**United      States**

**Securities      And Exchange Commission**

**Washington,      DC 20549**

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|--------|

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**                FORM 10-Q**

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**(Mark      One)**

| R | **Quarterly                Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange                Act Of                1934** |
|---|------------------------------------------------------------------------------------------------------------------------------------------|

**For      the quarterly period ended March 31, 2007**

**or**

| ¨ | **Transition                Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange                Act Of                1934** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

**For      the transition period from**
**                **
**      to**
**                **

**Commission      File Number: 1-8865**

**SIERRA      HEALTH SERVICES, INC.**

**(Exact      Name of Registrant as Specified in Its Charter)**

|                                                                                           |   |                                                    |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|
| **Nevada**                                                                                          |   | **88-0200415**                                          |
| **(State                or Other Jurisdiction****of                Incorporation or Organization)** |   | **(I.R.S.                Employer Identification No.)** |
|                                                                                                |   |
| **2724                North Tenaya Way, Las Vegas, NV**                                             |   | **89128**                                               |
| **(Address                of Principal Executive Offices)**                                         |   | **(Zip                Code)**                           |

**Registrant's      Telephone Number, Including Area Code: (702) 242-7000**

| Large                accelerated filer R  | Accelerated                filer o | Non-accelerated                filer o |
|------------------------------------------------|------------------------------------|----------------------------------------|

** **

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**Sierra      Health Services, Inc. **

**Quarterly      Report on Form 10-Q **

**For      The Period Ended March 31, 2007**

| **Part                I.** **Financial Information**                                                                                              | **Page                No.** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------|
| Item                1. Financial                Statements (Unaudited):                                                                           |                        |
| Condensed                Consolidated Balance Sheets - March 31, 2007 and December 31,                2006                                        | 1                           |
| Condensed                Consolidated Statements of Operations - three months ended March                31, 2007                and 2006         | 2                           |
| Condensed                Consolidated Statements of Stockholders' Equity -                three months ended March 31, 2007 and 2006                   | 3                           |
| Condensed                Consolidated Statements of Cash Flows - three months ended March                31, 2007                and 2006         | 4                           |
| Notes                to Condensed Consolidated Financial Statements                                                                               | 5-14                        |
| Item                2.  Management's                Discussion and Analysis of Financial Condition and Results of                Operations  | 15-26                       |
| Item                3. Quantitative                and Qualitative Disclosures About Market Risk                                             | 27                          |
| Item                4. Controls                and Procedures                                                                                | 27                          |
|                                                                                                                                              |                        |
| **Part                II. Other Information**                                                                                                          |                        |
| Item                1. Legal                Proceedings                                                                                      | 28-29                       |
| Item                1A. Risk                Factors                                                                                          | 29                          |
| Item                2. Unregistered                Sales of Equity Securities and Use of Proceeds                                            | 30                          |
| Item                3. Defaults                upon Senior Securities                                                                        | 30                          |
| Item                4. Submission                of Matters to a Vote of Security Holders                                                    | 30                          |
| Item                5. Other                Information                                                                                      | 30                          |
| Item                6. Exhibits                                                                                                              | 31                          |
| Signatures                                                                                                                                        | 32                          |

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Table          of Contents

**Part      I. Financial Information **

**Item      1. **
**Financial      Statements**

**Sierra      Health Services, Inc. And Subsidiaries**

**Condensed      Consolidated Balance Sheets **

*(in      thousands, except per share data) *

*(Unaudited)*

|                                                                                                       |   | March                31, 2007 |     | December                31, 2006 |   |
|------------------------------------------------------------------------------------------------------------|--------|-------------------------------|----------|----------------------------------|--------|
| **Assets**                                                                                                 |   |                          |     |                             |   |
| Current                assets:                                                                             |   |                          |     |                             |   |
| Cash                and cash equivalents                                                                   |   | $                             | 77,242   |                             | $      | 58,918 |   |
| Investments                                                                                                |   |                          | 345,460  |                             |   | 323,846 |   |
| Accounts                receivable (less allowance for doubtful accounts:                                  |   |                          |     |                             |   |   |   |
| 2007                - $6,728; 2006 - $5,518)                                                               |   |                          | 24,881   |                             |   | 21,308 |   |
| Current                portion of deferred tax asset                                                       |   |                          | 47,955   |                             |   | 29,861 |   |
| Prepaid                expenses and other current assets                                                   |   |                          | 126,757  |                             |   | 110,020 |   |
| Total                current assets                                                                        |   |                          | 622,295  |                             |   | 543,953 |   |
|                                                                                                       |   |                          |     |                             |   |   |   |
| Property                and equipment, net                                                                 |   |                          | 70,269   |                             |   | 71,893 |   |
| Restricted                cash and investments                                                             |   |                          | 19,470   |                             |   | 19,428 |   |
| Goodwill                                                                                                   |   |                          | 14,782   |                             |   | 14,782 |   |
| Deferred                tax asset (less current portion)                                                   |   |                          | 25,983   |                             |   | 18,656 |   |
| Note                receivable (less valuation allowance: 2007 and 2006 -                $15,000)          |   |                          | 47,000   |                             |   | 47,000 |   |
| Other                assets                                                                                |   |                          | 90,349   |                             |   | 93,700 |   |
| Total                assets                                                                                |   | $                             | 890,148  |                             | $      | 809,412 |   |
|                                                                                                       |   |                          |     |                             |   |   |   |
| **Liabilities                and stockholders****'                equity**                                 |   |                          |     |                             |   |   |   |
| Current                liabilities:                                                                        |   |                          |     |                             |   |   |   |
| Accrued                and other current liabilities                                                       |   | $                             | 97,801   |                             | $      | 99,314 |   |
| Trade                accounts payable                                                                      |   |                          | 1,902    |                             |   | 1,552 |   |
| Accrued                payroll and taxes                                                                   |   |                          | 23,906   |                             |   | 25,925 |   |
| Medical                claims payable                                                                      |   |                          | 219,170  |                             |   | 222,895 |   |
| Premium                deficiency reserve                                                                  |   |                          | 45,309   |                             |   | 1,076 |   |
| Unearned                premium revenue                                                                    |   |                          | 121,958  |                             |   | 52,075 |   |
| Current                portion of long-term debt                                                           |   |                          | 132      |                             |   | 116 |   |
| Total                current liabilities                                                                   |   |                          | 510,178  |                             |   | 402,953 |   |
|                                                                                                       |   |                          |     |                             |   |   |   |
| Long-term                debt (less current portion)                                                       |   |                          | 70,523   |                             |   | 118,734 |   |
| Other                liabilities                                                                           |   |                          | 90,712   |                             |   | 71,007 |   |
| Total                liabilities                                                                           |   |                          | 671,413  |                             |   | 592,694 |   |
|                                                                                                       |   |                          |     |                             |   |   |   |
| Commitments                and contingencies                                                               |   |                          |     |                             |   |   |   |
|                                                                                                       |   |                          |     |                             |   |   |   |
| Stockholders'                equity:                                                                       |   |                          |     |                             |   |   |   |
| Preferred                stock, $.01 par value, 1,000 shares authorized;                                   |   |                          |     |                             |   |   |   |
| none                issued or outstanding                                                                  |   |                          |     |                             |   |   |   |
| Common                stock, $.005 par value, 120,000 shares authorized; 2007 - 73,525;                    |   |                          | ¾   |                             |   | ¾ |   |
| 2006                - 70,835 shares issued; 2007                - 55,948; 2006 - 53,824 shares outstanding |   |                          | 368      |                             |   | 354 |   |
| Treasury                stock at cost: 2007 - 17,577; 2006 - 17,011 common stock                shares     |   |                          | (620,951 | )                                |   | (600,539 | ) |
| Additional                paid-in capital                                                                  |   |                          | 464,804  |                             |   | 436,643 |   |
| Accumulated                other comprehensive loss                                                        |   |                          | (8,559   | )                                |   | (8,635 | ) |
| Retained                earnings                                                                      |   |                          | 383,073  |                             |   | 388,895 |   |
| Total                stockholders' equity                                                                  |   |                          | 218,735  |                             |   | 216,718 |   |
| Total                liabilities and stockholders' equity                                                  |   | $                             | 890,148  |                             | $      | 809,412 |   |

