COXHEALTH SETTLEMENT ANNOUNCEMENT

What is the settlement for/about?

The settlement revolves around potential errors Cox made years ago in

interpreting highly complex Medicare billing regulations and in structuring

business relationships with physicians. In almost every instance of what is

included in the settlement, the issues were identified by hospital administration

and the results of our review were reported to the government.

It's important to understand that none of the government's claims against

CoxHea1th involved the quality of patient care or safety. Similarly, there were no

claims that CoxHealth had billed the government for any services that hadn't

been provided.

Did Cox commit fraud or do anything criminal?

No, we did not. These were potential errors we made in interpreting highly

complex Medicare billing regulations and in structuring business relationships

with physicians.

What is the amount of the settlement?

The settlement negotiated with the U.S. Department of Justice is for an initial

payment of $35 million with additional $5 million payments per year for five years.

There will be annual interest at 4% due on the deferred amounts. The settlement

also includes Cox HPS of the Ozarks, Inc., a Cox affiliate

What is the Health and Human Services agreement you had to agree to?

In a separate agreement with the Ohio of Inspector General of the

U.S. Department of Health and Human Services we agreed to participate in a

five-year program of intensive legal compliance education for employees,

physicians and others associated with CoxHealth, as well as heightened

monitoring and reporting to the Department. We feel very confident that we as

an organization will be able to honor this commitment to the government as we

already have a strong internal annual compliance education program at

CoxHealth.

Is this unusual? Did CoxHealth do anything unusual?

Every health care organization in this country that chooses to participate in

Medicare and Medicaid is challenged as we are, to navigate the very same maze

of regulations without making any billing errors In the past decade numerous

other well-respected hospitals and health care organizations - including Baylor

Healthcare System, Beth Israel in New York, Johns Hopkins, Mount Sinai

Medical Center in Florida, Mayo Clinic, Sharp Healthcare System, Kaiser

Foundation, University Hospital Health System (Cleveland Clinic) and University

of Washington Physicians - have been subject to similar types of government

investigations that have resulted in settlements with the government.

What is Cox HPS of the Ozarks?

Cox HPS of the Ozarks is a Home Parenteral Services œmpany that is an

affiliate of CoxHealth, and they provide home infusion therapy. They were

essentially the billing agent for the involved component for our dialysis services -

which we discovered we were potentially not technically eligible to bill Medicare

for.

How was the amount of the settlement derived?

These health care laws are very complex and are very unforgiving. They require

that the government demand repayment, which can be very large. In fact, given

the size of CoxHealth and the number of patients we treat on a daily basis, one

potential error in interpreting a billing regulation can affect every claim filed

thereafter - in our case tens of thousands of claims. Since damages can be

assessed on a per claim basis, the repayment can quickly result in an amount

that is well beyond our ability to pay.

The government began its settlement negotiations by taking the position that Cox

should repay every claim the government alleges we improperly billed to

Medicare. The amount of this repayment exceeded the amount Cox could pay.

Given the magnitude of the alleged damages, if we were to go to trial and lose,

which is always a possibility with jury trials, we negotiated with the government

until we reached an amount we could pay and still continue to fulfill our mission

to serve the community now and in the future.

Why ultimately did you settle?

Our Board of Directors determined that the organization and the community it

serves had been through enough, and that it was in the best interest of

CoxHealth and the community to settle with the government rather than engage

in litigation that would take many more years to resolve and cost millions in legal

fees. Our Board has been keenly aware for some time of the need to put the

investigation behind us so we can move forward with crucial expansion project

that are necessary to serve the growing needs of our community. Our Board

carefully analyzed our ability to pay a settlement of this magnitude and ultimately

determined that after three years of essentially standing still while waiting for the

investigation to resolve, it was in the best interest of CoxHeaIth and the

community to settle to allow us to finally move forward with these vital projects.

The government also has the power to exclude hospitals from the Medicare

program, which means the hospital can no longer accept patients who are

Medicare or Medicaid beneficiaries. No tax-exempt hospital can survive an

exclusion from Medicare. Exclusion essentially shuts down a hospital. Cox

could not fulfill its mission to the community if it were excluded from Medicare

and Medicaid which we believe would be devastating to this community.

How is Cox going to pay for the settlement?

The Board of Directors and leadership of CoxHeaIth have been reserving funds

from the time we knew there would be an impact from the investigation. These

monies, along with some that we have had in a long-term reserve fund, will pay

for the initial installment of the settlement.

The remaining five years' settlement payments are projected to come from our

long-term reserve funds. No funds from charitable donations will be used to pay

any part of the settlement.

What is the reserve fund and how did it get so big?

The reserve fund has been in existence for many years and is one that helps us

maintain enough cash to allow us to borrow money at better interest rates. Use

of funds from the reserve fund will not jeopardize our ability to begin our muchneeded

expansion projects as we will finance these projects through bonds, and

our bond ratings will not suffer as a result of drawing down the on this reserve.

Will you have to cut programs or staff, halt any expansion project, etc. as

a result of the payment you are required to make?

CoxHealth will continue to have a sound financial foundation that will allow us to

continue to meet our mission, and these payments will not cause us to have to

cut programs, reduce our workforce halt technology purchases, or stop investing

in our community in any other ways. CoxHealth will remain financially equipped

to continue to serve the residents of southwest Missouri, thanks to years of

sound financial management and reserving funds for unexpected situations such

as this.

Will you have to raise rates/prices to make the repayments?

We have a low cost structure, and we intend to stay cost competitive. We have

no plans to raise rates or fees as a result of the settlement payments

What were you investigated for?

There are two primary issues involved and each is slightly different in nature:

1. The first relates to our dialysis billing and the medical director structure for

dialysis: Dialysis services are governed by highly technical Medicare billing

regulations that can be interpreted in different ways. CoxHealth learned that

under one interpretation, it may have billed dialysis services provided through its

Ozarks Dialysis Services ("ODS") from 1999 to 2004 using a method it was not

eligible to bill under. Similarly, medical director agreements with physicians are

also subject to different interpretations. CoxHealth teamed that under one

interpretation, the way it structured its dialysis medical director agreements at

ODS from 1996 to 2004 may have been incorrect. It is important to note that

during these time periods, every dialysis services billed was provided. CoxHealth

self-reported these issues to the government in January 2005.

2. The second relates to issues of how compensation to some physicians was

structure: The government's rules regarding payments made to physicians and

their practices have shifted dramatically over the last decade. CoxHealth

internally discovered that under one interpretation of these rules, it may have

provided improper compensation to physicians including physicians with FerrellDuncan

Clinic, Inc. ("FDCI"). FDCI is a separate physician corporation - not

owned by CoxHealth - that is under contract with Cox to provide professional

services to Ferrell-Duncan Clinic. Ferrell-Duncan Clinic is a clinic that is owned

and operated by CoxHealth much like CoxHealth's other physician clinics.

CoxHealth determined that from 2000 to 2004, we may have paid physicians

from a revenue source from which they may not have been eligible to be paid. It

is important to note that none of the government's claims relating to FDCI'S

physicians involved quality of patient care or safety. In addition, there were no

claims that the services of FDCI's physicians were not provided.

Is the Board of Directors supportive of this decision and senior

management in the process?

It was a difficult decision to agree to a settlement amount of this magnitude, but

the board, along with senior leadership and those advisors with prior experience

in such negotiations, finally came to the conclusion that agreeing to the

settlement amount was the better path for the organization and the community in

the long run. The board fully support the leadership, employees, and physicians

in their future efforts and strong commitment to the people we serve in the

region.