8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 16, 2008

HEALTHWAYS, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-19364	62-1117144
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

701 Cool Springs Boulevard Franklin, Tennessee	37067
(Address of principal executive offices)	(Zip Code)

(615) 614-4929

(Registrant's telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On October 16, 2008, Healthways, Inc. issued a press release announcing earnings results for the fourth quarter and fiscal year ended August 31, 2008, the text of which is attached hereto as Exhibit 99.1. This information furnished pursuant to this Item 2.02 and Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as shall be expressly set forth by specific reference in such filing.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b)    In connection with the appointment of Stefen F. Brueckner as President and Chief Operating Officer of the Company as described in (c) below, James E. Pope, who has served as Chief Operating Officer of the Company since May 2006, will move from Chief Operating Officer to Chief Science Officer of the Company. In addition, due to the separation of the roles of Chief Executive Officer and President, Ben R. Leedle, Jr., current Chief Executive Officer and President of the Company, will continue to serve as Chief Executive Officer of the Company while Mr. Brueckner will serve as President of the Company.

(c)     On October 16, 2008, the Company announced the appointment of Mr. Brueckner to serve as President and Chief Operating Officer of the Company. Prior to joining the Company, Mr. Brueckner, 59, served as Vice President, Senior Products, for Humana Inc., from 2005 to 2008 and served as Vice President, Market Operations and Large Group Underwriting, from 2001 to 2005.

On October 11, 2008, the Company entered into an employment agreement with Mr. Brueckner in connection with his appointment as President and Chief Operating Officer of the Company. The employment agreement has a term of two years and may be terminated at any time upon the mutual written agreement of the Company and Mr. Brueckner. Pursuant to the terms of the employment agreement, Mr. Brueckner will receive an annual base salary of $475,000, and will be eligible to participate in all benefit plans maintained by the Company for officers. Under the employment agreement, short-term incentive plan awards, if any, and long-term incentive awards will be determined by the Board of Directors, or a committee thereof comprised solely of independent directors.

Mr. Brueckner’s employment agreement with the Company provides for potential severance and change of control benefits. In the event Mr. Brueckner’s employment is terminated by the Company without cause or by Mr. Brueckner for good reason, Mr. Brueckner will be entitled to receive (i) all base salary and benefits due to him through the date of termination and a pro-rata portion of any bonus plan or other compensation to which he is otherwise entitled as of the date of termination, (ii) his base salary for a period of 18 months to be paid at regular payroll dates following such termination, and (iii) group medical benefits for a period of 18 months following the date of termination. In addition, upon execution of a full release of claims in favor of the Company, Mr. Brueckner may elect to receive an enhanced severance consisting of six additional months of base salary payable at regular payroll dates following the date of termination. Further, all of Mr. Brueckner’s outstanding unvested equity awards shall vest and/or remain exercisable for their stated terms in accordance with the terms of the agreement governing such equity award. In addition, all amounts contributed by the Company to the Company’s Capital Accumulation Plan (“CAP”) for Mr. Brueckner’s benefit shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the date of termination. If Mr. Brueckner’s employment is terminated by the Company without cause or by Mr. Brueckner for good reason within 12 months following a change in control, the payments described in (i), (ii) and (iii) above shall be paid in a lump sum no later than 60 days following the date of termination.

If Mr. Brueckner dies during the term of the employment agreement, the Company will pay his base salary due through the date of his death plus a pro-rata portion of any bonus plan to which he is otherwise entitled as of the time of his death. Further, all of Mr. Brueckner’s outstanding unvested equity awards shall vest and/or remain exercisable for their stated terms in accordance with the terms of the agreement governing such equity award. In addition, all amounts contributed by the Company to the CAP for Mr. Brueckner’s benefit shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the date of his death.

If Mr. Brueckner’s employment agreement is terminated by the Company or Mr. Brueckner due to Mr. Brueckner’s disability, Mr. Brueckner will be entitled to receive (i) all base salary and benefits due to him through the date of termination and a pro-rata portion of any bonus plan to which he is otherwise entitled as of the date of termination, (ii) his base salary for a period of 18 months to be paid at regular payroll dates following such termination, and (iii) if permitted under the Company’s group medical insurance, group medical benefits for a period of two years following the date of termination; provided, that if Mr. Brueckner instead elects continuation of group benefits under COBRA, the Company shall pay the full cost of premiums for two years following the date of termination. The amounts described in (ii) and (iii) above will be offset by any disability insurance payments Mr. Brueckner receives as a result of his disability. In addition, upon execution of a full release of claims in favor of the Company, Mr. Brueckner may elect to receive an enhanced severance consisting of six additional months of base salary payable at regular payroll dates following the date of termination. Further, all of Mr. Brueckner’s outstanding unvested equity awards shall vest and/or remain exercisable for their stated terms in accordance with the terms of the agreement governing such equity incentive. In addition, all amounts contributed by the Company to the CAP for Mr. Brueckner’s benefit shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the date of termination.

If Mr. Brueckner’s employment is terminated by the Company for cause, he will be entitled to receive all base salary and benefits to be paid or provided to him under his employment agreement through the date of termination. In addition, upon execution of a full release of claims in favor of the Company, Mr. Brueckner may elect to receive six additional months of base salary payable at regular payroll dates following the date of termination. Further, the vested portions of Mr. Brueckner’s outstanding equity awards shall remain exercisable for their stated terms in accordance with the terms of the agreement governing such equity awards. All of Mr. Brueckner’s unvested equity awards shall terminate on the date of termination. In addition, all amounts contributed by the Company to the CAP for Mr. Brueckner’s benefit that have vested shall be paid out in accordance with the terms of the CAP as in effect on the date of termination. Mr. Brueckner shall not be entitled to receive any unvested Company contributions to the CAP.

If Mr. Brueckner’s employment is terminated by Mr. Brueckner without good reason, he will be entitled to receive all base salary and benefits to be paid or provided to him under his employment agreement through the next payroll date following the date of termination. Further, the vested portions of Mr. Brueckner’s outstanding equity awards shall remain exercisable for their stated terms in accordance with the terms of the agreement governing such equity awards. All of Mr. Brueckner’s unvested equity awards shall terminate on the date of termination. In addition, all amounts contributed by the Company to the CAP for Mr. Brueckner’s benefit that have vested shall be paid out in accordance with the terms of the CAP as in effect on the date of termination. Mr. Brueckner shall not be entitled to receive any unvested Company contributions to the CAP.

Mr. Brueckner is generally subject to non-compete and non-solicitation covenants under his employment agreement for a period of 18 months following the date of his termination. In the event Mr. Brueckner terminates his employment without good reason, the non-compete and non-solicitation covenants shall remain in effect for 24 months; however, Mr. Brueckner may reduce the term of the non-

compete and non-solicitation covenants from 24 months to 18 months by executing a full release of claims in favor of the Company.

In connection with his employment, the Company has granted Mr. Brueckner options to purchase 225,000 shares of the Company’s common stock. Such options will vest ratably over four years.

A copy of Mr. Brueckner’s employment agreement is attached hereto as Exhibit 10.1. A copy of the press release announcing Mr. Brueckner’s appointment and other management changes referenced herein is attached hereto as Exhibit 99.1.