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Table          of Contents

**Sierra      Health Services, Inc. And Subsidiaries**

**Condensed      Consolidated Statements Of      Operations**

*(In      thousands, except per share data)*

*(Unaudited)*

|                                                                |   | Three                Months Ended March 31, |    |
|---------------------------------------------------------------------|--------|---------------------------------------------|---------|
|                                                                |   | 2007                                        |    | 2006 |   |
| Operating                revenues:                                  |   |                                        |    |   |   |
| Medical                premiums                                     |   | $                                           | 468,074 |   | $ | 414,444 |   |
| Professional                fees                                    |   |                                        | 14,642  |   |   | 12,915 |   |
| Investment                and other revenues                        |   |                                        | 11,921  |   |   | 10,889 |   |
| Total                                                               |   |                                        | 494,637 |   |   | 438,248 |   |
|                                                                |   |                                        |    |   |   |   |   |
| Operating                expenses:                                  |   |                                        |    |   |   |   |   |
| Medical                expenses                                     |   |                                        | 435,311 |   |   | 336,519 |   |
| General                and administrative expenses                  |   |                                        | 59,192  |   |   | 51,339 |   |
| Total                                                               |   |                                        | 494,503 |   |   | 387,858 |   |
|                                                                |   |                                        |    |   |   |   |   |
| Operating                income                                |   |                                        | 134     |   |   | 50,390 |   |
| Interest                expense                                     |   |                                        | (1,955  | ) |   | (776 | ) |
| Other                income (expense), net                          |   |                                        | 650     |   |   | (33 | ) |
|                                                                |   |                                        |    |   |   |   |   |
| (Loss)                income before income taxes                    |   |                                        | (1,171  | ) |   | 49,581 |   |
| Provision                for income taxes                      |   |                                        | (68     | ) |   | (16,910 | ) |
| Net                (loss) income                                    |   | $                                           | (1,239  | ) | $ | 32,671 |   |
|                                                                |   |                                        |    |   |   |   |   |
| Net                (loss) income per common share                   |   | $                                           | (0.02   | ) | $ | 0.57 |   |
|                                                                |   |                                        |    |   |   |   |   |
| Net                (loss) income per common share assuming dilution |   | $                                           | (0.02   | ) | $ | 0.51 |   |

