APACHE Medical Systems Reports Improved Results.

McLEAN, Va.--(BUSINESS WIRE)--July 20, 1998--APACHE Medical Systems Inc. (NASDAQ:AMSI) a leading provider of outcome evaluation and care management products and services, today reported results for the second quarter and six months ended June 30, 1998.

Total revenue for the second quarter of 1998 was $2.3 million compared with $2.5 million for the second quarter of 1997. The Company reported a net loss for the quarter of $989,000 or $0.14 per share compared with a net loss of $4.5 million or $0.62 per share for the second quarter of 1997. Cash and short term investments were at $8.3 million on June 30, 1998.

For the six months ended June 30, 1998, total revenue was $5.7 million compared with $5.5 million for the six months ended June 30, 1997. The company reported a net loss for the period of $994,000 or $0.14 per share compared with a net loss of $7.6 million or $1.05 per share in the same period a year ago.

Systems and related products revenue was $423,000 for the second quarter and $1.5 million for the first six months of 1998 compared with $657,000 and $2.1 million for the respective periods in 1997. Revenue from system support increased to $540,000 for the second quarter and $1.1 million for the first six months compared with $469,000 and $946,000 in the same periods for 1997. Professional services revenue was $1,314,000 for the second quarter and $3,230,000 for the first six months of 1998 compared with $3,230,000 and $2,470,000 in the respective year ago periods.

The Company also said, as previously announced, that Peter Gladkin has joined APACHE effective July 1, 1998, as president and chief executive officer. Most recently, Mr.Gladkin was president and chief operating officer of Health Data Sciences Corporation (HDS), a leading provider of clinical information systems. Prior to joining HDS in 1994, Mr. Gladkin spent over 20 years at Hewlett Packard (HP) where he was credited with turning HP's healthcare information systems business into a thriving worldwide enterprise. Thomas W. Hodson, who has been serving as Chairman and Acting CEO of APACHE will continue to serve as Chairman.

Thomas W. Hodson, Chairman, said, "APACHE's management team continues to make good overall progress and we look forward to Peter Gladkin's leadership. Our cash position remains strong and we are continuing to closely control expenses."

Hodson continued, "While our systems revenue was somewhat lower than last year, this was mainly due to the timing of implementations and associated strategic product decisions. Our systems backlog continues to be strong and our sales pipeline continues to grow."

Hodson added, "The professional service component of our business is showing good growth. This is being fueled by solid performance in our health outcomes research group and expansion of our professional consulting services. In addition to the strategic consulting services revenues that came with the acquisition of Natural Health Advisors last year, we have also expanded the clinical consulting capabilities that we now combine with new critical care system sales."

Hodson concluded, "We continue to focus on our new Critical Care Series products and the migration of clients to this new product line. This new product is a major milestone for the Company. It is year 2000 ready and includes important advancements in functionality, all of which is being well received by existing clients and prospective new clients."

APACHE Medical Systems is the recognized leader in the development of risk-adjustment models, clinical decision support tools and quality improvement programs for the care of high-risk, high-cost patients. The Company's products and services enable health systems, hospitals, and providers to apply an evidence-based approach to achieve clinical performance excellence, reduce cost and compete effectively under managed care. Known internationally for APACHE III methodology for critical care, the Company's programs are today helping providers to better manage the clinical, financial and patient satisfaction outcomes of high-risk, high-cost patients in critical, acute, cardiovascular, HIV/AIDS and sub-acute care.

APACHE's Health Outcomes Research division provides clinical trial design services, research support for product marketing and disease management programs for the pharmaceutical and medical device industries, as well as government research and database services. In addition to the Company's clinical performance improvement services, the APACHE/National Health Advisors division offers strategic and management consulting services to strengthen the competitive position and operating performance of hospitals, health systems and other providers.

Statements in this press release which are not historical facts are forward-looking statements under provisions of the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve risks and uncertainties. The Company wishes to caution readers that the following important factors, among others, in some cases have affected, and in the future could affect, the Company's actual results and could cause its actual results in fiscal 1998 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company.

Important factors that could cause actual results to differ materially include but are not limited to the Company's: having sufficient sales and timely collections to meet cash requirements and achieve profitability; ability to attract and retain key employees and to successfully replace its chief financial officer; success of its strategy to concentrate its product offerings on high-risk, high-cost patients; ability to timely develop new products and enhance existing products; ability to compete in the competitive and rapidly evolving healthcare information technology industry; ability to correctly estimate and manage its Year 2000 costs and liabilities; success of its marketing and consulting efforts and ability to effectively utilize its direct sales force; ability to protect proprietary information and to obtain necessary licenses on commercially reasonable terms; and ability to comply with and adapt products and services to potential regulatory changes.

                       APACHE MEDICAL SYSTEMS, INC.
                    Consolidated Statements of Operations
                                 (unaudited)
                    (In thousands, except per share data)

                             Second Quarter Ended   Six Months Ended
                                       June 30,          June 30,
                                    1998     1997       1998    1997
Revenue:
  Systems and related products  $    423   $  657    $ 1,462 $ 2,102
  Support                            540      469      1,057     946
  Professional services            1,314    1,326      3,230   2,470
    Total revenue                  2,277    2,452      5,749   5,518

Expenses:
  Cost of systems, support and
    services                         985    1,441      1,897   2,975
  Selling, general and
    administrative                 2,045    4,507      4,329   7,658
  Research and development           360      700        786   1,371
  Write-off of acquired in-process
   research and development costs      -      500          -   1,612
    Total expenses                 3,390    7,148      7,012  13,616

Loss from operations             (1,113)  (4,696)    (1,263)  (8,098)

Other income (expense):
  Interest income                    132      228        286     465
  Interest expense                    (8)      (7)       (17)    (15)
  Other net                            -        9          -      10
    Total other income (expense)     124      230        269     460

Net loss                         $  (989) $(4,466)  $   (994) $(7,638)

Net loss per share               $ (0.14) $ (0.62)  $  (0.14) $ (1.05)

Weighted average number of
 shares used for calculation
 of net loss per share             7,289    7,242      7,289    7,242


                         Condensed Balance Sheets
                                (in thousands)
                                               June 30,
                                           1998            1997
Assets
  Cash and short-term investments         8,262          14,832
  Accounts receivable, net                3,022           3,309
  Other current assets                      509             717
  Property, plant and equipment, net      1,117           1,418
  Other assets                              583           1,761
                                       $ 13,493      $   22,037

Liabilities and Stockholders' Equity
  Current liabilities                     7,450           6,680
  Long-term debt and capital leases          46             146
  Deferred rent                              93             141
  Stockholders' equity                    5,904          15,070
                                       $ 13,493      $   22,037

CONTACT: APACHE Medical Systems, McLean

703/847-1400