<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q/A-1

          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                  FOR QUARTERLY PERIOD ENDED FEBRUARY 28, 1998
                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
             FOR THE TRANSITION PERIOD FROM __________ TO __________

                         COMMISSION FILE NUMBER 0-19393


                          MANAGED CARE SOLUTIONS, INC.
             (Exact name of registrant as specified in its charter)


            DELAWARE                                        36-3338328
 (State or other jurisdiction of incorporation or organization)(I.R.S. Employer
Identification No.)


                             7600 NORTH 16TH STREET
                                    SUITE 150
                             PHOENIX, ARIZONA 85020
                    (Address of principal executive offices)
                                   (Zip Code)

                                  602-331-5100
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No _______

There were 4,602,723 shares of common stock outstanding as of April 1, 1998.

<PAGE>

     ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits
               (10.1) Agreement   between   the   registrant   and  the State of
                      Indiana.(1)
               (10.2) Purchase  Agreement  between  the  registrant and  Beverly
                      Enterprises, Inc.(1)
               (10.3) 1998 CEO Stock Option Plan
               (10.4) Stock    Option    Certificate  for  Options   Granted  to
                      Michael D. Hernandez
               (27)   Financial data schedule.(1)

          (b)  Reports on Form 8-K

               None


     (1)  Filed as  part of the registrant's Quarterly  Report on Form  10-Q for
          the quarter ended February 28, 1998.

                                       
<PAGE>

SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                        MANAGED CARE SOLUTIONS, INC.

                        By:     /s/ Michael D. Hernandez
                                ------------------------
                                Michael D. Hernandez, Chairman and Chief 
                                Executive Officer

                        By:     /s/ Michael J. Kennedy
                                ----------------------
                                Michael J. Kennedy, Chief Financial Officer

                        Dated:  April 15, 1998

                                       
<PAGE>              
[TYPE]                   EX-10.3 1998 CEO Stock Option Plan
                                                                   Exhibit  10.3
                         
                          MANAGED CARE SOLUTIONS, INC.
                           1998 CEO STOCK OPTION PLAN

      The purpose of this Stock Option Plan (the  "Plan") is to benefit  Managed
Care  Solutions,   Inc.  (the  "Company")  and  its  subsidiaries   through  the
maintenance and development of management by offering certain present and future
executive and key personnel a favorable  opportunity  to become holders of stock
in the Company over a period of years,  thereby giving them a permanent stake in
the growth and  prosperity of the Company and  encouraging  the  continuance  of
their services with the Company or its subsidiaries.  Options granted under this
Plan are  intended  not to qualify as  "Incentive  Stock  Options" as defined in
Section 422 of the Internal  Revenue Code of 1986, as amended (the "Code"),  and
the Plan shall be construed so as to carry out that intention.

      1.  ADMINISTRATION.  The Plan shall be  administered  by a committee  (the
"Committee")  of  the  Board  of  Directors   composed  of  no  fewer  than  two
"non-employee"  "outside"  directors  designated by the Board of Directors.  For
purposes of this Plan, "non-employee" directors shall include directors who meet
the tests for "non-employee  directors" under the rules and regulations  adopted
by the  Securities  and Exchange  Commission  under Section 16 of the Securities
Exchange Act of 1934 and (b) "outside"  directors  shall  include  directors who
meet the tests for  "outside  director"  under the  Regulations  adopted  by the
Internal Revenue Service  relating to Section 162 of the Code,  including all of
the transition rules thereunder.  A majority of the Committee shall constitute a
quorum,  and the acts of a majority  of the  members  present at any  meeting at
which a quorum is present,  or acts  approved in writing by all of the  members,
shall be the acts of the  Committee.  This Plan and options  granted  under this
Plan are intended to qualify for exemption  from Section 16(b) of the Securities
Exchange  Act of 1934 and to qualify  as  performance-based  compensation  under
Section 162 of the Code and shall be  interpreted  in such a way as to result in
such qualification.