Item9.01. Financial Statements and Exhibits.

(c) Exhibits:
Exhibit 10.1	Employment Agreement between Healthways, Inc. and Stefen F. Brueckner
Exhibit 99.1	Press Release.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

HEALTHWAYS, INC.
By:	/s/ Mary A. Chaput
	Mary A. Chaput
	Chief Financial Officer

Date: October 16, 2008

EXHIBIT INDEX

Exhibit 10.1	Employment Agreement between Healthways, Inc. and Stefen F. Brueckner
Exhibit 99.1	Press Release dated October 16, 2008

EX-10

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT dated as of October 11, 2008 (the “Agreement”), is by and between Healthways, Inc., a Delaware corporation (the “Company”), and Stefen F. Brueckner (the “Executive”).

WHEREAS, the Company desires that the Executive serve as President and COO and the Executive desires to hold such position under the terms and conditions of this Agreement; and

WHEREAS, the parties desire to enter into this Agreement setting forth the terms and conditions of the employment relationship of the Executive with the Company.

NOW, THEREFORE, intending to be legally bound hereby, the parties agree as follows:

I. EMPLOYMENT. The Company hereby employs the Executive and the Executive hereby accepts employment with the Company, upon the terms and subject to the conditions set forth herein.

II. TERM. Subject to termination as stated in Section VI, the term of employment of the Executive pursuant to this Agreement (as the same may be extended, the “Term”) shall commence on October 31, 2008 (the “Effective Date”), and shall have a continuous term of two (2) years thereafter.

III. POSITION. During the Term, the Executive shall serve as President and COO of the Company performing duties commensurate with the position and such additional duties as the Company shall determine. If asked, the Executive agrees to serve, without any additional compensation, as a director on the Board of Directors of the Company (the “Board”) and/or the board of directors of any subsidiary of the Company, and/or in one or more officer positions with the Company and/or any subsidiary of the Company. If the Executive’s employment is terminated for any reason, whether such termination is voluntary or involuntary, the Executive shall resign as a director and officer of the Company (and any of its subsidiaries), such resignation to be effective no later than the date of termination of the Executive’s employment with the Company.

IV. DUTIES. During the Term, the Executive shall devote his full time and attention during normal business hours to the business and affairs of the Company; provided, however, that it shall not be a violation of this Agreement for the Executive with the approval of the Company to devote reasonable periods of time to charitable and community activities and industry or professional activities, and/or to manage personal investments, so long as such activities do not interfere with the performance of the Executive’s responsibilities under this Agreement.

V. COMPENSATION

A. Base Salary. The Executive’s initial base salary as of the Effective Date is $475,000.00. Effective January 1 of each calendar year after the Effective Date during the Term of this Agreement, upon the recommendation of the Chief Executive Officer (“CEO”), the Board (or a committee of the Board) shall review the Executive’s base salary and may increase such amount if and as it may deem advisable. Such initial base salary, as it may be increased during the Term, is defined as the “Base Salary.” The Base Salary shall be payable in substantially equal installments in accordance with the Company’s normal payroll practices, and is subject to all proper taxes and withholding. The Base Salary rate at which the Executive is being compensated on the Date of Termination (as defined below) shall be the Base Salary rate used in determining all severance amounts payable to the Executive hereunder.

B. Bonus Plan. Such bonus, if any, as shall be determined upon the recommendation of the CEO by the Board (or any designated Committee of the Board comprised solely of independent directors), shall be paid in accordance with the terms and conditions of the bonus plan established for the Company (“Bonus Plan”).

C. Long Term Incentive Awards. During the Term, upon the recommendation of the CEO, the Board (or any designated committee of the Board comprised solely of independent directors) will consider, in its sole discretion, long term incentive awards to the Executive pursuant to the Company’s equity incentive plans.

D. Vacation. During each calendar year of this Agreement, the Executive shall be entitled to vacation in accordance with Company policy in effect from time to time, but in any event not less than four (4) weeks per calendar year.

E. Other Benefits. In addition to the benefits specifically provided for herein, during the Term the Executive shall be entitled to participate in all benefit plans maintained by the Company for officers generally according to the terms of such plans.

VI. TERMINATION OF AGREEMENT. The Executive’s employment under this Agreement shall not be terminated except as set forth in this Section. Any reference to the date of delivery of a notice of termination or resignation by either the Company or the Executive in this Section VI shall constitute the “Date of Termination,” unless otherwise set forth herein. For purposes of this Agreement, the Executive will be deemed to have terminated employment when the Executive has a “separation from service” from the Company as determined in accordance with Treasury Regulation 1.409A-1(h).

A. By Mutual Consent. The Executive’s employment pursuant to this Agreement may be terminated at any time by the mutual written agreement of the Company and the Executive upon such terms as are agreed upon between the parties.

2

B. Death. If Executive dies during the Term of this Agreement, the Company shall pay his Base Salary due through the date of his death to the Executive’s designated beneficiary plus a pro-rata portion of any Bonus Plan or other compensation to which he is otherwise entitled as of the time of his death, which Bonus Plan amount will be determined after the end of the fiscal year for which the Bonus Plan was in place. The amount of Base Salary due through the date of the Executive’s death shall be paid to his designated beneficiary within thirty (30) days of the Executive’s death, with the date of such payment chosen by the Company in its sole discretion. Any bonus shall be paid at such time designated in the Bonus Plan. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other unvested equity incentives shall vest and/or remain exercisable for their stated terms solely in accordance with the terms of the award agreements to which the Company and the Executive are parties at the time of his death. In addition, all amounts contributed by the Company to the Capital Accumulation Plan (“CAP”) for the benefit of the Executive shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect at the time of the Executive’s death. The Company shall then have no further obligations to the Executive or any representative of his estate or his heirs except that Executive’s estate or beneficiaries, as the case may be, shall be paid such amounts as may be payable under the Company’s life insurance policies and other plans as they relate to benefits following death then in effect.

C. Disability

1. The Executive’s employment may be terminated by written notice by either party to the other party, when:

a. the Executive suffers a physical or mental disability entitling the Executive to long-term disability benefits under the Company’s long-term disability plan, if any, or

b. in the absence of a Company long-term disability plan, the Executive is unable, as determined by the Board (or any designated Committee of the Board), to perform the essential functions of his regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six (6) consecutive months.

2. If the Executive’s employment is terminated under this Section (C), the Executive shall be entitled to receive:

a. all Base Salary and benefits due to the Executive through the Date of Termination (payable within thirty (30) days of the Date of Termination, with the date of such payment determined by the

3

Company in its sole discretion) and a pro-rata portion of any Bonus Plan or other compensation to which he is otherwise entitled as of the Date of Termination, which Bonus Plan amount will be determined after the end of the fiscal year for which the Bonus Plan was in place and paid in accordance with the terms of such Bonus Plan;

b. an amount equal to the Executive’s Base Salary for a total of eighteen (18) months following the Date of Termination; and

c. if permitted under the Company’s group medical insurance, group medical benefits at the same rate as then in effect for the Company’s employees for two (2) years after the Date of Termination; provided, that if the Executive instead elects continuation of group benefits under COBRA, the Company shall pay the full cost of the premiums for two (2) years following the Date of Termination. The costs of the Company’s portion of any premiums due under this clause (c) shall be included in the Executive’s gross income to the extent the provision of such benefits is deemed to be discriminatory under Section 105(h) of the Internal Revenue Code of 1986, as amended (the “Code”).