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Table          of Contents

**Sierra      Health Services, Inc. And Subsidiaries **

**Condensed      Consolidated Statements Of Stockholders' Equity**

*(In      thousands)*

*(Unaudited)*

|                                                                                                        |   | Common                Stock |   | In                Treasury |   | AdditionalPaid-in |   | AccumulatedOtherComprehensive |   | Retained |   | TotalStock-holders' |   |
|-------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|----------------------------|--------|-------------------|--------|-------------------------------|--------|----------|--------|---------------------|--------|
|                                                                                                        |   |
|                                                                                                        |   |
|                                                                                                        |   | Shares                      |   | Amount                     |   | Shares            |   | Amount                        |   | Capital  |   | Loss                |   | Earnings |   | Equity |   |
| Balance,                January 1, 2006                                                                     |   |                        | 69,136 |                       | $      | 346               |   |                          | 11,006 |     | $      | (377,190            | )      | $ | 400,287 |   | $ | (1,750 | ) | $ | 262,559 |   | $ | 284,252 |   |
| Common                stock issued in connection with stock plans                                           |   |                        | 384    |                       |   | 2                 |   |                          | (205   | )        |   | 6,814               |   |   | 5,657 |   |   | ¾ |   |   | (4,665 | ) |   | 7,808 |   |
| Share-based                compensation expense                                                             |   |                        | ¾ |                       |   | ¾            |   |                          | ¾ |     |   | ¾              |   |   | 1,652 |   |   | ¾ |   |   | 8 |   |   | 1,660 |   |
| Common                stock issued in connection with conversion of debentures                              |   |                        | 54     |                       |   | ¾            |   |                          | ¾ |     |   | ¾              |   |   | 500 |   |   | ¾ |   |   | ¾ |   |   | 500 |   |
| Excess                tax benefits from share-based payment arrangements                                    |   |                        | ¾ |                       |   | ¾            |   |                          | ¾ |     |   | ¾              |   |   | 5,109 |   |   | ¾ |   |   | ¾ |   |   | 5,109 |   |
| Repurchase                of common stock shares                                                            |   |                        | ¾ |                       |   | ¾            |   |                          | 2,213  |     |   | (91,131             | )      |   | ¾ |   |   | ¾ |   |   | ¾ |   |   | (91,131 | ) |
| Comprehensive                income:                                                                        |   |                        |   |                       |   |              |   |                          |   |     |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                                                                   |   |                        | ¾ |                       |   | ¾            |   |                          | ¾ |     |   | ¾              |   |   | ¾ |   |   | ¾ |   |   | 32,671 |   |   | 32,671 |   |
| Other                comprehensive income:                                                                  |   |                        |   |                       |   |              |   |                          |   |     |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                unrealized holding loss on available-for-sale                investments ($1,612 pretax) |   |                        | ¾ |                       |   | ¾            |   |                          | ¾ |     |   | ¾              |   |   | ¾ |   |   | (1,048 | ) |   | ¾ |   |   | (1,048 | ) |
| Total                comprehensive income                                                                   |   |                        | ¾ |                       |   | ¾            |   |                          | ¾ |     |   | ¾              |   |   | ¾ |   |   | (1,048 | ) |   | 32,671 |   |   | 31,623 |   |
| Balance,                March 31, 2006                                                                      |   |                        | 69,754 |                       | $      | 348               |   |                          | 13,014 |     | $      | (461,507            | )      | $ | 413,205 |   | $ | (2,798 | ) | $ | 290,573 |   | $ | 239,821 |   |
|                                                                                                        |   |                        |   |                       |   |              |   |                          |   |     |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                        |   |                        |   |                       |   |              |   |                          |   |     |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                        |   |                        |   |                       |   |              |   |                          |   |     |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,                January 1, 2007                                                                     |   |                        | 70,835 |                       | $      | 354               |   |                          | 17,011 |     | $      | (600,539            | )      | $ | 436,643 |   | $ | (8,635 | ) | $ | 388,895 |   | $ | 216,718 |   |
| Common                stock issued in connection with stock plans                                           |   |                        | 147    |                       |   | 1                 |   |                          | (19    | )        |   | 669                 |   |   | 2,125 |   |   | ¾ |   |   | (321 | ) |   | 2,474 |   |
| Share-based                compensation expense                                                             |   |                        | ¾ |                       |   | ¾            |   |                          | ¾ |     |   | ¾              |   |   | 1,738 |   |   | ¾ |   |   | 6 |   |   | 1,744 |   |
| Common                stock issued in connection with conversion of debentures                              |   |                        | 2,543  |                       |   | 13                |   |                          | ¾ |     |   | ¾              |   |   | 23,243 |   |   | ¾ |   |   | ¾ |   |   | 23,256 |   |
| Excess                tax benefits from share-based payment arrangements                                    |   |                        | ¾ |                       |   | ¾            |   |                          | ¾ |     |   | ¾              |   |   | 1,055 |   |   | ¾ |   |   | ¾ |   |   | 1,055 |   |
| Repurchase                of common stock shares                                                            |   |                        | ¾ |                       |   | ¾            |   |                          | 585    |     |   | (21,081             | )      |   | ¾ |   |   | ¾ |   |   | ¾ |   |   | (21,081 | ) |
| Cumulative                effect from adoption of FIN                48                                     |   |                        | ¾ |                       |   | ¾            |   |                          | ¾ |     |   | ¾              |   |   | ¾ |   |   | ¾ |   |   | (4,268 | ) |   | (4,268 | ) |
| Comprehensive                income:                                                                        |   |                        |   |                       |   |              |   |                          |   |     |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                loss                                                                                     |   |                        | ¾ |                       |   | ¾            |   |                          | ¾ |     |   | ¾              |   |   | ¾ |   |   | ¾ |   |   | (1,239 | ) |   | (1,239 | ) |
| Other                comprehensive income:                                                                  |   |                        |   |                       |   |              |   |                          |   |     |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                unrealized holding loss on available-for-sale investments ($237                pretax)   |   |                        | ¾ |                       |   | ¾            |   |                          | ¾ |     |   | ¾              |   |   | ¾ |   |   | (154 | ) |   |   |   |   | (154 | ) |
| Unfunded                portion of defined benefit pension plan ($354 pretax)                               |   |                        | ¾ |                       |   | ¾            |   |                          | ¾ |     |   | ¾              |   |   | ¾ |   |   | 230 |   |   |   |   |   | 230 |   |
| Total                comprehensive loss                                                                     |   |                        | ¾ |                       |   | ¾            |   |                          | ¾ |     |   | ¾              |   |   | ¾ |   |   | 76 |   |   | (1,239 | ) |   | (1,163 | ) |
| Balance,                March 31, 2007                                                                      |   |                        | 73,525 |                       | $      | 368               |   |                          | 17,577 |     | $      | (620,951            | )      | $ | 464,804 |   | $ | (8,559 | ) | $ | 383,073 |   | $ | 218,735 |   |