      Subject to the provisions of the Plan,  the Committee  shall have full and
final authority, in its absolute discretion,  (a) to determine the persons to be
granted options under the Plan, (b) to determine the number of shares subject to
each  option,  (c) to  determine  the time or times  at  which  options  will be
granted, (d) to determine the option price of the shares subject to each option,
which  price shall not be less than the  minimum  specified  in Section 4 of the
Plan,  (e) to determine the time or times when each option  becomes  exercisable
and the duration of the exercise  period,  (f) to prescribe the form or forms of
the agreements  evidencing any options granted under the Plan (which forms shall
be  consistent  with the Plan),  (g) to adopt,  amend and rescind such rules and
regulations   as,  in  the  Committee's   opinion,   may  be  advisable  in  the
administration  of the Plan,  and (h) to construe and  interpret  the Plan,  the
rules and  regulations and the agreements  evidencing  options granted under the
Plan and to make all other determinations  deemed necessary or advisable for the
administration  of the Plan.  Any decision made or action taken in good faith by
the  Committee  in  connection  with  the  administration,  interpretation,  and
implementation of the Plan and of its rules and regulations shall, to the extent
permitted by law, be conclusive  and binding upon all  optionees  under the Plan
and upon any person claiming under or through such an optionee,  and no director
of the Company shall be liable for any such decision made or action taken by the
Committee.

      2.    ELIGIBILITY.  Options  shall be  granted only  to key  employees and
directors  (other  than  members  of  the  Committee)  of the  Company  and  its
subsidiaries.

                                       1
<PAGE>

      3.    GRANTING OF OPTIONS.

            (a) The  Committee may grant options under which a total of not more
      than  400,000  shares of the common  stock of the Company may be purchased
      from the Company,  subject to adjustment as provided in paragraph 9. Since
      this Plan is being adopted  principally to be used for the Chief Executive
      Officer of the  Company,  options to purchase up to 400,000  shares of the
      common stock of the Company may be granted to the Chief Executive  Officer
      of the Company.

            (b) No options  shall be granted  under the Plan after  January  12,
      2008. If an option expires or is terminated or canceled  unexercised as to
      any shares,  such released shares may again be optioned (including a grant
      in substitution for a canceled  option).  Shares subject to options may be
      made available from unissued or reacquired shares of common stock.

            (c) Nothing  contained in the Plan or in any option granted pursuant
      thereto  shall  confer upon any  optionee any right to be continued in the
      employment of the Company or any  subsidiary of the Company,  or interfere
      in any way with the right of the Company or its  subsidiaries to terminate
      his employment at any time.

      4. OPTION  PRICE.  The option price shall be  determined  by the Committee
and,  subject to the  provisions of paragraph 9, shall be not less than the fair
market  value,  at the time the option is granted,  of the stock  subject to the
option.

      5. DURATION OF OPTIONS, INCREMENTS AND EXTENSIONS.

            (a) Subject to the  provisions  of paragraph 7, each option shall be
      for such  term of not more than ten  years as shall be  determined  by the
      Committee at the date of the grant.  Each option shall become  exercisable
      in such  installments,  at such time or times,  and may be subject to such
      conditions,  including  conditions  based  upon  the  performance  of  the
      Company,  as the Committee may in its discretion  determine at the date of
      grant.

            (b)  The  Committee  may  in  its   discretion  (i)  accelerate  the
      exercisability  of any option or (ii) at any time before the expiration or
      termination  of an option  previously  granted,  extend  the terms of such
      option (including  options held by officers) for such additional period as
      the  Committee,  in its  discretion,  shall,  determine,  except  that the
      aggregate option period with respect to any option, including the original
      term of the option and any  extensions  thereof,  shall  never  exceed ten
      years.

      6.    EXERCISE OF OPTION.

            (a) An  option  may be  exercised  by giving  written  notice to the
      Company, attention of the Secretary, specifying the number of shares to be
      purchased,  accompanied  by the full  purchase  price for the shares to be
      purchased in cash or by check,  except that the  Committee  may permit the
      purchase  price for the shares to be paid, all or in part, by the delivery
      to the  Company  of other  shares of common  stock of the  Company in such
      circumstances  and manner as it may  specify.  For this  purpose,  the per

                                       2
<PAGE>

      share value of the  Company's  common stock shall be the fair market value
      at the close of business on the date preceding the date of exercise.

            (b) At the time of exercise of any option,  the Committee may, if it
      shall  determine it necessary  or  desirable  for any reason,  require the
      optionee (or his heirs, legatees, or legal representative, as the case may
      be) as a condition upon the exercise,  to deliver to the Company a written
      representation  of present  intention  to purchase  the shares for his own
      account for  investment  and an agreement  not to  distribute or sell such
      shares  in  violation  of  the   registration   provisions  of  applicable
      securities laws. If such  representation  and agreement are required to be
      delivered,  an  appropriate  legend  may be placed  upon each  certificate
      delivered to the  optionee  upon his exercise of part or all of the option
      and a stop transfer order may be placed with the transfer agent.