3. The amounts in clause 2(b) above shall be reduced by any disability insurance payments the Executive receives as a result of his disability, and shall be paid to the Executive periodically at the regular payroll dates commencing as of the Date of Termination and for the remaining term of the non-compete covenant in Section IX hereof. In addition, the Executive will receive an enhanced severance amount consisting of six (6) additional months of the Executive’s Base Salary (payable periodically at regular payroll intervals) upon his or her execution of a full release of claims in favor of the Company. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other unvested equity incentives shall vest and/or remain exercisable for their stated terms solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the Date of Termination.

D. By the Company for Cause

1. The Executive’s employment may be terminated by the Board upon recommendation of the CEO, both acting in good faith, by written notice to the Executive specifying the event(s) relied upon for such termination upon the occurrence of any of the following events (each of which shall constitute “Cause” for termination):

4

a. the continued failure by the Executive to substantially perform his duties after written notice and failure to cure within sixty (60) days;

b. conviction of a felony or engaging in misconduct which is materially injurious to the Company, monetarily or to its reputation or otherwise, or which would damage Executive’s ability to effectively perform his duties;

c. theft or dishonesty by the Executive;

d. intoxication while on duty; or

e. willful violation of Company policies or procedures after written notice and failure to cure within thirty (30) days.

2. If the Executive’s employment is terminated under this Section (D), the Executive shall be entitled to receive all Base Salary and benefits to be paid or provided to the Executive under this Agreement through the Date of Termination, and no more.

3. In addition, the Executive will receive an enhanced severance amount consisting of six (6) additional months of the Executive’s Base Salary (payable periodically at regular payroll intervals) upon his or her execution of a full release of claims in favor of the Company. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other vested equity incentives shall remain exercisable solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. All unvested equity incentives shall terminate on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive that have vested shall be paid out in accordance with the terms of the CAP as in effect on the Date of Termination. The Executive shall not be entitled to receive any unvested Company contributions to the CAP.

E. By the Company Without Cause

1. The Executive’s employment may be terminated by the Board upon recommendation of the CEO at any time without Cause by delivery of a written notice of termination to the Executive. If the Executive’s employment is terminated under this Section (E), the Executive shall be entitled to receive:

5

a. all Base Salary and benefits due to the Executive through the Date of Termination (payable within thirty (30) days of the Date of Termination, with the date of such payment determined by the Company in its sole discretion) and a pro-rata portion of any Bonus Plan or other compensation to which he is otherwise entitled as of the Date of Termination, which Bonus Plan amount will be determined after the end of the fiscal year for which the Bonus Plan was in place and paid in accordance with the terms of such Bonus Plan;

b. an amount equal to the Executive’s Base Salary for a total of eighteen (18) months following the Date of Termination; and

c. group medical benefits for eighteen (18) months after the Date of Termination. The costs of the Company’s portion of any premiums due under this clause (c) shall be included in the Executive’s gross income to the extent the provision of such benefits is deemed to be discriminatory under Section 105(h) of the Internal Revenue Code of 1986, as amended (the “Code”).

2. The amount in clause 1(b) above shall be paid to the Executive periodically at the regular payroll dates commencing as of the Date of Termination and for the remaining term of the non-compete covenant in Section IX hereof. In addition, the Executive will receive an enhanced severance amount consisting of six (6) additional months of the Executive’s Base Salary (payable periodically at regular payroll intervals) upon his or her execution of a full release of claims in favor of the Company. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other unvested equity incentives shall vest and/or remain exercisable for their stated terms solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the Date of Termination.

F. By the Executive for Good Reason

1. The Executive’s employment may be terminated by the Executive by written notice of his resignation delivered within sixty (60) days after the occurrence of any of the following events, each of which shall constitute “Good Reason” for resignation:

a. a material reduction in the Executive’s Base Salary (unless such reduction is part of an across the board reduction affecting all Company executives with a comparable title);

6

b. a requirement by the Company to relocate the Executive to a location that is greater than twenty-five (25) miles from the location of the office in which the Executive performs his duties hereunder at the time of such relocation;

c. in connection with a Change in Control, a failure by the successor person or entity, or the Board, either to honor this Agreement or to present the Executive with an employment agreement containing provisions substantially similar to this Agreement or otherwise satisfactory to the Executive and which is executed by the Executive; or

d. a material reduction in the Executive’s title, or a material and adverse change in Executive’s status and responsibilities, or the assignment to Executive of duties or responsibilities which are materially inconsistent with Executive’s status and responsibilities.

2. The Executive shall give the Company written notice of his intention to resign for Good Reason (stating the reason therefor) within sixty (60) days after the occurrence of one of the events stated in subparagraphs (a), (b), (c) or (d) above (the “Good Reason Events”) and the Company shall have sixty (60) days (the “Cure Period”) thereafter to rescind the Good Reason Event(s), in which event the Executive no longer shall have the right to resign for Good Reason. If the Company fails to rescind the Good Reason Event(s) before the expiration of the Cure Period, then the Executive may resign for Good Reason and receive the benefits described below so long as the resignation for Good Reason occurs within thirty (30) days following the expiration of the Cure Period, otherwise the right to resign on the basis of that Good Reason Event(s) shall be deemed to have been waived. If the Executive resigns for Good Reason as defined in this Section (F), the Executive shall be entitled to receive:

a. all Base Salary and benefits due to the Executive under this Agreement through the Date of Termination (payable within thirty (30) days of the Date of Termination, with the date of such payment determined by the Company in its sole discretion) and a pro-rata portion of any Bonus Plan or other compensation to which he is otherwise entitled as of the Date of Termination, which Bonus Plan amount will be determined after the end of the fiscal year for which the Bonus Plan was in place and paid in accordance with the terms of such Bonus Plan;

b. an amount equal to Executive’s Base Salary for a total of eighteen (18) months following the Date of Termination; and

7

c. group medical benefits for eighteen (18) months after the Date of Termination. The costs of the Company’s portion of any premiums due under this clause (c) shall be included in the Executive’s gross income to the extent the provision of such benefits is deemed to be discriminatory under Section 105(h) of the Internal Revenue Code of 1986, as amended (the “Code”).

3. The amount in clause 2(b) above shall be paid to the Executive periodically at the regular payroll dates commencing as of the Date of Termination and for the remaining term of the non-compete covenant in Section IX hereof. In addition, the Executive will receive an enhanced severance amount consisting of six (6) additional months of the Executive’s Base Salary (payable periodically at regular payroll intervals) upon his or her execution of a full release of claims in favor of the Company. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other unvested equity incentives shall vest and/or remain exercisable for their stated terms solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the Date of Termination.

G. By the Executive Without Good Reason

1. The Executive may terminate his employment at any time by delivery of a written notice of resignation to the Company no less than sixty (60) days and no more than ninety (90) days prior to the effective date of the Executive’s resignation. The Executive shall receive all Base Salary and benefits due under this Agreement through the next payroll date following the Date of Termination, and no more.