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Table          of Contents

**Sierra      Health Services, Inc. And Subsidiaries **

**Condensed      Consolidated Statements Of Cash Flows**

*(In      thousands)*

*(Unaudited)*

|                                                                                                   |   | Three                Months Ended March 31, |    |
|--------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|---------|
|                                                                                                   |   | 2007                                        |    | 2006 |   |
| Cash                flows from operating activities:                                                   |   |                                        |    |   |   |
| Net                (loss) income                                                                       |   | $                                           | (1,239  | ) | $ | 32,671 |   |
| Adjustments                to reconcile net (loss) income to net cash                                  |   |                                        |    |   |   |   |   |
| provided                by operating activities:                                                       |   |                                        |    |   |   |   |   |
| Depreciation                                                                                           |   |                                        | 3,954   |   |   | 4,318 |   |
| Share-based                compensation expense                                                        |   |                                        | 1,744   |   |   | 1,660 |   |
| Excess                tax benefits from share-based payment arrangements                               |   |                                        | (1,055  | ) |   | (5,109 | ) |
| Provision                for doubtful accounts                                                         |   |                                        | 1,108   |   |   | 538 |   |
| Loss                on property and equipment dispositions                                        |   |                                        | 3       |   |   | 108 |   |
| Change                in operating assets and liabilities:                                             |   |                                        |    |   |   |   |   |
| Deferred                tax asset                                                                      |   |                                        | (24,283 | ) |   | 2,628 |   |
| Other                current assets                                                                    |   |                                        | (21,210 | ) |   | (23,107 | ) |
| Other                assets                                                                            |   |                                        | (2,449  | ) |   | (5,404 | ) |
| Accrued                payroll and taxes                                                               |   |                                        | (2,019  | ) |   | (2,139 | ) |
| Medical                claims payable                                                                  |   |                                        | (3,725  | ) |   | 26,434 |   |
| Other                current liabilities                                                               |   |                                        | 4,566   |   |   | 35,670 |   |
| Unearned                premium revenue                                                                |   |                                        | 69,883  |   |   | 61,154 |   |
| Premium                deficiency reserve                                                              |   |                                        | 44,233  |   |   | ¾ |   |
| Other                liabilities                                                                       |   |                                        | 15,666  |   |   | 127 |   |
| Net                cash provided by operating activities                                               |   |                                        | 85,177  |   |   | 129,549 |   |
|                                                                                                   |   |                                        |    |   |   |   |   |
| Cash                flows from investing activities:                                                   |   |                                        |    |   |   |   |   |
| Capital                expenditures, net of dispositions                                               |   |                                        | (2,233  | ) |   | (2,785 | ) |
| Purchase                of investments, net of proceeds                                                |   |                                        | (22,029 | ) |   | (57,630 | ) |
| Net                cash used for investing activities                                                  |   |                                        | (24,262 | ) |   | (60,415 | ) |
|                                                                                                   |   |                                        |    |   |   |   |   |
| Cash                flows from financing activities:                                                   |   |                                        |    |   |   |   |   |
| Payments                on debt and capital leases                                                     |   |                                        | (25,039 | ) |   | (25 | ) |
| Proceeds                from other long-term debt                                                      |   |                                        | ¾  |   |   | 20,000 |   |
| Purchase                of treasury stock                                                         |   |                                        | (21,081 | ) |   | (91,131 | ) |
| Excess                tax benefits from share-based payment arrangements                               |   |                                        | 1,055   |   |   | 5,109 |   |
| Proceeds                from exercise of stock in connection with stock plans                          |   |                                        | 2,474   |   |   | 7,808 |   |
| Net                cash used for financing activities                                                  |   |                                        | (42,591 | ) |   | (58,239 | ) |
|                                                                                                   |   |                                        |    |   |   |   |   |
| Net                increase in cash and cash equivalents                                               |   |                                        | 18,324  |   |   | 10,895 |   |
| Cash                and cash equivalents at beginning of period                                        |   |                                        | 58,918  |   |   | 88,059 |   |
| Cash                and cash equivalents at end of period                                              |   | $                                           | 77,242  |   | $ | 98,954 |   |
|                                                                                                   |   |                                        |    |   |   |   |   |
| Supplemental                condensed consolidated statement of cash flows                information: |   |                                        |    |   |   |   |   |
| Cash                paid during the period for interest                                                |   | $                                           | 2,158   |   | $ | 1,141 |   |
| Net                cash paid during the period for income taxes                                        |   |                                        | 12,500  |   |   | 3 |   |
| Non-cash                investing and financing activities:                                            |   |                                        |    |   |   |   |   |
| Senior                convertible debentures converted into Sierra common stock                        |   |                                        | 23,256  |   |   | 500 |   |
| Additions                to capital leases                                                             |   |                                        | 100     |   |   | ¾ |   |
| Investments                purchased but not settled                                                   |   |                                        | 4,170   |   |   | 2,221 |   |

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Table          of Contents

**Sierra        Health Services, Inc.**

**Notes        to Condensed Consolidated Financial        Statements**

*(Unaudited)*

**1.**
**Basis      of Presentation**

**2.**
**Pending      Business Combination**

**3.**
**Premium      Deficiency Reserves**

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Table          of Contents

**4.**
**Investments**

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Table          of Contents

**5.**
**Long-Term      Debt**

*Sierra      Debentures*

*Revolving      Credit Facility - *

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Table          of Contents

**6.**
**Employee      and Director Benefit Plans**

*Share-based      Compensation *

|                                                                            |   | Three                Months Ended March 31, |   |
|---------------------------------------------------------------------------------|--------|---------------------------------------------|--------|
|                                                                            |   | 2007                                        |   | 2006 |   |
|                                                                            |   | *(In                thousands)*             |   |
| Medical                expenses                                            |   | $                                           | 190    |   | $ | 187 |   |
| General                and administrative expenses                    |   |                                        | 1,554  |   |   | 1,473 |   |
| Share-based                compensation expense before income taxes   |   |                                        | 1,744  |   |   | 1,660 |   |
| Income                tax benefit                                          |   |                                        | (610   | ) |   | (581 | ) |
| Net                share-based compensation expense                   |   | $                                           | 1,134  |   | $ | 1,079 |   |

*Employee      Stock Purchase Plan and Stock Options*

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Table          of Contents

|                                               |   |                            |   |                          |   | Weighted                        |   |                            |   |
|----------------------------------------------------|--------|---------------------------------|--------|-------------------------------|--------|---------------------------------|--------|---------------------------------|--------|
|                                               |   | Number                          |   | Weighted                      |   | Average                         |   | Aggregate                       |   |
|                                               |   | Of                              |   | Average                       |   | Contractual                Life |   | Intrinsic                       |   |
|                                               |   | Shares                          |   | Exercise                Price |   | Remaining                       |   | Value                           |   |
|                                               |   | *(In                thousands)* |   | *(per                share)*  |   | *(In                years)*     |   | *(In                thousands)* |   |
| Outstanding,                January 1, 2007   |   |                            | 1,775  |                          | $      | 12.94                           |   |                            |   |   |   |   |   |
| Granted                                       |   |                            | ¾ |                          |   | ¾                          |   |                            |   |   |   |   |   |
| Exercised                                     |   |                            | (113   | )                             |   | 8.64                            |   |                            |   |   |   |   |   |
| Canceled                                      |   |                            | (10    | )                             |   | 18.08                           |   |                            |   |   |   |   |   |
| Outstanding,                March 31, 2007    |   |                            | 1,652  |                          | $      | 13.20                           |   |                            | 5.35   |   | $ | 46,215 |   |
|                                               |   |                            |   |                          |   |                            |   |                            |   |   |   |   |   |
| Exercisable                at March 31, 2007  |   |                            | 834    |                          | $      | 11.40                           |   |                            | 5.03   |   | $ | 24,823 |   |

|                                                       |   | Number                          |   | Weighted-Average             |   |
|------------------------------------------------------------|--------|---------------------------------|--------|------------------------------|--------|
|                                                       |   | Of                              |   | Grant                Date    |   |
|                                                       |   | Shares                          |   | Fair                Value    |   |
|                                                       |   | *(In                thousands)* |   | *(per                share)* |   |
| Nonvested                shares, January 1, 2007 (1)  |   |                            | 803    |                         | $      | 7.34 |   |
| Granted                                               |   |                            | ¾ |                         |   | ¾ |   |
| Vested                                                |   |                            | (140   | )                            |   | 7.55 |   |
| Canceled                                              |   |                            | (6     | )                            |   | 6.98 |   |
| Nonvested                shares, March 31, 2007 (1)   |   |                            | 657    |                         | $      | 7.30 |   |

|   | (1) | Excludes                164,000 and 161,000 shares at January 1, 2007 and March 31, 2007,                respectively, which vested in 2005, but are not exercisable until                2008. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Restricted      Stock Units*

