Advanced Health Initiates Restructuring Plan in Anticipation of a Second-Quarter Loss.

TARRYTOWN, N.Y.--(BUSINESS WIRE)--June 30, 1998--Advanced Health's Chairman and CEO Jon Edelson, MD, announced today the Company is restructuring elements of its physician practice management organization and re-focusing its strategic software sales efforts to improve profitability in light of an anticipated second-quarter loss. Based on a preliminary analysis of results in the second quarter and possible one-time special charges, the Company will likely experience an operating loss of approximately $3 million to $4 million on revenues of approximately $17.5 million and one-time charges of approximately $8 million pre-tax.

Dr. Edelson explained that the major factors behind the anticipated second-quarter operating loss include:

-- The absence of large information technology software sales.

-- The previously announced loss of a contract to provide practice

management services to one large physician group; the conclusion of one non-recurring management contract; and the failureto recognize practice management gain-sharing revenues in the quarter.

-- The lack of large physician group additions for management services,

other than those added through the previously announced Integrated Medical Management (IMM) acquisition, due to a longer than anticipated decision-making process by the larger groups with which the Company now seeks to affiliate.

-- One-time, non-recurring expenses, principally related to

professional fees.

-- Operating losses related to the Company's IMM acquisition.

The components of the special one-time charges are anticipated to include:

-- The write-off of approximately $5 million in certain accounts

receivable for sales prior to 1998.

-- The write-off of the Company's investment in a consulting company

acquired in 1996.

-- The write-off of certain one-time charges related to the Company's

acquisition of IMM.

Physician Practice Management (PPM)

Alan Masarek, President and COO, explained that "the Company is focusing on affiliating with larger independent and hospital-affiliated groups in order to reduce expense to achieve higher practice management margins. In connection with this restructuring, we are taking other measures to improve profitability, including, most importantly, the reduction of expenses."

Information Technology (IT)

IT revenues for the quarter will be less than $1 million, which is below expected results. "The Company has historically relied on large, strategic software sales which did not materialize in the second quarter," Dr. Edelson explained. "Although nine software agreements were signed in the quarter, these were not significant enough in the aggregate to offset the absence of larger type sales. We are committed to making our sales process more predictable and therefore manageable by focusing on the smaller but much more numerous recurring sales to hospitals and physician groups. We are also shifting the direction of our strategic software sales efforts from a focus on near-term large sales to partnerships that offer the potential for significant longer-term recurring revenues."

Michael Rogers Resignation

Dr. Edelson also announced that Michael Rogers, Chief Financial and Corporate Development Officer, has elected to resign from Advanced Health to pursue other interests but will remain with the Company through a transition period and assist in the search for his replacement. "My resignation after a brief period with the Company is driven by my own personal desire to pursue other interests," Mr. Rogers commented. "I am confident of the ability of the senior management team to manage through the challenges of this marketplace with the restructuring plan that has been set in motion."

Outlook

"Although we are disappointed by the revenue and earnings foreseen in the second quarter," Dr. Edelson said, "we remain confident that our fundamental approach is the right one to providing the comprehensive tools necessary for physicians to be successful. We will get beyond the second quarter, supported by what we believe is the right strategy, a solid staff, and a strong debt-free balance sheet."

Advanced Health is a leading physician practice management and health care information services company that vertically integrates practice and network management services with clinical information systems. Unlike other physician management companies, Advanced Health partners with - instead of purchases - physician group practices. Advanced Health provides physician practice and network management consulting services through its Advanced Health Management subsidiary and clinical information services through its Advanced Health Technologies subsidiary. These information systems provide physicians and Integrated Delivery Systems with patient-specific clinical and health plan information at the point of care to improve the quality and reduce the costs of health care.

This press release contains forward-looking information and management's best estimates for anticipated financial results for the second quarter ended June 30, 1998. These second-quarter estimates are made based on limited financial data since all final results for the full quarter are not yet available and won't be available until early August. The second-quarter estimates, therefore, are subject to revision pending final results for this period. The second-quarter estimates and the forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be significantly impacted by certain risks and uncertainties described herein and in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1997.

    CONTACT: Arthur Dague
              (914-524-4783)
              e-mail: [e-mail]