2. Although the Executive is not entitled to any severance amount in the event of termination pursuant to this Section (G), the Executive may reduce the term of the non-compete and non-solicitation covenants in Section IX hereof, from twenty-four (24) months to eighteen (18) months, upon execution of a full release of claims in favor of the Company. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other vested equity incentives shall remain exercisable solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. All unvested equity incentives shall terminate on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive that have vested shall be paid out in accordance with the terms of the CAP as in effect on the Date of Termination. The

8

Executive shall not be entitled to receive any unvested Company contributions to the CAP.

H. Following a Change in Control

1. If the Executive’s termination of employment without Cause (pursuant to Section VI(E)) or for Good Reason (pursuant to Section VI(F)) occurs within twelve (12) months following a Change in Control, then the amounts payable pursuant to Section VI(E) or Section VI(F) above, as the case may be, shall be referred to as the “Change in Control Severance Amount,” and shall be paid to Executive in a lump sum no later than sixty (60) days following the Date of Termination, with the date of such payment determined by the Company in its sole discretion. In addition, the Executive will receive an enhanced severance amount consisting of six (6) additional months of the Executive’s Base Salary (payable periodically at regular payroll dates) upon his or her execution of a full release of claims in favor of the Company. Payments pursuant to this Section VI(H) shall be made in lieu of, but not in addition to, any payment under any other paragraph of this Section VI. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other unvested equity incentives shall vest and/or remain exercisable for their stated terms solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the Date of Termination.

2. For the purposes of this Agreement, a “Change in Control” shall mean any of the following events:

a. any person or entity, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than the Company or a wholly-owned subsidiary thereof or any employee benefit plan of the Company or any of its subsidiaries, becomes the beneficial owner of the Company’s securities having 35% or more of the combined voting power of the then outstanding securities of the Company that may be cast for the election of directors of the Company (other than as a result of an issuance of securities initiated by the Company in the ordinary course of business);

b. as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sales of assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding securities of the Company or any successor

9

corporation or entity entitled to vote generally in the election of the directors of the Company or such other corporation or entity after such transaction are held in the aggregate by the holders of the Company’s securities entitled to vote generally in the election of directors of the Company immediately prior to such transaction; or

c. during any period of two (2) consecutive years, individuals who at the beginning of any such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company’s stockholders, of each director of the Company first elected during such period was approved by a vote of at least two-thirds of the directors of the Company then still in office who were directors of the Company at the beginning of any such period.

3. Excise Tax Payment. If, in connection with a Change in Control, the Internal Revenue Service asserts, or if the Executive or the Company is advised in writing by an established accounting firm, that any payment in the nature of compensation to, or for the benefit of, the Executive from the Company (or any successor in interest) constitutes an “excess parachute payment” under Section 280G of the Code, whether paid pursuant to this Agreement or any other agreement, and including property transfers pursuant to securities and other employee benefits that vest upon a Change in Control (collectively, the “Excess Parachute Payments”) the Company shall pay to the Executive, on demand, a cash sum equal to the amount of excise tax due under Section 4999 of the Code on the entire amount of the Excess Parachute Payments (excluding any payment pursuant to this Section VI(H)(3)).

I. Delay of Payments Pursuant to Section 409A. It is intended that (1) each installment of the payments provided under this Agreement is a separate “payment” for purposes of Section 409A of the Code and (2) that the payments satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(9)(iii), and 1.409A-1(b)(9)(v). Notwithstanding anything to the contrary in this Agreement, if the Company determines (i) that on the date the Executive’s employment with the Company terminates or at such other time that the Company determines to be relevant, the Executive is a “specified employee” (as such term is defined under Treasury Regulation 1.409A-1(i)) of the Company and (ii) that any payments to be provided to the Executive pursuant to this Agreement are or may become subject to the additional tax under Section 409A(a)(1)(B) of the Code or any other taxes or penalties imposed under Section 409A of the Code if provided at the time otherwise required under this Agreement then such payments shall be delayed until the date that is six months after the date of the Executive’s “separation from service” (as such term is defined under Treasury Regulation 1.409A-1(h)) with the Company, or, if earlier, the date of the

10

Executive’s death. Any payments delayed pursuant to this Section VI(I) shall be made in a lump sum on the first day of the seventh month following the Executive’s “separation from service” (as such term is defined under Treasury Regulation 1.409A-1(h)), or, if earlier, the date of the Executive’s death. In addition, to the extent that any reimbursement, fringe benefit or other, similar plan or arrangement in which the Executive participates during the term of Executive’s employment under this Agreement or thereafter provides for a "deferral of compensation" within the meaning of Section 409A of the Code, (i) the amount eligible for reimbursement or payment under such plan or arrangement in one calendar year may not affect the amount eligible for reimbursement or payment in any other calendar year (except that a plan providing medical or health benefits may impose a generally applicable limit on the amount that may be reimbursed or paid), and (ii) subject to any shorter time periods provided herein or the applicable plans or arrangements, any reimbursement or payment of an expense under such plan or arrangement must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred.

VII. REPRESENTATIONS. The Executive represents and warrants that he is not a party to any agreement or instrument which would prevent him from entering into or performing his duties in any way under this Agreement.

VIII. ASSIGNMENT, BINDING AGREEMENT. This Agreement is a personal contract and the rights and interests of the Executive hereunder may not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him, except as otherwise expressly permitted by the provisions of this Agreement. This Agreement shall inure to the benefit of and be enforceable by the Executive and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable to him hereunder had the Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there is no such designee, to his estate.

IX. CONFIDENTIALITY, NON-COMPETITION, NON-SOLICITATION

A. The Executive acknowledges that:

1. the business of the Company of providing care support services and health support services in which the Company is engaged (the “Business”) is intensely competitive and that the Executive’s employment by the Company will require that the Executive have access to and knowledge of confidential information of the Company relating to its business plans, financial data, marketing programs, client information, contracts and other trade secrets, in each case other than as and to the extent such information is generally known or publicly available through no violation of this Agreement by the Executive;

11

2. the use or disclosure of such information other than in furtherance of the Business may place the Company at a competitive disadvantage and may do damage, monetary or otherwise, to the Business; and

3. the engaging by the Executive in any of the activities prohibited by this Section shall constitute improper appropriation and/or use of such information. The Executive expressly acknowledges the trade secret status of the Company’s confidential information and that the confidential information constitutes a protectable business interest of the Company. Other than as may be required in the performance of his duties, Executive expressly agrees not to divulge such confidential information to anyone outside the Company without prior permission.