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Table          of Contents

|                                                    |   |                            |   |      |   |
|---------------------------------------------------------|--------|---------------------------------|--------|-----------|--------|
|                                                    |   | Number                          |   | Aggregate |   |
|                                                    |   | Of                              |   | Intrinsic |   |
|                                                    |   | Shares                          |   | Value     |   |
|                                                    |   | *(In                thousands)* |   |
| Outstanding,                January 1, 2007(1)(2)  |   |                            | 104    |      |   |   |   |
| Granted                                            |   |                            | 10     |      |   |   |   |
| Vested                                             |   |                            | ¾ |      |   |   |   |
| Canceled                                           |   |                            | ¾ |      |   |   |   |
| Outstanding,                March 31, 2007(1)(3)        |   |                            | 114    |      | $      | 4,693 |   |

*Supplemental      Executive Retirement Plan ("SERP") - *

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|                                                    |   | Three                Months Ended March 31, |                                  |
|---------------------------------------------------------|--------|---------------------------------------------|---------------------------------------|
|                                                    |   | 2007                                        |                                  | 2006 |   |
| Components                of net periodic benefit cost: |   |                                        | *(In                thousands)*  |   |
| Service                cost                        |   | $                                           | 139                                   |   | $ | 126 |   |
| Interest                cost                       |   |                                        | 426                                   |   |   | 399 |   |
| Amortization                of prior service credits    |   |                                        | 303                                   |   |   | 303 |   |
| Recognized                actuarial loss           |   |                                        | 52                                    |   |   | 32 |   |
| Net                periodic benefit cost           |   | $                                           | 920                                   |   | $ | 860 |   |

**7.**
**Share      Repurchases **

**8.**
**Earnings      Per Share**

|                                                                                                              |   | Three                    Months Ended March 31,            |   |
|-------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|--------|
|                                                                                                              |   | 2007                                                       |   | 2006 |   |
|                                                                                                              |   | *(In                    thousands, except per share data)* |   |
| Basic                    (loss) income per share:                                                                 |   |                                                       |   |   |   |   |   |
| Net                    (loss) income                                                                              |   | $                                                          | (1,239 | ) | $ | 32,671 |   |
|                                                                                                              |   |                                                       |   |   |   |   |   |
| Weighted                    average common shares outstanding                                                     |   |                                                       | 55,414 |   |   | 57,727 |   |
|                                                                                                              |   |                                                       |   |   |   |   |   |
| Net                    (loss) income per common share                                                             |   | $                                                          | (0.02  | ) | $ | 0.57 |   |
|                                                                                                              |   |                                                       |   |   |   |   |   |
| Diluted                    (loss) income per share:                                                               |   |                                                       |   |   |   |   |   |
| Net                    (loss) income                                                                         |   | $                                                          | (1,239 | ) | $ | 32,671 |   |
| Interest                    expense on Sierra debentures, net of tax                                              |   |                                                       | ¾ |   |   | 189 |   |
| (Loss)                    income for purposes of computing diluted net (loss) income per                    share |   | $                                                          | (1,239 | ) | $ | 32,860 |   |
|                                                                                                              |   |                                                       |   |   |   |   |   |
| Weighted                    average common shares outstanding                                                |   |                                                       | 55,414 |   |   | 57,727 |   |
| Dilutive                    options and restricted shares outstanding                                             |   |                                                       | ¾ |   |   | 1,352 |   |
| Dilutive                    impact of conversion of Sierra debentures                                             |   |                                                       | ¾ |   |   | 5,648 |   |
| Weighted                    average common shares outstanding assuming dilution                                   |   |                                                       | 55,414 |   |   | 64,727 |   |
|                                                                                                              |   |                                                       |   |   |   |   |   |
| Net                    (loss) income per common share assuming dilution                                           |   | $                                                          | (0.02  | ) | $ | 0.51 |   |

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**9.**
**Income      Taxes**

| **10.** | **Recently                Issued Accounting                Standards** |
|---------|------------------------------------------------------------------------|

**11.**
**Segment      Reporting**

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Through      participation in Medicare and the Federal Employees Health Benefit Plan      programs, the Company generated approximately 52% and 47% of its total      consolidated revenues from agencies of the U.S. government for the three months      ended March 31, 2007 and 2006, respectively. 

**12.**
**Commitments      and Contingencies**

*Litigation      and Legal Matters.*

*Shane*

*Shane*

*Shane*

----

Table          of Contents

On      March      19, 2007, a purported class action complaint, styled Edward Sara, on behalf      of      himself and all others similarly situated v. Sierra Health Services, Inc.,      Anthony M. Marlon, Charles L. Ruthe, Thomas Y. Hartley, Anthony L. Watson,      Michael E. Luce and Albert L. Greene, was filed in the Eighth Judicial District      Court for the State of Nevada in and for the County of Clark. The complaint      names the Company and each of its directors as defendants (collectively, the      “defendants”), and was filed by a purported stockholder of the Company. The      complaint alleges, among other things, that the defendants breached and/or      aided      the other defendants’ breaches of their fiduciary duties of loyalty, due care,      independence, good faith and fair dealing in connection with the merger      contemplated by the merger agreement, the defendants breached their fiduciary      duty to secure and obtain the best price reasonably available for the Company      and its shareholders, and the defendants are engaging in self-dealing and unjust      enrichment. The complaint seeks, among other relief, (i) an injunction      prohibiting the defendants from consummating the merger unless and until the      Company adopts and implements a procedure or process to obtain the highest      possible price for shareholders and (ii) the imposition of a constructive trust      upon any benefits improperly received by the defendants as a result of the      alleged wrongful conduct. The Company believes that this complaint is without      merit.

