Thursday, February 26, 1998

FOR MORE INFORMATION CONTACT:
Diane Landry King 301-838-5636

MAMSI REPORTS FOURTH QUARTER AND FISCAL 1997 EARNINGS:
PROFITS & MEMBERSHIP UP

Rockville, Md. -- Mid Atlantic Medical Services, Inc. (MAMSI) (NYSE-MME), one of the largest managed care companies in the mid-Atlantic region, announced today increased earnings and steady membership gains for the fourth quarter and fiscal year ended December 31, 1997.

Diluted earnings per share (EPS) on net income for fiscal year 1997 was $.31 on 46,885,666 weighted average shares outstanding, compared with a loss per share of $(.06) on 45,978,864 weighted average shares outstanding for fiscal 1996, an increase in earnings per share of $.37.

Total membership in all products was 1,696,500 covered lives as of December 31, 1997 -- up from 1,679,600 as of December 31, 1996.

Diluted earnings per share on net income for the fourth quarter of 1997 was $0.13 on 46,995,403 shares outstanding, compared with a loss of $(0.07) per share on 45,641,267 shares outstanding for the same period in 1996.

Revenue for fiscal 1997 was $1.112 billion, compared with $1.134 billion in 1996, a decrease of
$22 million. Net income for 1997 was $14.5 million, compared with a net loss of $(2.8) million in 1996 -- an increase of $17.3 million. Medical and home health patient services expenses in 1997 were $957 million, compared with 1996’s $1.015 billion, representing a decrease of $58 million. Administrative expenses for 1997 were $130.0 million, compared with $121.7 million in 1996 -- an increase of $8.3 million.

Revenue for the fourth quarter of 1997 was $276.2 million, compared to $292.8 million for the same quarter in 1996, a decrease of $16.6 million. Net income for the quarter was $6.2 million or $0.13 per share, compared with a net loss of $(3.4) million or $(.07) per share for the same period in 1996. Medical and home health patient services expenses for the fourth quarter of 1997 were $234.8 million, compared with $266.0
million for the same quarter in 1996, a decrease of $31.2 million. Administrative expenses for each of the fourth quarters of 1997 and 1996 were approximately $32.1 million.

"These numbers show we’re on a steady course and will continue to grow the business," stated
George T. Jochum, Chairman of the Board, CEO and President of MAMSI. "The decisions we made to rebound from a tough FY ‘96 were right on target. We’re pleased with the continued earnings growth and confident that with our re-emphasis on service, value and sales, MAMSI is properly positioned to gain significant membership and market share, as well as continued future growth in EPS. 1997 was a year of recovery. We had to demonstrate to ourselves that we could compete in a very competitive market and at the same time be profitable."

"The move to decrease our emphasis on Medicare and Medicaid and focus more on bottom-line growth has paid off for us," added Mr. Jochum. "Other noteworthy developments included a modest premium increase on our commercial business averaging 6 %, continued membership growth in our newest market areas in West Virginia and North Carolina, and M.D. IPA and OCI received one year accreditation from the National Committee for Quality Assurance (NCQA) on May 12, 1997."

Membership figures for individual product categories are as follows:

* Includes indemnity members.

Membership continues to grow. As of February 1, 1998, the total number of covered lives under all managed care plans reached 1,750,000. Of that figure, 705,000 are HMO, indemnity and ASO plan members; and 1,045,000 are PPO members.

The company’s provider network numbered 26,843 physicians, specialists and affiliate providers; 276 hospitals; 1,213 outpatient facilities and 8,703 pharmacies as of December 31, 1997.

In other news, the company announced:

• George T. Jochum, Chairman of the Board, CEO and President, has signed a new three year contract, which begins January 1, 1999.
• The Board of Directors has authorized a $20 million stock repurchase program. The company may purchase its stock on the open market, through block trades, or in private transactions over the next 12 months. The program may be discontinued at any time.
• Approximately 500,000 options are to be exercised (a portion of these shares may be disposed of) over the next month by senior executives of the company under the 1993 stock option program, due to the expiration of the options.
• The company recently purchased a large office building in Frederick, Md. in which all of its service departments will now operate. The departments, which had previously operated from several different locations in Rockville, include claims, professional services, member services, group services, support services, warehouse facilities, and MIS. The move is nearly completed and did not result in any customer service interruption.

For the year ahead, the company plans to continue its renewed emphasis on service, value and sales; geographical expansion into areas that include West Virginia and North Carolina; and its targeting of small groups for membership growth.

"The experience in 1996 taught us that we needed to re-evaluate our product mix and profitability," Mr. Jochum said. "As we look back on 1997, we can see we took appropriate action, and will continue these measures to reach our targeted goals in 1998. We anticipate additional rate increases of 5 – 7 % in 1998. Our January rate increases (which represent 30 % of our total renewals) were within our targeted range. Operationally, the move of our claims processing and other departments to Frederick has been positive for two reasons: we now have all our service departments in one location and we’re in a much improved labor market."

Selected Income Statement Information

(In thousands except share amounts)
(Unaudited)

*Earnings per share and weighted average share amounts have been restated to reflect the adoption of statement of financial accounting standards No. 128, "Earnings Per Share."

MID ATLANTIC MEDICAL SERVICES, INC.
IN 000's EXCEPT PMPM AND PER SHARE
(UNAUDITED)

MID ATLANTIC MEDICAL SERVICES, INC.
IN 000's EXCEPT PMPM AND PER SHARE
(UNAUDITED)

Note 1: Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: All forward-looking information or statements contained in this release are based on management’s current knowledge of factors, all with inherent risks and uncertainties, affecting MAMSI’s business. MAMSI’s actual results may differ materially if these assumptions prove invalid. Significant risk factors, while not all-inclusive, are: the possibility of increasing price competition in the Company’s marketplace; the possibility of state or Federal budget mandates that reduce premium levels; the possibility of increased medical expenses due to increased utilization, inflation or legislative mandates; and the possibility that the Company is not able to expand its Service Area as planned. Investors should review other risks and uncertainties contained in Company documents filed with the Securities and Exchange Commission.

Note 2: MAMSI is a regional holding company for health care organizations that provide comprehensive health insurance products and services including: M.D. IPA, a traditional HMO, and M.D. IPA Preferred, an open-ended version of the HMO; Optimum Choice, Inc., a non-federally qualified HMO; Optimum Choice of the Carolinas, Inc. (OCCI); Optimum Choice, Inc. of Pennsylvania (OCIPA); Alliance PPO, Inc., a preferred provider organization; Mid Atlantic Psychiatric Services, Inc. (MAPSI), a preferred provider organization offering managed psychiatric health care services; MAMSI Life and Health Insurance Company, an indemnity insurance company; HomeCall, Inc. and FirstCall, Inc., home health care companies; and HomeCall Pharmaceutical Services, Inc., a mail order pharmacy and home infusion services company.

Note 3: Mid Atlantic Medical Services, Inc. securities are traded on the New York Stock Exchange (NYSE-MME).