B. The “Company” (which shall be construed to include the Company, its subsidiaries and their respective affiliates) and the Executive agree that for a period of eighteen (18) months after the Date of Termination if the Executive’s employment is terminated under Sections VI(C), (D), (E), (F) or (H), and for a period of twenty-four (24) months after the Date of Termination if the Executive’s employment is terminated under Section VI(G), the Executive shall not:

1. engage in Competition, as defined below, with the Company or its subsidiaries within any market where the Company is conducting the Business at the time of termination of the Executive’s employment hereunder. For purposes of this Agreement, “Competition” by the Executive shall mean the Executive’s being employed by or acting as a consultant or lender to, or being a director, officer, employee, principal, agent, stockholder, member, owner or partner of, or permitting his name to be used in connection with the activities of any entity engaged in the Business, provided that, it shall not be a violation of this sub-paragraph for the Executive to become the registered or beneficial owner of less than five percent (5%) of any class of the capital stock of any one or more competing corporations registered under the 1934 Act, provided that, the Executive does not participate in the business of such corporation until such time as this covenant expires; and

2. The Executive further agrees that he will not, directly or indirectly, for his benefit or for the benefit of any other person or entity, do any of the following:

a. solicit from any customer, doing business with the Company as of the Executive’s termination, business of the same or of a similar nature to the Business of the Company with such customer;

b. solicit from any known potential customer of the Company business of the same or of a similar nature to that which, to the knowledge of the Executive, has been the subject of a written or

12

oral bid, offer or proposal by the Company, or of substantial preparation with a view to making such a bid, proposal or offer, within eighteen (18) months prior to the Executive’s termination; or

c. recruit or solicit the employment or services of any person who was employed by the Company upon termination of the Executive’s employment and is employed by the Company at the time of such recruitment or solicitation.

3. The Executive acknowledges that the services to be rendered by him to the Company are of a special and unique character, which causes this Agreement to be of significant value to the Company, the loss of which may not be reasonably or adequately compensated for by damages in an action at law, and that a breach or threatened breach by him of any of the provisions contained in this Section will cause the Company irreparable injury. The Executive therefore agrees that the Company will be entitled, in addition to any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining the Executive from any such violation or threatened violations. The Executive acknowledges that the terms of this Section IX and its obligations are reasonable and will not prohibit him from being employed or employable in the health care industry.

C. If any one or more of the provisions contained in this Agreement shall be held to be excessively broad as to duration, activity or subject, such provisions shall be construed by limiting and reducing them so as to be enforceable to the fullest extent permitted by law.

X. ENTIRE AGREEMENT. This Agreement, together with Exhibit A attached hereto, contains all the understandings between the parties pertaining to the matters referred to herein, and supersedes any other undertakings and agreements, whether oral or written, previously entered into by them with respect thereto. The Executive represents that, in executing this Agreement, he does not rely and has not relied upon any representation or statement not set forth herein made by the Company with regard to the subject matter or effect of this Agreement or otherwise and that Executive has had the opportunity to be represented by counsel of his choosing.

XI. AMENDMENT OR MODIFICATION; WAIVER. No provision of this Agreement may be amended or waived, unless such amendment or waiver is agreed to in writing, signed by the Executive and by a duly authorized officer of the Company. No waiver by any party hereto of any breach by another party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, any prior time or any subsequent time.

13

XII. NOTICES. Any notice to be given hereunder shall be in writing and shall be deemed given when delivered personally, sent by courier, facsimile or registered or certified mail, postage prepaid, return receipt requested, addressed to the party concerned at the address indicated below or to such other address as such party may subsequently give notice in writing:

To the Executive at: Stefen F. Brueckner 16986 Cortile Drive Naples, FL To the Company at: Chief Executive Officer Healthways, Inc. 701 Cool Springs Boulevard Franklin, Tennessee 37067

Any notice delivered personally or by courier shall be deemed given on the date delivered. Any notice sent by facsimile, registered or certified mail, postage prepaid, return receipt requested, shall be deemed given on the date transmitted by facsimile or mailed.

XIII. SEVERABILITY. If any provision of this Agreement or the application of any such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid and unenforceable, shall not be affected thereby, and each provision hereof shall be validated and shall be enforced to the fullest extent permitted by law.

XIV. SURVIVORSHIP. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.

XV. GOVERNING LAW; VENUE. This Agreement will be governed by and construed in accordance with the laws of the State of Tennessee, without regard to the principles of conflicts of law thereof.

XVI. HEADINGS. All descriptive headings of sections and paragraphs in this Agreement are intended solely for convenience, and no provision of this Agreement is to be construed by reference to the heading of any section or paragraph.

XVII. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement effective as of date set forth above.

14

HEALTHWAYS, INC.

By: /s/ Ben R. Leedle Jr.

Name: Ben R. Leedle Jr.

Title: President and Chief Executive Officer

EXECUTIVE

/s/ Stefen F. Brueckner

15

EXHIBIT A

Exceptions

Notwithstanding anything in the Agreement to the contrary, the following terms are also part of the Agreement and supersede any contradictory term contained therein:

16

EX-99

Exhibit 99.1

Contact: Mary A. Chaput

Executive Vice President and

Chief Financial Officer

(615) 614-4929

HEALTHWAYS REPORTS EARNINGS OF $0.49 PER DILUTED SHARE

FOR FOURTH-QUARTER FISCAL 2008

ANNOUNCES APPOINTMENT OF STEFEN F. BRUECKNER

AS PRESIDENT AND COO

TO STREAMLINE MANAGEMENT TO OPTIMIZE CAPABILITIES FOR FULLY INTEGRATED SOLUTIONS

NASHVILLE, Tenn. (October 16, 2008) – Ben R. Leedle, Jr., chief executive officer of Healthways, Inc. (NASDAQ: HWAY), today announced financial results for the fourth quarter of fiscal 2008, ended August 31, 2008. Total revenues for the quarter were $190.0 million, a 12% increase from $170.4 million for the fourth quarter of fiscal 2007. Net income grew 50% to $17.2 million from $11.5 million. Net income per diluted share increased 58% to $0.49 for the fourth quarter of fiscal 2008 from $0.31 for the fourth quarter of fiscal 2007.

Revenues for fiscal 2008 increased 20% to $736.2 million from $615.6 million for fiscal 2007. Net income increased 21% for fiscal 2008 to $54.8 million from $45.1 million for fiscal 2007, while net income per diluted share rose 23% to $1.50 from $1.22. EBITDA for fiscal 2008 also increased 23% to $161.0 million or 22% of revenue, which is consistent with the Company’s EBITDA margin for fiscal 2007.See pages 9 and 10 for a reconciliation of GAAP and non-GAAP results.

COMPARISON OF COMPONENTS OF NET INCOME PER DILUTED SHARE

See pages 9 and 10 for a reconciliation of GAAP and non-GAAP results

Three Months Ended Twelve Months Ended

August 31, % August 31, %

2008 2007 Chg. 2008 2007 Chg.

Domestic $ 0.51 $ 0.37 38% $ 1.61 $ 1.34 20%

International (0.02) (0.06) (0.11) (0.12)

Earnings per diluted share,

GAAP basis $ 0.49 $ 0.31 58% $ 1.50 $ 1.22 23%

Mr. Leedle remarked, “Healthways’ comparable-quarter revenue and earnings growth for the fourth quarter of fiscal 2008 was primarily driven by the expansion of our domestic commercial revenue and increased operating efficiencies. Our growth reflected the expansion of our domestic commercial billed lives by 4.3 million or 16% during fiscal 2008 through growth within existing contracts and the initiation of new contracts. Domestic commercial available lives increased to 192.5 million by the end of fiscal 2008, and our penetration of these lives increased to a record 16.5%. We

- MORE -

HWAY Reports Fourth-Quarter Results

Page 2

October 16, 2008

also completed the fiscal year with a backlog of annualized revenues from contracts awarded but not implemented of $13.6 million. As anticipated, our fourth–quarter results also benefited from lower net costs related to both our Medicare Health Support pilot, which was completed during the quarter, and our international business.”