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**Management's        Discussion And Analysis Of        Financial**

**Condition        And Results Of Operations**

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**Summary      of Consolidated Results - Three Months Ended March 31, 2007 and      2006**

|                                                                |   | Three                Months EndedMarch                31,                                    |    | Percent                Of RevenueThree                Months EndedMarch                31, |   | Increase                (Decrease) |   |
|---------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|---------|--------------------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                |   | 2007                                                                                         |    | 2006                                                                                       |   | 2007                               | 2006   | 2007              vs. 2006 |   |  |   |
|                                                                |   |                                                                                         |    |                                                                                       |   |
| Operating                revenues:                                  |        | *(In                thousands, except percentages, per share and                membership)* |    |                                                                                            |   |
| Medical                premiums                                |   | $                                                                                            | 468,074 |                                                                                       | $      | 414,444                            |   |   | 94.6 | % |   | 94.6 | % | $ | 53,630 |   |   | 12.9 | % |
| Professional                fees                               |   |                                                                                         | 14,642  |                                                                                       |   | 12,915                             |   |   | 3.0 |   |   | 2.9 |   |   | 1,727 |   |   | 13.4 |   |
| Investment                and other revenues                        |   |                                                                                         | 11,921  |                                                                                       |   | 10,889                             |   |   | 2.4 |   |   | 2.5 |   |   | 1,032 |   |   | 9.5 |   |
| Total                                                          |   |                                                                                         | 494,637 |                                                                                       |   | 438,248                            |   |   | 100.0 |   |   | 100.0 |   |   | 56,389 |   |   | 12.9 |   |
|                                                                |   |                                                                                         |    |                                                                                       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                                  |   |                                                                                         |    |                                                                                       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Medical                expenses                                |   |                                                                                         | 435,311 |                                                                                       |   | 336,519                            |   |   | 88.0 |   |   | 76.8 |   |   | 98,792 |   |   | 29.4 |   |
| Medical                care ratio                              |   |                                                                                         | 90.2    | %                                                                                          |   | 78.7                               | %      |   |   |   |   |   |   |   |   |   |   |   |   |
| General                and administrative expenses             |   |                                                                                         | 59,192  |                                                                                       |   | 51,339                             |   |   | 12.0 |   |   | 11.7 |   |   | 7,853 |   |   | 15.3 |   |
| Total                                                          |   |                                                                                         | 494,503 |                                                                                       |   | 387,858                            |   |   | 100.0 |   |   | 88.5 |   |   | 106,645 |   |   | 27.5 |   |
|                                                                |   |                                                                                         |    |                                                                                       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                |   |                                                                                         |    |                                                                                       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                income                           |   |                                                                                         | 134     |                                                                                       |   | 50,390                             |   |   | (0.0 | ) |   | 11.5 |   |   | (50,256 | ) |   | (99.7 | ) |
| Interest                expense                                |   |                                                                                         | (1,955  | )                                                                                          |   | (776                               | )      |   | (0.4 | ) |   | (0.2 | ) |   | (1,179 | ) |   | 151.9 |   |
| Other                income (expense), net                     |   |                                                                                         | 650     |                                                                                       |   | (33                                | )      |   | 0.1 |   |   | ¾ |   |   | 683 |   |   | (2,069.7 | ) |
|                                                                |   |                                                                                         |    |                                                                                       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss)                income before income taxes               |   |                                                                                         | (1,171  | )                                                                                          |   | 49,581                             |   |   | (0.3 | ) |   | 11.3 |   |   | (50,752 | ) |   | (102.4 | ) |
| Provision                for income taxes                      |   |                                                                                         | (68     | )                                                                                          |   | (16,910                            | )      |   | 0.0 |   |   | (3.8 | ) |   | 16,842 |   |   | (99.6 | ) |
| Tax                rate                                        |   |                                                                                         | 5.8     | %                                                                                          |   | 34.1                               | %      |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                (loss) income                               |   | $                                                                                            | (1,239  | )                                                                                          | $      | 32,671                             |   |   | (0.3 | )% |   | 7.5 | % | $ | (33,910 | ) |   | (103.8 | )% |
|                                                                |   |                                                                                         |    |                                                                                       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                |   |                                                                                         |    |                                                                                       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                (loss) income per common share assuming dilution |   | $                                                                                            | (0.02   | )                                                                                          | $      | 0.51                               |   |   |   |   |   |   |   | $ | (0.53 | ) |   | (103.9 | )% |
|                                                                |   |                                                                                         |    |                                                                                       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Membership                                                          |   |                                                                                         |    |                                                                                       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| HMO:                                                                |   |                                                                                         |    |                                                                                       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                          |   |                                                                                         | 275,300 |                                                                                       |   | 260,800                            |   |   |   |   |   |   |   |   | 14,500 |   |   | 5.6 | % |
| Medicare                                                            |   |                                                                                         | 56,800  |                                                                                       |   | 56,400                             |   |   |   |   |   |   |   |   | 400 |   |   | 0.7 |   |
| Medicaid                                                            |   |                                                                                         | 59,600  |                                                                                       |   | 55,000                             |   |   |   |   |   |   |   |   | 4,600 |   |   | 8.4 |   |
| Subtotal                HMO                                         |   |                                                                                         | 391,700 |                                                                                       |   | 372,200                            |   |   |   |   |   |   |   |   | 19,500 |   |   | 5.2 |   |
|                                                                |   |                                                                                         |    |                                                                                       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                PPO and HSA                               |   |                                                                                         | 34,300  |                                                                                       |   | 28,600                             |   |   |   |   |   |   |   |   | 5,700 |   |   | 19.9 |   |
| Medicare                PPO and PFFS                                |   |                                                                                         | 2,900   |                                                                                       |   | 900                                |   |   |   |   |   |   |   |   | 2,000 |   |   | 222.2 |   |
| Medicare                Part D-Basic                                |   |                                                                                         | 159,100 |                                                                                       |   | 160,800                            |   |   |   |   |   |   |   |   | (1,700 | ) |   | (1.1 | ) |
| Medicare                Part D-Enhanced                             |   |                                                                                         | 43,200  |                                                                                       |   | ¾                             |   |   |   |   |   |   |   |   | 43,200 |   |   | ¾ |   |
| Medicare                supplement                                  |   |                                                                                         | 13,100  |                                                                                       |   | 14,600                             |   |   |   |   |   |   |   |   | (1,500 | ) |   | (10.3 | ) |
| Administrative                services                              |   |                                                                                         | 218,200 |                                                                                       |   | 214,600                            |   |   |   |   |   |   |   |   | 3,600 |   |   | 1.7 |   |
| Total                membership                                |   |                                                                                         | 862,500 |                                                                                       |   | 791,700                            |   |   |   |   |   |   |   |   | 70,800 |   |   | 8.9 | % |
|                                                                |   |                                                                                         |    |                                                                                       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Member                months                                        |   |                                                                                         |    |                                                                                       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| HMO:                                                                |   |                                                                                         |    |                                                                                       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                          |   |                                                                                         | 823,300 |                                                                                       |   | 777,600                            |   |   |   |   |   |   |   |   | 45,700 |   |   | 5.9 | % |
| Medicare                                                            |   |                                                                                         | 170,500 |                                                                                       |   | 168,900                            |   |   |   |   |   |   |   |   | 1,600 |   |   | 1.0 |   |
| Medicaid                                                            |   |                                                                                         | 180,200 |                                                                                       |   | 166,900                            |   |   |   |   |   |   |   |   | 13,300 |   |   | 8.0 |   |

