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QUALMED ANNOUNCES THIRD QUARTER RESULTS

 PUEBLO, Colo., Nov. 12 /PRNewswire/ -- QualMed Inc. (NYSE: MQ) today reported that revenues for the third quarter ended Sept. 30, 1993, increased 16 percent to $147.0 million, compared with revenues of $126.8 million for the third quarter of 1992.
 Net income for the third quarter of 1993 was negatively affected by the write-off of previously capitalized Health Net acquisition-related costs in accordance with the announcement on Aug. 30, 1993, that QualMed and HN Management Holdings Inc. had entered into a merger agreement. Since the merger will be accounted for as a pooling of interests, all fees and expenses relating to the merger will be expensed as period expenses. With the write-off of these costs during the three-month period ended Sept. 30, 1993, net income was negatively affected by $3.8 million (net of taxes), or $0.22 per share.
 Net income for the third quarter of 1993 was $2.5 million ($0.14 per share), compared with third quarter 1992 results of $6.4 million ($0.38 per share).
 Excluding the effects of the Health Net write-off, net income for the third quarter of 1993 would have been $6.3 million, or $0.36 per share.
 Malik M. Hasan, M.D., chairman, president and chief executive officer of QualMed, said, "Although these initial write-offs associated with the Health Net merger impacted our earnings during the third quarter, we're pleased to be joining forces in what will surely be a strong, well-positioned company that will be a major force in the increasingly competitive health care industry."
 For the nine months ended Sept. 30, 1993, QualMed reported revenues of $420.5 million, an increase of 37 percent over revenues of $306.4 million for the same period a year ago. Of the $114.1 million increase, approximately $79.5 million is attributable to 1992 acquired plans.
 Net income for the nine months was $9.3 million ($0.54 per share), compared to $14.7 million ($0.85 per share) for the same period last year.
 Excluding the effect of Health Net and CHAMPUS write-offs, net income for the nine-month period ended Sept. 30, 1993, would have been $14.5 million, or $0.84 per share.
 Health Care Expenses
 The consolidated medical loss ratios (medical costs as a percentage of premium revenues) for all QualMed plans in the quarter ended Sept. 30, 1993, was 77.4 percent, compared to 77.5 percent for the same period last year. The third quarter consolidated medical loss ratio for commercial business was 75.2 percent in 1993, compared to 75.8 percent in 1992. The third quarter comparison of consolidated medical loss ratios for Medicare risk business was 85.7 percent in 1993, compared with 85.6 percent in 1992.
 The consolidated medical loss ratios for all QualMed plans in the nine months ended Sept. 30, 1993, was 78.6 percent, compared with 77.7 percent a year ago. The nine-month comparison of consolidated medical loss ratios for commercial HMO business was 76.1 percent in 1993, compared with 76.2 percent in 1992. The nine-month comparison of consolidated medical loss ratios for Medicare risk business was 88.5 percent in 1993, compared with 88.2 percent in 1992.
 Enrollment
 Enrollment on Sept. 30, 1993, was 354,400, compared to 324,000 on the same date last year, an increase of 9.4 percent. Enrollment as of Nov. 1, 1993, was 366,700, compared to 328,500 on the same date one year ago, an increase of 11.6 percent.
 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 been tentatively scheduled for March 1994, and delivery of services is scheduled to commence in September 1994. QualMed said that approximately $1.0 million has been capitalized in connection with this proposal as of Sept. 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
 On Aug. 30, 1993, QualMed and HN Management Holdings Inc., parent of California's second-largest health maintenance organization, Health Net, announced the signing of a definitive merger agreement. The merger has been approved by the boards of directors of both companies.
