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QUALMED ANNOUNCES SECOND QUARTER RESULTS

    PUEBLO, Colo., Aug. 13 /PRNewswire/ -- QualMed Inc. (NYSE: MQ) today reported that revenues for the second quarter ended June 30, 1993, increased 29 percent to $137.3 million, compared with revenues of $106.3 million for the second quarter of 1992.  Of the $31 million increase, 43 percent was attributable to internal growth.
    Malik M. Hasan, M.D., chairman, president and chief executive officer, said, "Despite our disappointment over the Department of Defense decision regarding CHAMPUS, we remain optimistic.  We're encouraged by the internal enrollment growth of the last year.  We're completing our best-and-final offer for the CHAMPUS contract in Oregon and Washington and with health care reform challenging our industry, we're confident that QualMed's medical management expertise complements the health care reform initiative."
    On July 28, the U.S. Department of Defense (DoD) informed QualMed that the CHAMPUS Reform Initiative (CRI) contract for the DoD's Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) in California and Hawaii was awarded to another bidder.
    Net income for the second quarter and first half of 1993 were negatively affected by the CHAMPUS write-off of development and acquisition-related costs for the unsuccessful proposal in the amount of $1.4 million (net of tax), or $0.08 per share, as previously disclosed.
    Other non-recurring costs totaling $455,000 incurred during the second quarter included listing QualMed's common stock on the New York Stock Exchange.
    Excluding the effects of the CHAMPUS proposal costs write-off and the non-recurring costs, net income for the second quarter of 1993, would have been $4.0 million, or $0.23 per share.
    Net income for the second quarter of 1993 was $2.4 million ($0.14 per share), compared with second quarter 1992 results of $3.7 million ($0.21 per share).
    For the six months ended June 30, 1993, QualMed reported revenues of $273.5 million, an increase of 52 percent over revenues of $179.5 million for the same period a year ago.  Of the $94 million increase approximately $69 million is attributable to 1992 acquired plans.  Income before the cumulative effect of an accounting change amounted to $6.9 million ($.40 per share), compared to $7.1 million ($.42 per share) last year.  Net income was $6.9 million ($0.40 per share), compared to $8.3 million ($0.48 per share) for the same period last year.
    Health Care Expenses
    The consolidated medical loss ratios (medical costs as a percentage of premium revenues) for all QualMed plans in the quarter ended June 30, 1993, was 78.7 percent, the same as a year ago.  The second quarter consolidated medical loss ratio for commercial HMO business was 76.5 percent in both 1993 and 1992.  The second quarter comparison of consolidated medical loss ratios for medicare risk business was 87.7 percent in 1993, compared with 92.4 percent in 1992.
    The consolidated medical loss ratios for all QualMed plans in the six months ended June 30, 1993, was 79.2 percent, compared with 77.8 percent a year ago.  The six-month comparison of consolidated medical loss ratios for commercial HMO business was 76.6 percent in 1993, compared with 76.5 percent in 1992.  The six-month comparison of consolidated medical loss ratios for medicare risk business was 90.0 percent in 1993, compared with 91.0 percent in 1992.
    Enrollment
    Enrollment on June 30, 1993, was 337,000, compared to 312,000 on the same date last year, an increase of 8.0 percent.  Enrollment as of Aug. 1, 1993, was 351,000, compared to 321,000 on the same date a year ago, an increase of 9.3 percent.  August 1993 enrollment includes approximately 6,000 members related to the acquisition of certain HMO employer group and subscriber contracts in Colorado from Humana Inc. on July 1, 1993.
    CHAMPUS
    The company announced on May 7, 1993, that it had received written notice that its initial proposal for providing managed health care services under the CHAMPUS Reform Initiative in Washington and Oregon was accepted for consideration.  An award date has not been announced. QualMed said that approximately $994,000 has been capitalized in connection with this proposal, as of June 30, 1993.
    If the proposal is successful, the costs will be amortized over the contract period.  If unsuccessful, the costs will be expensed as development and acquisition-related costs.
    Health Net
    As of June 30, 1993, approximately $5.2 million has been deferred by the company in connection with the potential acquisition of Health Net, a California HMO.  If the company consummates the acquisition and the acquisition is accounted for under the purchase method, the costs will be included in the total cost of the acquisition.  If the company agrees to an alternative type of transaction with Health Net under which the deferral of such costs would no longer be appropriate or if no acquisition occurs, the costs will be expensed as development and acquisition-related costs.
    QualMed Inc., headquartered in Pueblo, provides health care products and services to approximately 351,000 members as of Aug. 1, 1993, in California, Colorado, Idaho, New Mexico, Oregon and Washington.  Through its subsidiary, Preferred Health Network Inc., the company also provides access to preferred provider networks in 16 states for more than 2.3 million covered persons.  The company's common stock presently trades on the NYSE under "MQ."
                              QUALMED INC.