Update on Growth Initiatives

“Our strategy to drive long-term growth is based on three central growth initiatives: increasing our domestic commercial business, expanding addressable markets and enhancing our value proposition,” remarked Mr. Leedle. “The expansion in billed lives for fiscal 2008 provides tangible evidence of our success in increasing our domestic commercial business. We also made significant progress during the year in expanding addressable markets worldwide, with the launch of our first international contract in Germany and the signing and launch of our second international contract in Brazil.

“In addition, we made significant progress against our initiative to enhance our value proposition during fiscal 2008 through the further development and refinement of integrated WholeHealth solutions focused on enhancing productivity by improving well-being. We achieved a critical milestone in this process through the launch of our strategic relationship with Gallup to create the Gallup-Healthways Well-Being Index^SM. Shortly after the introduction of the Index, one of our long-term customers, Wellmark Blue Cross and Blue Shield, became the first health plan to engage in a well-being analysis of both its employees and plan members using the Index. In addition to creating an internal benchmark for its customers and employees, the Well-Being Index validated the strong commitment to health and well-being that Wellmark has continually demonstrated over our four-year relationship, evidenced by the significantly higher well-being scores reported by Wellmark’s customers and employees than the national average.

“Looking forward, we are optimistic about the long-term growth potential represented by each of our central growth initiatives. Furthermore, we continue to be encouraged by the number and scope of Requests for Proposal for comprehensive, integrated and sole-source solutions to improve health and reduce cost. We believe Healthways remains at the industry’s forefront in its ability to meet this demand with differentiated solutions. With fiscal 2008 cash flow from operations of $105.3 million, or 1.9 times net income, and with a debt to EBITDA ratio of 2.2 times at the end of fiscal 2008, we believe that our strong financial position will allow us to pursue the long-term implementation of our central growth initiatives.

“As previously discussed, we also recognize the significant challenges our existing and potential customers face in the nearer term due to the uncertain economic environment, as well as the continuing rise in health care costs. These challenges will likely continue to affect the certainty of timing for our converting industry demand into new business.

“We believe we are well positioned to overcome these challenges as the incidence and prevalence of chronic disease around the world and of lifestyle risk factors, such as obesity, that lead to serious health conditions are steadily increasing. As a result of these trends driving a continuing rise in healthcare costs, demand is growing around the world for comprehensive, long-term solutions that deliver tangible outcomes. We believe Healthways is unique in its ability to address this demand through its expertise, infrastructure and comprehensive solutions proven to produce or exceed

- MORE -

HWAY Reports Fourth-Quarter Results

Page 3

October 16, 2008

targeted outcomes at scale. With our continuing progress in expanding the value proposition through integrated WholeHealth solutions, we are taking the lead in next generation capabilities for enhancing productivity and lowering healthcare costs by improving well-being. We expect the long-term thought leadership and investment required to deliver these capabilities to the market will provide a sustained competitive advantage for Healthways, which will support our goals of improving the health outcomes of millions of additional people worldwide and increasing stockholder value.”

Appoints Stefen F. Brueckner President and COO, Enhancing Capacity to Execute Daily Operations and Drive Strategic Growth Initiatives

Mr. Leedle continued, “In addition, I am pleased to announce the appointment of Stefen F. Brueckner as president and chief operating officer. This appointment enables me to apply increased intensity to our strategic initiatives that will drive future growth, while Steve will focus on enhancing the disciplined execution of our current business.

“Steve has created an outstanding record of management accomplishment, amply demonstrating his ability to manage growth and change in a variety of healthcare and other managerial environments. These skills are exactly what we need as we prepare to meet the challenges and opportunities of the movement to fully integrated solutions. We welcome Steve to Healthways, confident in his ability to contribute to the Company’s long-term growth.”

Mr. Brueckner brings more than 30 years of management experience to Healthways developed through senior leadership positions in the health, managed care, and life and casualty insurance industries.  Most recently, he served as vice president, senior products for Humana Inc., responsible for all Medicare/Medicaid business representing $16 billion in revenue and 4.6 million members.  Mr. Brueckner has also served as president and chief executive officer of both Medical Professional Mutual Insurance Company, a medical malpractice insurance company, and Anthem Companies, Inc., a division of Anthem, Inc., serving the health insurance and managed care sectors.  In addition, he was president of Community Mutual Insurance Company, a Blue Cross and Blue Shield organization.  He has also participated as a board member in numerous industry and civic organizations.

Consistent with the Company's philosophy of aligning the interests of its management with those of its stockholders, the Company has granted Mr. Brueckner non-qualified stock options exercisable for 225,000 shares of the Company's common stock that will vest over four years. These awards constitute inducement awards under NASDAQ Marketplace Rule 4350.

“Mr. Brueckner’s addition to the leadership team has also enabled us to further strengthen our focus on the science that underlies our solutions,” Leedle added, “by naming Jim Pope, previously chief operating officer, to the position of chief science officer. This change enables Jim to lead the continuous and vital task of assuring that best science is integrated into our products in order to both optimize and demonstrate the value we create for our customers. Jim’s extensive medical and research experience, coupled with the deep market perspective he has gained through his leadership role with our key customers, make him uniquely qualified to step into and meet the challenges of this new position.”

- MORE -

HWAY Reports Fourth-Quarter Results

Page 4

October 16, 2008

Healthways to Streamline Management to Optimize Capabilities for Fully Integrated Solutions

Healthways today also announced the initiation of a comprehensive process to simplify its management structure to deliver more effectively on its existing business as well as better position the organization as a result of the market’s movement to fully integrated solutions focused on WholeHealth and well-being. Mr. Leedle said, “We believe that the market is nearing an inflection point with regard to these fully integrated solutions, driven by employer demand in the face of the inexorable rise in healthcare costs. The process we have initiated is designed to close the gap between our current management structure, which was developed historically to manage dozens of service programs individually or in a variety of combinations with others, and the optimal management structure to support fully integrated solutions.

“Through this structural realignment, we expect to enhance management decision making, improve the efficiency, speed and control of execution, increase communication and further strengthen our ability to respond to evolving customer needs. Following the realignment, we believe Healthways will be more effectively positioned to address future opportunities and challenges as the market accelerates its movement to a comprehensive, fully integrated solution with an expanded value proposition. We intend to report on the further progress in this management realignment process in conjunction with our regular reports of financial results. We expect this process to be substantially complete by the end of calendar year 2008.”

Financial Guidance for the Three Months Ending November 30, 2008

Earnings per Diluted Share

Healthways today affirms its existing guidance for earnings per diluted share for the three months ending November 30, 2008, in a range of $0.34 to $0.37. This guidance, which represents an increase of 13% to 23% from earnings per diluted share for the three months ended November 30, 2007, reflects the impact of certain contract renegotiations, reduced revenues associated with the winding down of a previously discussed contract terminating at the end of calendar 2008 and the full-quarter effect of small contract losses in fiscal 2008 due to health plan consolidation. This earnings guidance also anticipates incremental costs associated with the implementation of contracts scheduled to begin on January 1, 2009.