 Both QualMed Inc. and HN Management Holdings Inc. filed their respective notifications and report forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 on Sept. 23, 1993. The initial waiting period under the Act expired on Oct. 23, 1993.
 QualMed has filed a preliminary proxy statement with respect to the transaction with the Securities and Exchange Commission and anticipates that a definitive proxy statement will be mailed to stockholders in late November or early December 1993. The company anticipates that the transaction will be consummated prior to the end of this year, subject to regulatory and shareholder approval.
 QualMed Inc., headquartered in Pueblo, provides health care products and services to approximately 367,000 members as of November 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 2.4 million covered persons. The company's common stock presently trades on the NYSE under the symbol "MQ."
 QUALMED INC.
 Consolidated Statement of Operations
 (Unaudited)
 Three Months Ended Nine Months Ended
 Sept. 30, Sept. 30,
 1993 1992 1993 1992
 Revenues:
 Health care
 premiums $143,667,000 $123,707,000 $410,299,000 $299,681,000
 Administrative
 services 3,358,000 3,102,000 10,248,000 6,670,000
 Total 147,025,000 126,809,000 420,547,000 306,351,000
 Operating
 expenses:
 Health care
 services 111,227,000 95,833,000 322,320,000 232,708,000
 Selling,
 general and
 administra-
 tive 23,261,000 18,647,000 68,143,000 48,158,000
 Depreciation
 and amorti-
 zation 1,615,000 1,280,000 4,902,000 3,056,000
 Developmental
 and acquisition-
 related costs 656,000 300,000 2,228,000 1,093,000
 Write off of
 CHAMPUS/
 Health Net 5,830,000 525,000 8,085,000 525,000
 Total 142,589,000 116,585,000 405,678,000 285,540,000
 Income from
 operations 4,436,000 10,224,000 14,869,000 20,811,000
 Other income
 (expense):
 Interest income 810,000 795,000 2,474,000 2,529,000
 Interest expense(207,000) (314,000) (781,000) (692,000)
 Other 52,000 57,000 111,000 234,000
 Total 655,000 538,000 1,804,000 2,071,000
 Inc. before
 prov. for
 inc. taxes 5,091,000 10,762,000 16,673,000 22,882,000
 Provision for
 income taxes 2,602,000 4,338,000 7,329,000 9,310,000
 Inc. before
 cumulative
 effect of a
 change in
 accounting 2,489,000 6,424,000 9,344,000 13,572,000
 Cumulative
 effect on
 prior years --- --- --- 1,110,000
 Net income $2,489,000 $6,424,000 $9,344,000 $14,682,000
 Primary earnings
 per share:
 Income before
 cumulative effect .14 .38 .54 .79
 Cumulative effect
 on prior years --- --- --- .06
 Net income $.14 $.38 $.54 $.85
 Weighted average
 shares
 outstanding:
 Primary 17,283,701 17,092,478 17,275,534 17,206,241
 Fully diluted 17,283,701 17,127,174 17,275,534 17,207,279
 QUALMED INC.
 Membership Data
 (Figures have been rounded)
 At Sept. 30, 1993
 Medicare
 Commercial Risk Total
 California 150,200 22,000 172,200
 Colorado 33,600 4,900 38,500
 New Mexico 29,700 1,100 30,800
 Washington/Idaho 90,000 100 90,100
 Oregon 19,600 0 19,600
 Total HMO 323,100 28,100 351,200
 QMH&LIC 3,200 0 3,200
 Total 326,300 28,100 354,400
 At Sept. 30, 1992
 Medicare
 Commercial Risk Total
 California 150,100 16,800 166,900
 Colorado 26,300 2,200 28,500
 New Mexico 27,500 100 27,600
 Washington/Idaho 80,200 0 80,200
 Oregon 20,800 0 20,800
 Total HMO 304,900 19,100 324,000
 QMH&LIC 0 0 0
 Total 304,900 19,100 324,000
 At November 1993
 Medicare
 Commercial Risk Total
 California 153,500 23,700 177,200
 Colorado 35,300 5,900 41,200
 New Mexico 29,700 1,200 30,900
 Washington/Idaho 93,100 200 93,300
 Oregon 21,500 0 21,500
 Total HMO 333,100 31,000 364,100
 QMH&LIC 2,600 0 2,600
 Total 335,700 31,000 366,700
 At November 1992
 Medicare
 Commercial Risk Total
 California 151,300 17,300 168,600
 Colorado 26,400 2,400 28,800
 New Mexico 27,700 200 27,900
 Washington/Idaho 81,900 0 81,900
 Oregon 20,500 0 20,500
 Total HMO 307,800 19,900 327,700
 QMH&LIC 800 0 800
 Total 308,600 19,900 328,500
 QMH&LIC = QualMed Health & Life Insurance Co.
 -0- 11/12/93
 /CONTACT: E. Keith Hovland, executive VP & CFO, or George Evans, director investor relations, of QualMed, 719-542-0500/
 (MQ)


CO: QualMed Inc. ST: Colorado IN: HEA SU: ERN

LM-JL -- LA010 -- 3488 11/12/93 07:02 EST
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