Rockville, Md. -- Mid Atlantic Medical Services, Inc. (MAMSI) (NYSE-MME), one of the Mid-Atlantic region’s largest managed care companies, reported its results today for the third quarter and first nine months ended September 30, 1998.

Prior to the one-time accrual for a potential settlement of an examination performed by the Office of Personnel Management, diluted earnings for the first nine months of 1998 were $14,257,000 or $.31 per share on 46,422,587 weighted average shares, compared to earnings of $8,320,000 or $.18 per share on 46,849,087 weighted average shares for the same period in 1997. After the one-time item, net income for the first nine months of 1998 was $3,532,000 or $.08 per share. Revenue for the first nine months of 1998 was $883.3 million, compared with $835.5 million for the same period in 1997, an increase of $47.8 million or 5.7 %. Medical and home health patient services costs for the nine months ended September 30, 1998 were $754.6 million, compared with $722.6 million for the same period in 1997. Administrative expenses for the first three quarters of 1998 were $99.6 million, compared with $97.9 million for the same period in 1997.

For the third quarter of 1998, prior to the one-time item, diluted earnings were $3,982,000 or $.09 per share on 45,042,891 weighted average shares outstanding, compared with $.10 per share on 47,111,926 shares outstanding for the same period in 1997. After the one-time item, the Company incurred a loss of $(6,743,000) or $(.15) per share. Revenue for the third quarter of 1998 was $299.5 million, compared to $269.9 million for the same quarter in 1997, an increase of $29.6 million. Medical and home health patient services expenses for the third quarter of 1998 were $255.4 million, compared with $230.1 million for the same period in 1997. Third quarter 1998 administrative expenses were $33.3 million, compared with $31.9 million for the same period in 1997.

"The third quarter results reflect good progress in our business recovery," commented George T. Jochum, Chairman, CEO, and President. "It is appropriate to set up the OPM accrual at this time. The examination performed by the Office of Personnel Management showed no problems for the years 1995 through 1997. This gives us confidence that our current processes are correct and we have good controls in place. I am certain the Company’s momentum will continue. Our focus on customer service and value has given the Company an advantage in the marketplace which is demonstrated by our success in retaining current customers and attracting new ones. We expect 1999 to have continued strong sales growth."

Membership in MAMSI’s health plans continued an upward trend, reaching 1,788,800 covered lives in all products as of September 30, 1998, up from 1,687,500 on December 31, 1997, representing an increase of 101,300 covered lives or 6.0%. Of the 1998 figure, 713,800 are HMO, indemnity, and ASO plan members, and 1,075,000 are PPO members.

Membership figures for individual product categories are as follows:

* Includes indemnity members.

The Company’s provider network numbered 30,018 physicians, specialists, and affiliate providers; 290 hospitals; 1,334 outpatient facilities; and 5,976 pharmacies as of September 30, 1998.

In other news, the Company announced:

• It has achieved premium rate increases on commercial, fully-insured renewal business averaging approximately 7.4% this year through September 1998. These year-to-date renewals through September represent approximately 80% of that book of business.
• Under the Company’s current stock repurchase program, the Company is authorized to repurchase a total of $40 million of MAMSI common stock prior to February 25, 1999. To date, the Company has repurchased 5,043,700 shares at a cost of approximately $34,412,000 under this authorization. Of this total, 4,390,200 shares at a cost of $25,999,000 were purchased in the third quarter.
• MAMSI received three year, full accreditation from the National Committee for Quality Assurance (NCQA) for our two largest health maintenance organizations, M.D. IPA and OCI. The full accreditation applies to the health maintenance organization and point-of-service products.
• The Office of Personnel Management’s Federal Employee Health Benefit Plan Guide listed M.D. IPA as a Top Rated Plan because of its high customer satisfaction rate. It was the only top rated plan in Maryland and the District of Columbia and one of two top rated plans in Virginia.
• In recent national report cards, Newsweek ranked M.D. IPA and OCI the 34^th best HMOs in the nation and U.S. News and World Report gave M.D. IPA and OCI three stars (with the highest rating a four star).
• MAMSI has expanded the services available through its web site. Members may look up physicians and other health care practitioners to verify participation in the Company’s network. Physicians and other health care practitioners may verify the status of health care claims.

"Our membership growth, member satisfaction, and service improvements demonstrate MAMSI’s value to employer groups," added Mr. Jochum. "No other regional managed care company offers employer groups access to so many different types of coverage (e.g., HMO, PPO, Indemnity), or access to a large provider network."

Looking ahead, the Company plans to continue its focus on service, value, and sales for its members, as well as its health care providers. Targeted areas for membership growth include small and large groups in Maryland, Virginia, Washington D.C., Delaware, West Virginia, North Carolina, and Pennsylvania.

"We will continue to build on our strengths," Mr. Jochum concluded. "Membership growth, continued service improvement, and premium increases demonstrate that MAMSI is a solid company with a bright future."

Mid Atlantic Medical Services, Inc. is one of the largest managed care companies in the Mid-Atlantic region, with its health plan subsidiaries covering more than 1.7 million lives in Maryland, Virginia, Washington D.C., Pennsylvania, North Carolina, Delaware, and West Virginia. The Company’s internet address is www.mamsi.com.

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 3: Mid Atlantic Medical Services, Inc. common stock is traded on the New York Stock Exchange (NYSE-MME).

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