            (c) Each option shall also be subject to the requirement that, if at
      any time the Committee  determines,  in its discretion,  that the listing,
      registration or qualification of the shares subject to the option upon any
      securities  exchange or under any state or federal  law, or the consent or
      approval of any governmental regulatory body, is necessary or desirable as
      a condition  of, or in  connection  with,  the issue or purchase of shares
      thereunder,  the option may not be  exercised  in whole or in part  unless
      such listing, registration,  qualification, consent or approval shall have
      been effected or obtained  free of any  conditions  not  acceptable to the
      Committee.

            (d) If the Committee  shall  determine it necessary or desirable for
      any reason,  an option  shall  provide  that it is  contemplated  that the
      shares acquired  through the exercise of the option will not be registered
      under  applicable  federal and state  securities laws and that such shares
      cannot be resold unless they are  registered  under such laws or unless an
      exemption from registration is available, and the certificate for any such
      shares  issued upon the exercise of the option shall bear a legend  making
      appropriate reference to such provisions.

      7.    TERMINATION OF EMPLOYMENT-EXERCISE THEREAFTER.

            (a) If the  employment  or tenure as a director of any optionee with
      the Company or any of its  subsidiaries is terminated for any reason other
      than death,  permanent  disability,  retirement or cause,  such optionee's
      option,   to  the  extent  the  option  is  exercisable  at  the  date  of
      termination,  shall expire ninety days after the termination of employment
      or  directorship  (or upon the  scheduled  termination  of the option,  if
      earlier),  and all  rights  to  purchase  shares  pursuant  thereto  shall
      terminate  at such time.  Temporary  absence  from  employment  because of
      illness,  vacation,  approved leave of absence,  or transfer of employment
      among the Company and its parent or subsidiary corporations,  shall not be
      considered to terminate employment or to interrupt continuous employment.

            (b) In the  event  of  termination  of  employment  or  directorship
      because of death or  permanent  disability  (within the meaning of Section
      22(e)(3)  of the  Code),  the  option  may be  exercised  in full,  unless
      otherwise   provided  at  the  time  of  grant,   without  regard  to  any
      installments  established under paragraph 5 hereof, by the optionee or, if
      he is not  living,  by his heirs,  legatees,  or legal  representative  or
      alternate payee under a qualified  domestic  relations  order, as the case
      may be,  during  its  specified  term  prior to one year after the date of

                                       3
<PAGE>

      death or permanent  disability.  In the event of termination of employment
      or directorship because of retirement,  the option may be exercised by the
      optionee  (or, if he dies within three months after such  termination,  by
      his heirs,  legatees,  legal  representative  or  alternate  payee under a
      qualified  domestic  relations  order,  as the case  may be),  at any time
      during its  specified  term prior to three  months  after the date of such
      termination, but only to the extent the option was exercisable at the date
      of such termination.

            (c) If an optionee is discharged for cause,  his option shall expire
      forthwith  and all  rights to  purchase  shares  under it shall  terminate
      immediately.  For this purpose, "discharge for cause" means a discharge on
      account of dishonesty, disloyalty or insubordination.

            (d)  Notwithstanding  the foregoing  provisions of this paragraph 7,
      the  Committee  may in the grant of any option  make  other and  different
      provisions  with respect to its exercise after the optionee's  termination
      of employment or directorship.

      8.  NON-TRANSFERABILITY OF OPTIONS. No option shall be transferable by the
optionee  otherwise  than by will or the laws of  descent  and  distribution  or
pursuant to a  qualified  domestic  relations  order,  and each option  shall be
exercisable  during any  optionee's  lifetime only by the Optionee or Optionee's
legal representative.

      9.    ADJUSTMENT.

            (a) In the event  that the  Company's  outstanding  common  stock is
      changed by any stock dividend,  stock split or combination of shares,  the
      number of shares subject to this Plan and to options under this Plan shall
      be proportionately adjusted.

            (b)   In   case   of   any   capital   reorganization,   or  of  any
      reclassification  of the common stock or in case of the  consolidation  of
      the  Company  with or the  merger  of the  Company  with or into any other
      corporation  (other than a consolidation or merger in which the Company is
      the   continuing   corporation   and   which   does  not   result  in  any
      reclassification  of outstanding shares of common stock) or of the sale of
      the  properties  and assets of the  Company  as, or  substantially  as, an
      entirety  to any  other  corporation,  the  Company,  or  the  corporation
      resulting  from such  consolidation  or surviving  such merger or to which
      such sale shall be made,  as the case may be,  shall  determine  that upon
      exercise   of  options   granted   under  the  Plan  after  such   capital
      reorganization,  reclassification,  consolidation,  merger  or sale  there
      shall be issuable  upon  exercise of an option a kind and amount of shares
      of stock or other  securities or property (which may, as an example,  be a
      fixed amount of cash equal to the  consideration  paid to  stockholders of
      the Company for shares  transferred  or sold by them) which the holders of
      the  common  stock   (immediately  prior  to  the  time  of  such  capital
      reorganization,  reclassification,  consolidation,  merger  or  sale)  are
      entitled  to  receive  in  such  transaction  as in  the  judgment  of the
      Committee is required to compensate equitably for the effect of such event
      upon the exercise  rights of the optionees.  The above  provisions of this
      paragraph   shall   similarly   apply   to   successive   reorganizations,
      reclassifications, consolidations, mergers and sales.