**Overview**

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Table          of Contents

**Pending      Business Combination**

**Executive      Summary**

| · | Total                operating revenues increased by 12.9%. This improvement was primarily                driven by a 12.9% increase in medical premiums due to a 37.6% increase                in                our stand alone Medicare Part D prescription drug (PDP) programs,                an                increase in our HMO membership and premium rate increases. Also                contributing to the improvement in operating revenues was a 13.4%                increase                in professional fees due to an increase in visits to our clinical                subsidiaries and a 9.5% increase in investment and other revenues                due to                an increase in yield during 2007 and higher average invested                balances. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | HMO                membership increased 5.2% as a result of new accounts and in-case                growth                on commercial membership and continued growth in Medicaid membership.                This                increase includes the 11,000 commercial member terminations effective                January 1, 2007, from three large employer groups that had been                anticipated. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Medical                expenses, as a percentage of medical premiums and professional fees,                or                medical care ratio, increased to 90.2% in 2007 from 78.7% in 2006.                The                increase in our medical care ratio is primarily related to                the |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table          of Contents

| · | General                and administrative (G&A) expenses as a percentage of medical premiums                increased to 12.6% in 2007 from 12.4% in 2006. G&A expenses increased                15.3% primarily due to expenses related to our new enhanced PDP product,                costs associated with our pending merger with UnitedHealth Group,                and                increases in premium taxes and brokers' fees. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | We                had operating income of $134,000 in 2007 compared to $50.4 million                in                2006. This decrease in income is related to the $48.8 million operating                loss recorded during 2007 related to our new enhanced PDP product. See                Medical Expenses below for more                details. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Cash                  flows from operating activities decreased to $85.2 million from                  $129.5                  million during 2006. This decrease is mostly due to a $50.0 million                  decrease in operating cash flows from our PDP plans during 2007                  compared                  to 2006, primarily as a result of the timing of claim payments                  during the                  quarter. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Results      Of Operations For The Three Months Ended March 31, 2007 Compared To The Three      Months Ended March 31, 2006**

***Medical      Premiums.***

----

Table          of Contents

----

Table          of Contents

***Professional      Fees.***

***Investment      and Other Revenue.***
* *

***Medical      Expenses.***
* *

----

Table          of Contents

***General      and Administrative Expenses.***
* *

***Interest      Expense.***

***Provision      for Income Taxes.***

----

Table          of Contents

**Liquidity      And Capital Resources**

|                                                            |   | **Three                Months Ended March 31,** |    |
|-----------------------------------------------------------------|--------|-------------------------------------------------|---------|
|                                                            |   | **2007**                                        |    | **2006** |   |
|                                                            |   | (In                thousands)                   |    |
| Sources                of cash:*** ***                     |   |                                            |    |   |   |
| Cash                provided by operating activities            |   | $                                               | 85,177  |   | $ | 129,549 |   |
| Exercise                of stock in connection with stock plans |   |                                            | 2,474   |   |   | 7,808 |   |
| Proceeds                from other long-term debt               |   |                                            | ¾  |   |   | 20,000 |   |
| Other                                                           |   |                                            | 1,055   |   |   | 5,109 |   |
| Total                cash sources                               |   |                                            | 88,706  |   |   | 162,466 |   |
|                                                            |   |                                            |    |   |   |   |   |
| Uses                of cash:                                    |   |                                            |    |   |   |   |   |
| Purchase                of investments, net of proceeds    |   |                                            | (22,029 | ) |   | (57,630 | ) |
| Purchase                of treasury stock                       |   |                                            | (21,081 | ) |   | (91,131 | ) |
| Payment                on debt                                  |   |                                            | (25,039 | ) |   | (25 | ) |
| Other                                                           |   |                                            | (2,233  | ) |   | (2,785 | ) |
| Total                cash uses                                  |   |                                            | (70,382 | ) |   | (151,571 | ) |
| Net                increase                in cash              |   | $                                               | 18,324  |   | $ | 10,895 |   |

**Sierra      Debentures**

----

Table          of Contents

**Revolving      Credit Facility**

**Sierra      Share Repurchase Program**

----

Table          of Contents

**Statutory      Capital and Deposit Requirements**

**Obligations      and Commitments**

**Recently      Issued Accounting Standards**

*.      *

----

Table          of Contents

**Ratings**

|                                                          |   | A.M.                Best Company, Inc. (1) |                           | Fitch                Ratings (2) |   |
|---------------------------------------------------------------|--------|--------------------------------------------|--------------------------------|----------------------------------|--------|
|                                                          |   | Rating                                     |                           | Ranking                          |   | Rating |   | Ranking |   |
| Financial                strength rating:                     |   |                                       |                           |                             |   |   |   |   |   |
| HMO                and health and life insurance subsidiaries |   |                                       | B++                Very Good   |                             |   | 5th                of 16 |   |   | A-                Strong |   |   | 7th                of 23 |   |
|                                                          |   |                                       |                           |                             |   |   |   |   |   |   |   |   |   |
| Issuer                credit ratings:                         |   |                                       |                           |                             |   |   |   |   |   |   |   |   |   |
| HMO                and health and life insurance subsidiaries |   |                                       | bbb+                Very Good  |                             |   | 8th                of 22 |   |   | n/a |   |   | n/a |   |
|                                                          |   |                                       |                           |                             |   |   |   |   |   |   |   |   |   |
| Parent                company                            |   |                                       | bb+                Speculative |                             |   | 11th                of 22 |   |   | BBB                Good |   |   | 9th                of 23 |   |
|                                                          |   |                                       |                           |                             |   |   |   |   |   |   |   |   |   |
| Senior                convertible debentures                  |   |                                       | bb+                Speculative |                             |   | 11th                of 22 |   |   | BBB-                Investment Grade |   |   | 10th                of 23 |   |

|                                         |   |                Standard                & Poor's Corp. (3) |
|----------------------------------------------|--------|--------------------------------------------------------------------|
|                                         |   | Rating                                                             |   | Ranking |
|                                         |   |                                                               |   |   |
| Counterparty                credit rating    |   | BB+                Speculative                                     |   | 11th                of 22 |
|                                         |   |                                                               |   |   |
| Senior                convertible debentures |   | BB+                Speculative                                     |   | 11th                of 22 |

