Catasys, Inc. (OTCQB: CATS), provider of specialized health management services to health plans, announced today the latest outcome results for client health plan members enrolled in its OnTrak program. The OnTrak program continues to demonstrate improved member health resulting in reduced hospital utilization and a reduction in total health care costs of more than 50%. Program retention of eligible members remains high at more than 80%. The OnTrak program savings represents an estimated $20 million in potential annual savings for every one million health plan members.

Health improvements and the resulting total health care cost savings were demonstrated by the OnTrak program in both commercial and managed Medicare plans. The savings were driven primarily through a 76% reduction in facility costs (dramatically lower emergency department and inpatient utilization) and a 50% reduction in professional costs (e.g., doctor fees), partially offset by an increase in pharmacy costs from improved medication compliance for members with coexisting medical conditions. Encouragingly, medication use increased, especially among members with chronic conditions, as members became more proactive with their care which should assist in reducing facility and doctor utilization.

Substance dependent health plan members eligible for the OnTrak program tend to have one or more chronic co-morbid conditions. They are admitted to the hospital more frequently than non substance dependent members, often for medical conditions exacerbated by drug and/or alcohol use. Health plan data shows that typically more than 90% of these members do not receive care for substance dependence through their health insurance. The OnTrak program engages these high cost members in its integrated 52 week treatment program, which is designed to treat substance dependence while ensuring care for other co-existing conditions.

Commercial health plan substance dependent members who would be eligible for the OnTrak program incur over $110 million more in claims per one million members than non-substance dependent members. In managed Medicare and managed Medicaid populations that incremental cost is over $275 million and $450 million respectively, driven by higher incidences of substance dependence and higher costs per member in these populations. Due to the higher incident rate, managed Medicare covered lives are expected to result in more enrollment than an equivalent number of commercial covered lives at the same enrollment rates. As a result, each covered life in managed Medicare is equivalent to 2.5 commercial covered lives (known as “Commercial Life Equivalent”).

The cost savings and program retention were calculated by Catasys for eligible members enrolled in the OnTrak program across all Catasys customers based on claims data provided by Catasys customers. Catasys currently provides its OnTrak program to commercial and Medicare health plans and large employer populations in Kansas, Louisiana, Massachusetts, Michigan, Nevada and Oklahoma.

About Catasys

Catasys, Inc. provides specialized health management services to health plans, employers and unions through a network of licensed and company managed health care providers. The Catasys OnTrak program was designed to address substance dependence as a chronic disease and the whole health of the member. The program delivers integrated medical and psychosocial interventions in combination with long term care coaching in order to improve member health and thereby lower costs. For further information, please visit www.catasyshealth.com.

Forward-Looking Statements

Except for statements of historical fact, the matters discussed in this press release are forward-looking and made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect numerous assumptions and involve a variety of risks and uncertainties, many of which are beyond our control that may cause actual results to differ materially from stated expectations. These risk factors include, among others, changes in regulations or issuance of new regulations or interpretations, limited operating history, lack of outcomes and statistically significant formal research studies, difficulty enrolling members in our programs, the risk that treatment programs might not be effective, difficulty in developing, exploiting and protecting proprietary technologies and intense competition and substantial regulation in the health care industry. You are urged to consider statements that include the words “may,” “will,” “would,” “could,” “should,” “believes,” “estimates,” “projects,” “potential,” “expects,” “plan,” “anticipates,” “intends,” “continues,” “forecast,” “designed,” “goal,” or the negative of those words other comparable words to be uncertain and forward-looking. For a further list and description of the risks and uncertainties we face, please refer to our most recent Securities and Exchange Commission filings which are available on its website at http://www.sec.gov. Such forward-looking statements are current only as of the date they are made, and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.