COMPARISON OF COMPONENTS OF NET INCOME PER DILUTED SHARE FOR THE THREE MONTHS ENDING NOV. 30, 2008 (GUIDANCE) AND

THE THREE MONTHS ENDED NOV. 30, 2007

See pages 9 and 10 for a reconciliation of GAAP and non-GAAP results

Three Months

Ending

Nov. 30, 2008 Ended %

(Guidance) Nov. 30, 2007 Change

Domestic $ 0.36 – 0.38 $ 0.33 9 - 15%

International (0.02) – (0.01) (0.04)

Total Company $ 0.34 – 0.37 $ 0.30⁽¹⁾ 13 - 23%

 

⁽¹⁾ Figures may not add due to rounding.

- MORE -

HWAY Reports Fourth-Quarter Results

Page 5

October 16, 2008

Change in Fiscal Year End

As announced on August 25, 2008, Healthways will change its fiscal year end to December 31^st, from its current fiscal year end of August 31^st to align its fiscal year more closely with its own business cycle and that of its customers. Healthways will report its results of operations for the three months ending November 30, 2008, in early January. Consistent with historic practices, Healthways will provide financial guidance for the new fiscal year (calendar 2009) during the second month of the fiscal year, which, due to the change in the fiscal year end, will be in February 2009.

Conference Call

Healthways will hold a conference call to discuss this release today at 5:00 p.m. Eastern time. Investors will have the opportunity to listen to the conference call live over the Internet by going to www.healthways.com and clicking Investor Relations, or by going to www.earnings.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 telephonic replay will be available for one week at 719-457-0820, code 7704049, and the replay will also be available on the Company’s web site for the next 12 months.

Safe Harbor Provisions

This press release contains forward-looking statements, including our guidance for future periods, that are based upon current expectations, are subject to the finalization of the Company’s year end financial and accounting procedures, and involve a number of risks and uncertainties. Those forward-looking statements include all statements that are not historical statements of fact and those regarding the intent, belief or expectations of the Company, including, without limitation, all statements regarding the Company’s future earnings and results of operations. 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 the following important factors, among others, may affect these forward-looking statements. Consequently, actual operations and results may differ materially from those expressed in these forward-looking statements. The important factors include but are not limited to: the effect of any new or proposed legislation, regulations and interpretations relating to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, including the potential expansion to Phase II for Medicare Health Support Programs; the Company’s ability to accurately forecast performance and the timing of revenue recognition under the terms of its contracts with customers and/or its Cooperative Agreement with the Centers for Medicare and Medicaid Services (CMS) ahead of data collection and reconciliation in order to provide forward-looking guidance; the Company’s ability to effect the financial, clinical, and satisfaction outcomes under its Cooperative Agreement with CMS and reach mutual agreement with CMS with respect to results necessary to achieve success under Phase I of Medicare Health Support; the Company’s ability to anticipate the rate of market acceptance of Health and Care Support solutions and the individual market dynamics in potential international markets; the ability of the Company to accurately forecast the costs necessary to implement the Company’s strategy of establishing a presence in these markets; the Company’s ability to sign and implement new contracts for Health and Care Support solutions; the Company’s ability to effect cost savings and clinical outcomes improvements under Health and Care Support 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 ability of the Company to recognize estimated annualized revenue in backlog in the manner and within the timeframe the Company expects; the ability of the Company and/or its customers to enroll participants in the Company’s Health and Care Support

- MORE -

HWAY Reports Fourth-Quarter Results

Page 6

October 16, 2008

programs in a manner and within the timeframe anticipated by the Company; the ability of the Company’s customers and/or CMS to provide timely and accurate data that is essential to the operation and measurement of the Company’s performance under the terms of its contracts; the Company’s ability to favorably resolve contract billing and interpretation issues with its customers; the Company’s ability to service its debt and make principal and interest payments as those payments become due; the Company’s ability to integrate the operations and technology platforms of Axia and other acquired businesses or technologies into the Company’s business; 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’s customers to maintain the number of covered lives enrolled in the plans during the terms of the agreements; unusual and unforeseen patterns of healthcare utilization by individuals with diabetes, cardiac, respiratory and/or other diseases or conditions for which the Company provides services; the impact of litigation involving the Company and/or its subsidiaries; the impact of the macroeconomic conditions on the demand for our services and the availability of credit; and other risks detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2007 and other filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any such forward-looking statements.

About Healthways

Healthways is the leading provider of specialized, comprehensive Health and Care Support^SM solutions to help millions of people maintain or improve their health and, as a result, reduce overall healthcare costs. Healthways' solutions are designed to help healthy individuals stay healthy, mitigate and slow the progression of disease associated with family or lifestyle risk factors and promote the best possible health for those already affected by disease. Our proven, evidence-based programs provide highly specific and personalized interventions for each individual in a population, irrespective of age or health status, and are delivered to consumers by phone, mail, internet and face-to-face interactions, both domestically and internationally. Healthways also provides a national, fully accredited complementary and alternative Health Provider Network, offering convenient access to individuals who seek health services outside of, and in conjunction with, the traditional healthcare system. For more information, please visit www.healthways.com.

- MORE -

HWAY Reports Fourth-Quarter Results

Page 7

October 16, 2008

HEALTHWAYS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

	Three Months Ended				Twelve Months Ended
	August 31,				August 31,
	2008		2007		2008		2007
Revenues	$	190,018	$	170,350	$	736,243	$	615,586
Cost of services (exclusive of depreciation and amortization of $9,530, $7,257, $34,105, and $27,677, respectively, included below)		125,383		115,455		503,940		417,721
Selling, general and administrative expenses		17,175		19,361		71,342		67,352
Depreciation and amortization		13,426		9,819		47,479		37,044
Operating income		34,034		25,715		113,482		93,469
Interest expense		5,354		5,652		20,927		18,185
Income before income taxes		28,680		20,063		92,555		75,284
Income tax expense		11,477		8,592		37,740		30,163
Net income	$	17,203	$	11,471	$	54,815	$	45,121
Earnings per share:
Basic	$	0.51	$	0.32	$	1.57	$	1.29
Diluted	$	0.49	$	0.31	$	1.50	$	1.22
Weighted average common shares and equivalents:
Basic		33,588		35,463		34,977		35,049
Diluted		34,817		37,364		36,597		37,002

- MORE -

HWAY Reports Fourth-Quarter Results

Page 8

October 16, 2008

Healthways, Inc.

Statistical Information

(In thousands)

(Unaudited)

	August 31,		August 31,
	2008		2007
Operating Statistics
Domestic commercial available lives		192,500		188,500
Domestic commercial billed lives		31,700		27,400
Annualized revenue in backlog	$	13,600	$	39,900

- MORE -

HWAY Reports Fourth-Quarter Results

Page 9

October 16, 2008

Healthways, Inc.

