USON US Oncology (MM)

US Oncology Announces Transition of Three Practices to the Earnings Model HOUSTON, Feb. 9 /PRNewswire-FirstCall/ -- US Oncology, Inc. has signed renegotiated physician practice management agreements under its "earnings model" with three practices: Oncology & Hematology Associates of Southwest Virginia, a 17-physician group in Roanoke, Va.; Raleigh Hematology Oncology Associates, P.A., an 11-physician group in Raleigh, N.C.; and Hematology and Oncology Physicians, a 14-physician group in Tucson, Ariz. Each of these practices was previously affiliated with US Oncology under its "net revenue model." With these conversions, 83 percent of US Oncology's net revenue is now derived from non-net-revenue model agreements (including non-PPM agreements),an increase from 41 percent on Dec. 31, 2000, when US Oncology began its efforts to transition practices away from the net revenue model. "Particularly in light of recent reductions in Medicare reimbursement, we believe these conversions affirm how highly practices value their affiliation with us in facing the challenge of providing high-quality, cost-efficient cancer care to their patients in today's environment," said R. Dale Ross, chairman and CEO of US Oncology. "Converting these contracts to an earnings model leads to an alignment of interests and mutual focus on cost containment and capital investment in the vast growth opportunities presented in the cancer-care market." Dr. Manuel Modiano of the Tucson practice commented, "This contract amendment reaffirms our shared commitment to our affiliation and strengthens our relationship going forward." US Oncology operates its physician practice management business primarily under two economic models. Under each model, US Oncology is reimbursed for all operating costs of the practice. Under the "earnings model," US Oncology is then paid a percentage of practice operating income as its management fee. Under the "net revenue model," the practice is entitled to retain a fixed portion of revenues before any management fees are paid. Therefore, under that model, if practice profitability is insufficient to pay both the fixed percentage retained by the practice and management fees, the entire amount of such shortfall is a reduction to US Oncology's management fee. For this reason, US Oncology believes that the earnings model better aligns the interests of affiliated practices with those of US Oncology, particularly in a rising cost environment, and since 2001 has been converting agreementswith affiliated practices from the net revenue model to the earnings model. In certain states, US Oncology's fee is a fixed fee. "In practices that have converted to the earnings model, we have seen a significant increase in practice involvement in local management, as well as enhanced opportunities to expand and diversify practice offerings," Ross said. "US Oncology and the physicians at our practice share the same strategic vision and dedication to high-quality community cancer care, and we are excited about opportunities to grow and expand our service offerings in the Roanoke area," said Dr. Dan Temeles, president of the Roanoke practice. Dr. Alan Kritz of the Raleigh practice added that, "Particularly in these times of reimbursement pressure, we value the national scope and expertise of US Oncology and its continuing commitment to our market." About US Oncology, Inc. US Oncology, headquartered in Houston, Texas, is America's premier cancer- care services company. The company provides comprehensive services to a network of affiliated practices comprising more than 875 affiliated physicians in over 450 sites, including 78 integrated cancer centers, in 30 states. These practices care for approximately 15 percent of the country's new cancer cases each year. US Oncology's mission is to enhance access to high-quality cancer care in America. The company's strategies to accomplish this mission include: (a) helping practices lower their pharmaceutical and administration costs, (b) providing the capital and expertise to expand and diversify into radiation oncology and diagnostic radiology, (c) providing sophisticated management services to enhance profitability, and (d) providing access to and managing clinical research trials. In addition, the company assists practices in negotiations with private payers, in implementing programs to enhance efficiencies with respect to drugs and in expanding service offerings such as positron emission tomography and intensity modulated radiation therapy. This news release contains forward-looking statements, including statements that include the words "believes," "expects," "anticipates," "estimates," "intends," "plans," "projects," or similar expressions and statements regarding our prospects. All statements concerning business outlook, reimbursement outlook, expected financial results, business development activities and all other statements other than statements of historical fact included in this news release are forward-looking statements.Although the company believes that the expectations reflected in such statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Matters that could impact future results and financial condition or otherwise affect expectations include recent legislation relating to prescription drug reimbursement under Medicare, including the way in which such legislation is implemented with respect to modifications in practice expense reimbursement, calculation of average sales price, implementation of third-party vendor programs and other matters, the impact of the recent legislation on other aspects of our business (such as private payer reimbursement, the ability of practices to continue offering chemotherapy services to Medicare patients or maintaining existing practice sites, physician response to the legislation, including with respect to retirement or choice of practice setting, development activities, and the possibility of additional impairments of assets, including management services agreements and pharmaceutical pricing), reimbursement for pharmaceutical products generally, our ability to maintain good relationships with existing practices, expansion into new markets and development of existing markets, our ability to complete cancer centers and PET facilities currently in development, our ability to recover the costs of our investments in cancer centers, our ability to complete negotiations and enter into agreements with practices currently negotiating with us, reimbursement for health-care services, continued efforts by payers to lower their costs, government regulation and enforcement, continued relationships with pharmaceutical companies and other vendors, changes in cancer therapy or the manner in which care is delivered, drug utilization, increases in the cost of providing cancer treatment services and the operations of the company's affiliated physician practices. Please refer to the company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for 2002 and subsequent SEC filings, for a more extensive discussion of factors that could cause actual results to differ materially from the company's expectations. DATASOURCE: US Oncology, Inc. CONTACT: Steve Sievert of US Oncology, Inc., +1-832-601-6193, or Web site: http://www.usoncology.com/

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