Fort Sanders Health System and the University of Tennessee Medical Center
have agreed to affiliate and work together toward making healthcare more
accessible and cost effective for the communities they serve.

UT Medical Center Executive Vice Chancellor Charles Mercer, MD, and Fort
Sanders Health System President Alan Guy said the affiliation will mean
better coordination of clinical and support services as well as education
and research activities.

They pointed to the success of a pilot effort in Loudon County where Fort
Sanders and University Medical Center together manage a primary care center
in Tellico Village that is staffed by physicians from both

Further indication of a closer association between the region's two leading
healthcare systems was the recent addition of the Medical Center as a
provider in PHP's managed care products. PHP Companies, jointly owned by
Fort Sanders and Methodist Medical Center of Oak Ridge, offers the region's
largest managed care organization with over 275,000 covered lives. Until UT
Medical Center was added, Fort Sanders Regional and Parkwest and Children's
Hospital were the only Knoxville hospitals in the network. Other UT-Fort
Sanders joint managed care initiatives are also being developed.

Other cooperative efforts under active consideration are the development of
compatible information systems and shared biomedical imaging and
telemedicine services.

Mercer and Guy also pointed to opportunities for cooperation in education
and research. University Medical Center has a long history as a teaching
facility and Fort Sanders Health System has operated a School of Nursing
since 1919. Joint initiatives will create additional teaching sites for UT
graduate medical education and new programs and venues for
para-professional training. In addition, there will be opportunities for
joint development of clinical research protocols.

Another area of cooperation will be in community health improvement. In
February, the two institutions led a day-long forum on creating healthier
communities for almost 300 leaders in Knox, Sevier and Loudon Counties.
This is expected to lead to other joint strategies to improve the health
status of these and other East Tennessee counties.

"In the future, as the healthcare industry shifts to managed care and
assumes responsibility and risk for those managed care plan enrollees on a
per-member, per-month basis, health improvement strategies to improve the
broad health status of the region will take on increasing importance," said
Fort Sanders President Guy. "Healthcare will shift from illness care to
total health care that encourages health promotion and disease prevention
for the total community."

Mercer added, "This is only one of many implications of the dramatic and
rapid changes occurring in the healthcare industry, all of which have
contributed to Fort Sanders' and UT Medical Center's decision to affiliate.
The opportunity for cooperation between our medical staffs is very
exciting. Both of our institutions believe that our physicians' intense
involvement is critical to the future of any network."

"Market changes are driving the need for hospitals and physicians to
affiliate into more effective delivery systems and networks to drive down
costs, enhance quality, and develop new products in a managed care
environment," said Fort Sanders Executive Vice President for Network
Development Marvin Eichorn.

"Individually, both UT Medical Center and the Fort Sanders Health System
have distinguished histories; together, with their medical staffs, they
have the potential to be resource leaders in the evolution of the
healthcare industry for the benefit of our region," explained Mickey
Bilbrey, UT Medical Center Vice Chancellor for Health Systems

Officials of both institutions stressed that their affiliation is not a
merger but a cooperative move intended to benefit patients and the
community at large. This agreement will not affect either institution's
affiliate hospital program, which both have developed to support the
special needs of community hospitals. Rather, UT and Fort Sanders believe
their new relationship will strengthen these existing affiliations.

"As a board member, I am excited about the opportunities this affiliation
gives us to create the comprehensive, coordinated healthcare delivery
system the people of our region deserve," said Ralph A. Davidson, Jr.,
Chairman of Fort Sanders Health System Board when talks began between Fort
Sanders and UT last year.

Both UT Medical Center and Fort Sanders Health System are not-for-profit