EXHIBIT 99.1
[AMERICAN HEALTHWAYS LOGO]
FOR IMMEDIATE RELEASE Contact: Mary A. Chaput
Executive Vice President and
Chief Financial Officer
(615) 665-1122
AMERICAN HEALTHWAYS ANNOUNCES CONTRACT SETTLEMENT;
EXECUTES LETTER OF INTENT TO CONTINUE AND EXPAND SERVICES
NASHVILLE, TENN. (JULY 15, 2003) - American Healthways, Inc. (Nasdaq/NM: AMHC)
today announced that the Company has entered into a binding settlement agreement
and a letter of intent with a customer to replace its existing contract with a
new contract to be effective no later than December 31, 2003. The letter of
intent requires good faith negotiations of a new contract that, when compared to
the existing contract, would expand the services the Company provides, eliminate
the Company's contractual exposure to the customer's health care cost increases,
significantly reduce the percentage of the Company's fees that are performance
based and settle all issues relating to the original contract. In addition, the
settlement agreement enables the Company to reduce letters of credit and cash in
escrow, which secure fees and performance under the original contract from $17
million down to $5 million. As part of this agreement, the Company will refund
to this customer $14 million that has already been accrued in the Contract
Billings in Excess of Earned Revenue account on the balance sheet.
If the Company and the customer are unable to come to final agreement on the new
contract, the settlement agreement provides that the existing contract will
terminate and the Company will make an additional payment to the customer of $3
million.
Commenting on the announcement, Tom Cigarran, Chairman and Chief
Executive Officer of American Healthway's said, "As the industry leader, we are
constantly creating new ways of meeting our customers' needs through new
products, services and delivery mechanisms, which with few exceptions have
provided outcomes that were the same or better than we projected. The current
agreement with this customer, which was signed about 18 months ago, included
unique contracting and outcomes measurement provisions that, in the final
analysis, made it impossible for us to validate performance under the terms of
the contract, although both the customer and we believe that clinical and
financial benefit was achieved. This is evidenced by the customer's desire to
continue and expand their relationship with us. In this situation, which exists
only with this one customer, we felt that it was in the best interests of both
organizations to settle the issues created by the special contracting and
measurement provisions and move forward. We believe these agreements accomplish
that end.
"Because the Company has been recording payments from this customer in
the Billings in Excess of Earned Revenues account on the balance sheet, our
income statement will not be affected by the resolution of this measurement
issue. This event validates the way the Company
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July 15, 2003
has accounted for contracts where performance cannot be unequivocally
determined. Accordingly, we are reiterating our financial guidance for fiscal
2003."
CONFERENCE CALL
American Healthways will hold a conference call to discuss this
announcement tomorrow at 10:00 a.m. Eastern time. Investors will have the
opportunity to listen to the conference call live over the Internet by going to
www.americanhealthways.com and clicking Investor Relations or by going to
www.streetevents.com at least 15 minutes early to register, download and install
any necessary audio software. For those who cannot listen to the live broadcast,
a replay will be available on the Company's Web site for the next 12 months. Any
material information disclosed on the conference call that has not been
previously disclosed publicly will be available on the Company's website at
www.americanhealthways.com.
SAFE HARBOR PROVISIONS
This press release contains forward-looking statements that are based
upon current expectations and involve a number of risks and uncertainties. In
order for the Company to utilize the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, investors are hereby cautioned that
these statements may be affected by the important factors, among others, set
forth below, and consequently, actual operations and results may differ
materially from those expressed in these forward-looking statements. The
important factors include: the Company's ability to sign and execute new
contracts for health plan disease management services and care enhancement
services and to sign and execute new contracts for hospital-based diabetes
services; the risks associated with a significant concentration of the Company's
revenues with a limited number of health plan customers; the Company's ability
to effect cost savings and clinical outcomes improvements under health plan
disease management and care enhancement contracts and reach mutual agreement
with customers with respect to cost savings, or to effect such savings and
improvements within the time frames contemplated by the Company; the Company's
ability to accurately forecast performance under the terms of its health plan
contracts ahead of data collection and reconciliation; the ability of the
Company to collect contractually earned incentive performance bonuses; the
ability of the Company's health plan customers to provide timely and accurate
data that is essential to the operation and measurement of the Company's
performance under the terms of its health plan contracts; the Company's ability
to resolve favorably contract billing and interpretation issues with its health
plan customers; the ability of the Company to effectively integrate new
technologies such as those encompassed in its care enhancement initiatives into
the Company's care management information technology platform; the Company's
ability to renew and/or maintain contracts with its customers under existing
terms or restructure these contracts on terms that would not have a material
negative impact on the Company's results of operations; the ability of the
Company to implement its care enhancement strategy within expected cost
estimates; the ability of the Company to obtain adequate financing to provide
the capital that may be needed to support the growth of the Company's health
plan operations and to support or guarantee the Company's performance under new
health plan contracts; unusual and unforeseen patterns of health care
utilization by individuals with diabetes, cardiac, respiratory and/or other
diseases or conditions for which the Company provides services, in the health
plans with which the Company has executed a disease management contract; the
ability of the health plans to maintain the number
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AMHC Reports Contract Settlement and LOI
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July 15, 2003
of covered lives enrolled in the plans during the terms of the agreements
between the health plans and the Company; the Company's ability to attract
and/or retain and effectively manage the employees required to implement its
agreements with hospitals and health plan organizations; the impact of
litigation involving the Company; the impact of future state and federal health
care legislation and regulations on the ability of the Company to deliver its
services and on the financial health of the Company's customers and their
willingness to purchase the Company's services; and general economic conditions.
The Company undertakes no obligation to update or revise any such
forward-looking statements.
American Healthways (AMHC) is the nation's leading and largest provider
of specialized, comprehensive disease management and care enhancement services
to health plans, physicians, medical management organizations and hospitals. The
Company's programs have been reviewed and approved for clinical excellence by
Johns Hopkins and have been certified or accredited by the National Committee on
Quality Assurance (NCQA), the Joint Commission on Accreditation of Health Care
Organizations (JCAHO), and the American Accreditation Healthcare Commission
(URAC). American Healthways has contracts to provide disease and care management
programs to 844,000 equivalent lives in all 50 states, the District of Columbia,
Puerto Rico and Guam. The Company also operates diabetes management programs in
hospitals nationwide. For more information visit www.americanhealthways.com.
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