                                       4
<PAGE>

            (c) In the event of any such adjustment the purchase price per share
      shall be proportionately adjusted.

      10. AMENDMENT OF PLAN. The Board of Directors may amend or discontinue the
Plan at any time. However, no such amendment or discontinuance  shall (a) change
or impair any option previously granted without the consent of the optionee, (b)
increase the maximum number of shares which may be purchased by all optionees or
any one  optionee,  (c)  change  the  minimum  purchase  price,  (d)  change the
limitations  on the option period or increase the time  limitations on the grant
of options, or (e) permit the granting of options to members of the Committee.

      11.  EFFECTIVE DATE. The Plan has been adopted and authorized by the Board
of Directors for submission to the  stockholders of the Company.  If the Plan is
approved by the affirmative vote of the holders of a majority of the outstanding
voting stock of the Company at a duly held  stockholders'  meeting,  it shall be
deemed to have become effective on January 12, 1998, the date of adoption by the
Board of Directors. Options may be granted under the Plan before its approval by
the stockholders,  but subject to such approval,  and in each such case the date
of grant shall be  determined  without  reference to the date of the approval of
the Plan by stockholders.

                                       5
<PAGE>
[TYPE]                   EX-10.4 Stock Option Certificate
                                                                    Exhibit 10.4

                          MANAGED CARE SOLUTIONS, INC.
                            STOCK OPTION CERTIFICATE

                (NOT QUALIFYING AS AN INCENTIVE STOCK OPTION)

      This  is  to  certify  that  Managed  Care  Solutions,  Inc.,  a  Delaware
corporation    (the  "Company"),  has    on     JANUARY  12, 1998, granted    to
                                                -----------------
MICHAEL D. HERNANDEZ (the "Optionee") an option to purchase 400,000   shares  of
--------------------                                        -------
its common stock,  par value $.01 per share,  upon the terms and  conditions set
forth herein.

      1. The purchase  price  payable upon  exercise of this option,  shall   be
$4.00 per share, subject to adjustment as provided in paragraph 6 below.
-----

      2.  The  exercise  of  this  option  shall  be  subject  to the  following
conditions:

      (a) This option shall become exercisable with respect to 25% of the shares
subject to this option 12 months after the date of its grant and with respect to
an  additional  25% at the end of each  12-month  period  thereafter  during the
succeeding three years, provided that a disinterested  committee of the Board of
Directors may in its  discretion  accelerate the  exercisability  of this option
subject to such terms and conditions as it deems necessary and appropriate.  All
or any part of the  shares  with  respect  to which  the right to  purchase  has
accrued  may be  purchased  at the time of such  accrual or at any time or times
thereafter during the option period.

      (b) This option may be exercised by giving  written notice to the Company,
attention of the  Secretary,  specifying  the number of shares to be  purchased,
accompanied by (i) the full purchase price for the shares to be purchased either
in cash or by check; and (ii) payment in full of all withholding  taxes due as a
result of the exercise or another  arrangement  satisfactory  to the Company for
the payment of such  withholding  taxes except that the Committee may permit the
payment  of such  withholding  taxes,  all or in part,  by the  delivery  to the
Company of other shares of common stock of the Company in such circumstances and
manner as it may specify. For this purpose, the per share value of the Company's
common stock shall be the fair market value at the close of business on the date
preceding the date of exercise.

      (c) At the time of any  exercise of this  option,  the Company  may, if it
shall  determine it necessary or desirable for any reason,  require the Optionee
(or his  heirs,  legatees  or  legal  representative,  as the  case may be) as a
condition upon the exercise, to deliver to the Company a written  representation
of present  intention to purchase the shares for his own account for  investment
and an  agreement  not to  distribute  or sell such shares in  violation  of the
registration  provisions of applicable  securities laws. If such  representation
and agreement are required to be delivered,  an appropriate legend may be placed
upon each certificate delivered to the Optionee upon his exercise of part or all
of this option and a stop transfer order may be placed with the transfer agent.