                            Membership Data
                       Figures have been rounded)
                                        AT JUNE 30, 1993
                         Commercial       Medicare Risk         Total
    CALIFORNIA            151,000             20,000            171,000
    COLORADO               28,000              3,000             31,000
    NEW MEXICO             28,000              1,000             29,000
    WASHINGTON/IDAHO       85,000                  0             85,000
    OREGON                 19,000                  0             19,000
      TOTAL HMO           311,000             24,000            335,000
    QMH&LIC                 2,000                N/A              2,000
      TOTAL               313,000             24,000            337,000
                                      AT JUNE 30, 1992
                         Commercial       Medicare Risk         Total
    CALIFORNIA            149,000             16,000            165,000
    COLORADO               25,000              2,000             27,000
    NEW MEXICO             24,900                100             25,000
    WASHINGTON/IDAHO       75,000                  0             75,000
    OREGON                 20,000                  0             20,000
      TOTAL               293,900             18,100            312,000
                                       AT AUGUST 1993
                         Commercial       Medicare Risk         Total
    CALIFORNIA            151,000             21,000            172,000
    COLORADO               35,000              4,000             39,000
    NEW MEXICO             29,000              1,000             30,000
    WASHINGTON/IDAHO       87,900                100             88,000
    OREGON                 19,000                  0             19,000
      TOTAL HMO           321,900             26,100            348,000
    QMH&LIC                 3,000                N/A              3,000
      TOTAL               324,900             26,100            351,000
                                       AT AUGUST 1992
                         Commercial       Medicare Risk         Total
    CALIFORNIA            149,000             17,000            166,000
    COLORADO               26,000              2,000             28,000
    NEW MEXICO             26,900                100             27,000
    WASHINGTON/IDAHO       79,000                  0             79,000
    OREGON                 21,000                  0             21,000
     TOTAL                301,900             19,100            321,000
    QMH&LIC: QualMed Health & Life Insurance Co.
                              QUALMED INC.
                  Consolidated Statement of Operations
                              (Unaudited)
                                                Three Months Ended
                                                     June 30,
                                               1992             1993
    Revenues:
     Health care premiums                 $103,594,000      133,771,000
     Administrative services                 2,723,000        3,517,000
    Total                                  106,317,000      137,288,000
    Operating expenses:
     Health care services                   81,557,000      105,284,000
     Selling, general and administrative    17,389,000       23,877,000
     Depreciation and amortization           1,213,000        1,678,000
     Developmental and acquisition-related
      costs                                    531,000          720,000
     Write off of CHAMPUS CA/HI
      proposal costs                               ---        2,255,000
    Total                                  100,690,000      133,814,000
    Income from operations                   5,627,000        3,474,000
    Other income (expense):
     Interest income                           925,000          838,000
     Interest expense                         (207,000)        (393,000)
     Other                                      57,000           22,000
    Total                                      775,000          467,000
    Income before provision for income
     taxes and cumulative effect of a
     change in accounting principle          6,402,000        3,941,000
    Provision for income taxes               2,707,000        1,571,000
    Income before cumulative effect of a
     change in accounting principle          3,695,000        2,370,000
    Cumulative effect on prior years of a
     change in accounting for income taxes         ---              ---
    Net income                              $3,695,000       $2,370,000
    Primary earnings per share:
     Income before cumulative effect
      of a change in accounting principle        $0.21             0.14
     Cumulative effect on prior years
      of a change in accounting for income taxes   ---              ---
     Net income                                  $0.21            $0.14
    Weighted average common shares
     outstanding                            17,243,096       17,222,223
                                                 Six Months Ended
                                                     June 30,
                                               1992             1993
    Revenues:
     Health care premiums                 $175,974,000      266,632,000
     Administrative services                 3,568,000        6,890,000
    Total                                  179,542,000      273,522,000
    Operating expenses:
     Health care services                  136,875,000      211,093,000
     Selling, general and administrative    29,511,000       44,882,000
     Depreciation and amortization           1,776,000        3,287,000
     Developmental and acquisition-related
      costs                                    793,000        1,572,000
     Write off of CHAMPUS CA/HI proposal costs     ---        2,255,000
    Total                                  168,955,000      263,089,000
    Income from operations                  10,587,000       10,433,000
    Other income (expense):
     Interest income                         1,734,000        1,664,000
     Interest expense                         (378,000)        (574,000)
     Other                                     177,000           59,000
    Total                                    1,533,000        1,149,000
    Income before provision for income
     taxes and cumulative effect of a
     change in accounting principle         12,120,000       11,582,000
    Provision for income taxes               4,972,000        4,727,000
    Income before cumulative effect of a
     change in accounting principle          7,148,000        6,855,000
    Cumulative effect on prior years of a
     change in accounting for income taxes   1,110,000              ---
    Net income                              $8,258,000       $6,855,000
    Primary earnings per share:
     Income before cumulative effect
      of a change in accounting principle        $0.42             0.40
     Cumulative effect on prior years
      of a change in accounting for income taxes  0.06              ---
     Net income                                  $0.48            $0.40
    Weighted average common shares
     outstanding                            17,260,871       17,271,181
    -0-             08/13/93
    CONTACT:  E. Keith Hovland, executive VP & CFO, or George Evans, director of investor relations of QualMed, 719-542-0500
    (MQ) CO:  QUALMED INC. IN:  MTC SU:  ERN ST:  CO


-- LA017 -- X477 08/13/93
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