a total of $5 million over the next six months in order to end the dispute and avoid the inconvenience and expense of protracted litigation.

There is no further action required beyond payment of the settlement amount. No corporate integrity agreement was required. Keystone Mercy has a strong internal corporate compliance program already in place and is fully committed to operations that meet all state and federal legal and regulatory requirements governing Medicaid managed care organizations in Pennsylvania.

About Keystone Mercy
Keystone Mercy Health Plan is a Medical Assistance (Medicaid) managed care health plan serving more than more than 274,000 Medical Assistance recipients in Southeastern Pennsylvania including Bucks, Chester, Delaware, Montgomery, and Philadelphia counties. For more information, visit www.keystonemercy.com.

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