754009--2/27/2007--SIERRA_HEALTH_SERVICES

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Our actual experience for our enhanced PDP product offering for January 2007 has varied materially from the actuarial assumptions provided by the independent actuaries we retained to develop the plan design for our 2007 bid. As a result, our 2007 medical expenses for this program are expected to be significantly higher than anticipated, thereby materially adversely affecting our projected operating results, financial position and cash flows for 2007. Our continuing participation in the program beyond 2007 is subject to various risks including risks that may not be currently evident due to the newness of the program. The PDP program was new for 2006 and the final reconciliation of the results of the 2006 program will not occur with CMS until around the third quarter of 2007. If the results of this final reconciliation are not what we have estimated, the actual results may have a materially adverse effect on our operating results. During the past 18 months we have had several membership reconciliation issues with CMS that impact our Medicare Advantage HMO plan as well as our Medicare Advantage local and regional PPO plans and our stand-alone PDP. If these membership reconciliation issues are not able to be resolved and we continue to have these types of issues, our operating results may be adversely affected. As a health care company, we and our health care providers may be subject to increased malpractice costs and claims, which could adversely affect our business. If we fail to effectively manage our admissions to non-contracted facilities or there is insufficient capacity at contracted facilities, our operating results may be adversely affected. As a health care company, we and our health care providers may be subject to increased malpractice costs and claims, which could adversely affect our business. If we fail to effectively manage our admissions to non-contracted facilities or there is insufficient capacity at contracted facilities, our operating results may be adversely affected. If the billed charges we receive from non-contracted facilities are significantly higher than expected and are unreasonable, our operating results may be adversely affected. If we fail to qualify for the Nevada home office tax credit, our premium tax costs will increase. Our ability to obtain and maintain favorable group benefit agreements with employer groups affects our profitability. There can be no assurance that we will be able to maintain and enhance our information systems. Our ability to obtain and maintain favorable group benefit agreements with employer groups affects our profitability. There can be no assurance that we will be able to maintain and enhance our information systems. We operate in a highly competitive environment. The majority of our business is in southern Nevada and a significant prolonged economic recession would adversely affect our operating results. Our results of operations could be adversely affected by understatements in our actual liabilities caused by understatements in our actuarial estimates of incurred but not reported health care claims Our results of operations could be adversely affected by understatements in our actual liabilities caused by understatements in our actuarial estimates of incurred but not reported health care claims Our failure to comply with corporate practice of medicine laws in states in which we operate could result in our being unable to practice medicine in that state and possibly lead to penalties and/or higher medical expenses. 6, we had $43.5 million of senior convertible debentures outstanding, which we may not be able to repay in cash. Our debt levels may limit our flexibility in obtaining additional financing and in pursuing other business opportunities. Our debt levels may limit our flexibility in obtaining additional financing and in pursuing other business opportunities. Our senior secured credit facility imposes significant operating and financial restrictions on us. We depend on our management for our success and the loss of our founder, Chairman of the Board and Chief Executive Officer, or other key executives, could have a material adverse effect on our business. Terrorist attacks, such as the attacks that occurred in New York and Washington, D.C. on September 11, 2001, and other attacks, acts of war or military actions, such as military actions in Iraq or elsewhere, may adversely affect our operating results and financial condition. Our business is subject to substantial government regulation and the impact of this regulation may increase our exposure to lawsuits and/or penalties or other regulatory actions for non-compliance or may otherwise adversely affect our business. Our business is subject to substantial government regulation and the impact of this regulation may increase our exposure to lawsuits and/or penalties or other regulatory actions for non-compliance or may otherwise adversely affect our business. Our forecasts and forward-looking statements are based on assumptions and subject to uncertainties and actual results may be significantly different from those forecast We may not realize the total amount of the net sales proceeds from our sale of the workers compensation insurance operations. We may not realize the total amount of the net sales proceeds from our sale of the workers compensation insurance operations. We are obligated to perform certain services in connection with the sale of the workers compensation insurance operations and the accrual for the estimated contractual funding shortfall may be insufficient, which could result in a material adverse effect on our operating results.

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754009--2/27/2007--SIERRA_HEALTH_SERVICES_INC