Reconciliations of Non-GAAP Measures to GAAP Measures

(Unaudited)

Reconciliation of Domestic Diluted Earnings Per Share (EPS) to Diluted EPS, GAAP Basis

	Three Months			Twelve Months			Three Months			Twelve Months
	Ended			Ended			Ended			Ended
	August 31, 2008			August 31, 2008			August 31, 2007			August 31, 2007
Domestic EPS (1)	$	0.51		$	1.61		$	0.37		$	1.34
EPS (loss) attributable to international initiatives (2)		(0.02	)		(0.11	)		(0.06	)		(0.12	)
EPS, GAAP basis	$	0.49		$	1.50		$	0.31		$	1.22

	Three Months
	Ended
(Continued)	November 30, 2007
Domestic EPS (1)	$	0.33
EPS (loss) attributable to international initiatives (2)		(0.04	)
EPS, GAAP basis (3)	$	0.30

(1) Domestic EPS is a non-GAAP financial measure. The Company excludes EPS (loss) attributable to international initiatives from this measure and relies on domestic EPS because of its comparability to the Company's historical operating results and EPS guidance. The Company believes it is useful to investors to provide disclosures of its operating results and guidance on the same basis as that used by management. You should not consider domestic EPS in isolation or as a substitute for EPS determined in accordance with accounting principles generally accepted in the United States.

(2) EPS (loss) attributable to international initiatives includes costs to implement the Company's strategy of establishing a presence and securing contracts in international markets as well as revenues and costs attributable to operating international contracts.

(3) Figures do not add due to rounding.

Reconciliation of Domestic Diluted EPS Guidance toDiluted EPS Guidance, GAAP Basis

	Three Months Ending
	November 30, 2008
Domestic EPS guidance (4)	$	0.36 – 0.38
EPS (loss) guidance attributable to international initiatives (5)		(0.02) – (0.01	)
EPS guidance, GAAP basis	$	0.34 - 0.37

(4) Domestic EPS guidance is a non-GAAP financial measure. The Company excludes EPS (loss) guidance attributable to international operations from this measure and relies on domestic EPS guidance because of its comparability to the Company's historical operating results. The Company believes it is useful to investors to provide disclosures of its operating results and guidance on the same basis as that used by management. You should not consider domestic EPS guidance in isolation or as a substitute for EPS guidance determined in accordance with accounting principles generally accepted in the United States.

(5) EPS (loss) guidance attributable to international initiatives includes costs to implement the Company's strategy of establishing a presence and securing contracts in international markets as well as revenues and costs attributable to operating international contracts.

- MORE -

HWAY Reports Fourth-Quarter Results

Page 10

October 16, 2008

Reconciliation of Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) to Net Income (in thousands)

	Twelve Months		Twelve Months
	Ended		Ended
	August 31, 2008		August 31, 2007
EBITDA (6)	$	160,961	$	130,513
Interest expense		20,927		18,185
Income tax expense		37,740		30,163
Depreciation and amortization		47,479		37,044
Net income	$	54,815	$	45,121

(6) EBITDA is a non-GAAP financial measure. The Company excludes interest, taxes, depreciation and amortization from this measure and provides EBITDA to enhance investors' understanding of the Company's operating performance and its capacity to fund capital expenditures and working capital requirements. The Company believes it is useful to investors to provide disclosures of its operating results on the same basis as that used by management. You should not consider EBITDA in isolation or as a substitute for net income determined in accordance with accounting principles generally accepted in the United States.

- MORE -

HWAY Reports Fourth-Quarter Results

Page 11

October 16, 2008

HEALTHWAYS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)

		August 31,			August 31,
		2008			2007
Assets
Current assets:
Cash and cash equivalents	$	35,242		$		47,655
Accounts receivable, net		113,312				80,201
Prepaid expenses		8,992				10,370
Other current assets		5,275				4,319
Income taxes receivable		—				1,741
Deferred tax asset		24,948				7,145
Total current assets		187,769				151,431
Property and equipment
Leasehold improvements		37,475				19,268
Computer equipment and related software		131,296				87,843
Furniture and office equipment		29,209				20,435
Capital projects in process		12,052				12,336
		210,032				139,882
Less accumulated depreciation		(98,971	)			(81,160	)
Net property and equipment		111,061				58,722
Other assets		16,575				15,609
Customer contracts, net		34,521				41,777
Other intangible assets, net		72,582				77,722
Goodwill, net		484,305				483,584
Total assets	$	906,813		$		828,845
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	18,753		$		13,630
Accrued salaries and benefits		31,612				18,960
Accrued liabilities		23,555				22,146
Deferred revenue		6,422				7,918
Contract billings in excess of earned revenue		75,454				72,829
Income taxes payable		3,984				—
Current portion of long-term debt		2,837				2,213
Current portion of long-term liabilities		3,876				2,943
Total current liabilities		166,493				140,639

- MORE -

HWAY Reports Fourth-Quarter Results

Page 12

October 16, 2008

Long-term debt		345,395			297,059
Long-term deferred tax liability		9,364			14,009
Other long-term liabilities		31,227			14,388
Stockholders' equity
Preferred stock
$.001 par value, 5,000,000 shares authorized,
none outstanding		—			—
Common stock
$.001 par value, 75,000,000 shares authorized,
33,603,320 and 35,606,482 shares outstanding		34			35
Additional paid-in capital		207,918			188,126
Retained earnings		147,772			174,641
Accumulated other comprehensive loss		(1,390	)		(52	)
Total stockholders' equity		354,334			362,750
Total liabilities and stockholders' equity	$	906,813		$	828,845

- MORE -

HWAY Reports Fourth-Quarter Results

Page 13

October 16, 2008

HEALTHWAYS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Year Ended August 31,
	2008			2007
Cash flows from operating activities:
Net income	$	54,815		$	45,121
Adjustments to reconcile net income to net cash provided by
operating activities, net of business acquisitions:
Depreciation and amortization		47,479			37,044
Amortization of deferred loan costs		1,168			991
Share-based employee compensation expense		16,530			18,836
Excess tax benefits from share-based payment arrangements		(9,480	)		(12,152	)
Increase in accounts receivable, net		(33,131	)		(2,749	)
Decrease (increase) in other current assets		3,927			(3,299	)
Increase (decrease) in accounts payable		2,516			(1,143	)
Increase (decrease) in accrued salaries and benefits		12,652			(21,362	)
Increase in other current liabilities		11,491			52,227
Deferred income taxes		(10,835	)		(10,866	)
Other		11,761			5,092
(Increase) decrease in other assets		(1,367	)		834
Payments on other long-term liabilities		(2,220	)		(1,247	)
Net cash flows provided by operating activities		105,306			107,327
Cash flows from investing activities:
Acquisition of property and equipment		(82,521	)		(29,507	)
Acquisitions, net of cash acquired		(452	)		(493,071	)
Purchase of perpetual license		(3,690	)		—
Purchase of investment		—			(9,045	)
Other, net		—			(13	)
Net cash flows used in investing activities		(86,663	)		(531,636	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		85,420			350,000
Deferred loan costs		—			(4,357	)
Proceeds from sale of unregistered common stock		—			5,000
Repurchases of common stock		(94,340	)		(5,654	)
Excess tax benefits from share-based payment arrangements		9,480			12,152
Payments of long-term debt		(38,327	)		(51,190	)
Exercise of stock options		6,711			11,221
Net cash flows (used in) provided by financing activities		(31,056	)		317,172
Net decrease in cash and cash equivalents		(12,413	)		(107,137	)
Cash and cash equivalents, beginning of period		47,655			154,792
Cash and cash equivalents, end of period	$	35,242		$	47,655

- END -