**Inflation**

----

Table          of Contents

**Critical      Accounting Policies and Estimates**

----

Table          of Contents

**Item      3. Quantitative and Qualitative Disclosures About Market      Risk**

**Item      4. Controls and Procedures** 

*Evaluation      of Disclosure Controls and Procedures*

*Change      in Internal Control over Financial Reporting*

----

Table          of Contents

**Part      II. Other Information**

**Item      1. Legal Proceedings**

*Litigation      and Legal Matters.*

*Shane*

*Shane*

*Shane*

----

Table          of Contents

**Item      1A. Risk Factors**

**There      can be no assurance that the pending merger with UnitedHealth Group will be      completed.**

**Whether      or not the proposed merger with UnitedHealth Group is completed, the      announcement and pendency of the proposed merger could cause disruptions in      our      businesses, which could have a material adverse effect on our operating results,      financial condition and cash flows. **

| • |   | current                and prospective employees may experience uncertainty about their                future                roles with the combined company, which might adversely affect our                ability                to retain key managers and other employees; |
|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • |   | the                merger agreement with UnitedHealth Group imposes certain restrictions                on                the operations of our business until completion of the merger; and |
|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • |   | current                or prospective customers may experience uncertainty about potential                merger                transition complexities. |
|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

**Our      actual experience for our **
**Enhanced      Plan offered in January 2007 has varied materially from the actuarial      assumptions used to develop the plan design for our 2007 bid. As a result,      we      have recorded a $44.5 million premium deficiency reserve at March 31, 2007      based      on our best estimate of available data. If the assumptions used in our estimate      are incorrect, it could materially adversely affect our operating results,      financial position and cash flows.**

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**Item      2. Unregistered Sales of Equity Securities and Use of      Proceeds** 

|   | (c) | Below,                is a summary of stock repurchases for the three months ended March                31,                2007. See Note 7, "Share Repurchases", of our Notes to Condensed                Consolidated Financial Statements for information regarding our stock                repurchase plan. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Period                                                                                               |   | Total                NumberOf                SharesRepurchased                (1) |   | AveragePrice                PaidPer                Share |   | Total                NumberOf                Shares PurchasedAs                Part Of PubliclyAnnounced                PlanOr                Program |   | Approximate                DollarValue                Of SharesThat                May Yet BePurchased                UnderThe                Plan (2) |   |
|------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|----------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                 |   | *(In                thousands, except per share data)*                            |   |
| Beginning                approximate dollar value of shares that may yet be                purchased |   |                                                                              |   | $                                                        | 24,142 |                                                                                                                                                  |
| January                1, 2007 - January 31, 2007                                                    |   |                                                                              | 500    |                                                     | $      | 35.80                                                                                                                                                 |   |                                                                                                                                                   | 500    |   |   | 56,251 |   |
| February                1, 2007 - February 28, 2007                                                  |   |                                                                              | 85     |                                                     |   | 37.45                                                                                                                                                 |   |                                                                                                                                                   | 85     |   |   | 53,070 |   |
| March                1, 2007 - March 31, 2007                                                        |   |                                                                              | ¾ |                                                     |   | ¾                                                                                                                                                |   |                                                                                                                                                   | ¾ |   |   | 53,070 |   |

|   | (1) | Repurchases                were made pursuant to a 10b5-1                plan. |
|--------|-----|--------------------------------------------------------------------------------|

|   | (2) | At                January 1, 2007, $24.1 million remained available for purchase under                previously approved plans. On January 25, 2007, our Board of Directors                authorized an additional $50.0 million in share repurchases. The                repurchase program has no stated expiration date; however we have                halted                our repurchase program pending the UnitedHealth Group merger. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | Below,                is a summary of 2¼% senior convertible debenture conversions for the three                months ended March 31, 2007. See Note 5, "Long-Term Debt", of our                Notes to                Condensed Consolidated Financial Statements for information regarding                our                senior convertible debentures. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Period                                              |   | Total                Dollar Value of Debentures Converted |       | AveragePrice                Paid                Per Debenture |   | Total                Dollar ValueOf                DebenturesPurchasedAs                Part Of PubliclyAnnounced                PlanOr                Program |   | Approximate                DollarValue                Of DebenturesThat                May Yet BePurchased                UnderThe                Plan |   |
|-----------------------------------------------------|--------|-----------------------------------------------------------|------------|---------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| January                1, 2007 - January 31, 2007   |   | $                                                         | 21,720,000 |                                                          |   | 109.35                shares of common stock for each $1,000 principal amount of                debentures                                                     |   |                                                                                                                                                   | none   |   |   | none |   |
| February                1, 2007 - February 28, 2007 |   |                                                      | ¾     |                                                          |   | ¾                                                                                                                                                         |   |                                                                                                                                                   | ¾ |   |   | ¾ |   |
| March                1, 2007 - March 31, 2007       |   |                                                      | 1,536,000  |                                                          |   | 109.35                shares of common stock for each $1,000 principal amount of                debentures                                                     |   |                                                                                                                                                   | none   |   |   | none |   |

**Item      3.** **Defaults      Upon Senior Securities** 

**Item      4.** **Submission      Of Matters To A Vote Of Security Holders** 

**Item      5.** **Other      Information** 

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**Item      6.** **Exhibits**

| (31.1) |     Rule                13a - 14(a) or 15d - 14(a) Certification of Chief Executive Officer.                                                                                                           |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (31.2) |     Rule                13a - 14(a) or 15d - 14(a) Certification of Chief Financial Officer.                                                                                                           |
| (32.1) |     Certification                pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002 of Principal Executive Officer. |
| (32.2) |     Certification                pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002 of Principal Financial Officer. |

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**Signatures**

|   | SIERRA                HEALTH SERVICES, INC. Registrant                By:                /s/ MARC R. BRIGGS Marc                R. BriggsSenior                Vice President of Finance, Chief                Financial Officer and Treasurer(Principal                Financial and Accounting Officer)* * |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|