      (d) If at any time a  disinterested  committee  of the Board of  Directors
determines, in its discretion,  that the listing,  registration or qualification
of the shares subject to this option upon any  securities  exchange or under any
state or federal law, or the consent or approval of any governmental  regulatory
body, is necessary or desirable as a condition of, or in  connection  with,  the
issue or purchase of shares  thereunder,  this  option may not be  exercised  in
whole or in part unless such listing,  registration,  qualification,  consent or

<PAGE>

approval  shall  have been  effected  or  obtained  free of any  conditions  not
acceptable by the disinterested committee of the Board of Directors.

      3. The term of this option is ten years, but subject to earlier expiration
as provided in  paragraph 5. This option is thus not  exercisable  to any extent
after  the  expiration  of  ten  years  from  the  date  of  this  stock  option
certificate,  or after any earlier  expiration date that may be applicable under
the terms of paragraph 5.

      4. This option is not transferable by the Optionee  otherwise than by will
or the laws of descent and distribution,  and during the life of the Optionee it
is exercisable only by him.

      5. (a) If the  employment  of the Optionee  with the Company or any of its
subsidiaries   is  terminated  for  any  reason  other  than  death,   permanent
disability, retirement or cause, this option, to the extent it is exercisable on
the date of  termination,  shall  expire  ninety days after the  termination  of
employment (or upon the scheduled  termination of this option, if earlier),  and
all rights to purchase  shares  pursuant  thereto shall  terminate at such time.
Temporary  absence  from  employment  because of  illness,  vacation or approved
leaves of absence,  or transfers of employment  among the Company and its parent
or subsidiary  corporations,  shall not be considered to terminate employment or
to interrupt continuous employment.

      (b) In the  event  of  termination  of  employment  because  of  death  or
permanent  disability  (within the meaning of section  22(e)(3) of the  Internal
Revenue Code, as amended),  this option may be exercised in full, without regard
to the installments  established by paragraph 2(a), by the Optionee or, if he is
not living, by his heirs, legatees, or legal representative, as the case may be,
during its specified term prior to one year after the date of death or permanent
disability.  In the event of  termination  of employment  because of retirement,
this option may be  exercised by the Optionee (or if he dies within three months
after such termination,  by his heirs, legatees or legal representative,  as the
case may be) at any time during its  specified  term prior to three months after
the date of such termination, but only to the extent this option was exercisable
at the date of such termination.

      (c) If the  Optionee is  discharged  for cause,  this option  shall expire
forthwith  and  all  rights  to  purchase   shares  under  it  shall   terminate
immediately.  For this purpose,  "discharge for cause" shall mean termination on
account of gross negligence, dishonesty, willful material breach of an agreement
with the Company,  or  violation of any  reasonable  rule or  regulation  of the
Company of which the Optionee has been advised in writing.

      6. (a) In the event that the Company's outstanding common stock is changed
by any stock  dividend,  stock  split or  combination  of shares,  the number of
shares subject to this option shall be proportionately adjusted.

      (b) In case of any capital  reorganization,  or of any reclassification of
the common  stock or in case of the  consolidation  of the  Company  with or the
merger  of the  Company  with  or  into  any  other  corporation  (other  than a
consolidation  or merger in which the Company is the continuing  corporation and
which does not result in any  reclassification  of outstanding  shares of common
stock)  or of the sale of the  properties  and  assets  of the  Company  as,  or
substantially  as, an entirety to any other  corporation,  the  Company,  or the
corporation  resulting  from such  consolidation  or surviving such merger or to
which such sale  shall be made,  as the case may be,  shall  give  notice to the
Optionee  providing  that  upon  exercise  of this  option  after  such  capital
reorganization,  reclassification,  consolidation, merger or sale there shall be
issuable  upon  exercise  of this option a kind and amount of shares of stock or

<PAGE>

other  securities  or property  (which may, as an example,  be a fixed amount of
cash equal to the  consideration  paid to stockholders of the Company for shares
transferred or sold by them) which the holders of the common stock  (immediately
prior   to  the   time  of  such   capital   reorganization,   reclassification,
consolidation,  merger or sale) are entitled to receive in such transaction upon
exercise  as in the  judgment  of a  disinterested  committee  of the  Board  of
Directors is required to compensate  equitably for the effect of such event upon
the exercise rights of the Optionee.  The above provisions of this Section shall
similarly    apply    to    successive    reorganizations,    reclassifications,
consolidations, mergers and sales.

      (c) In the event of any such adjustment the purchase price per share shall
be proportionately adjusted.

      7. The  granting of this option  shall not confer  upon the  Optionee  any
right to be continued in the  employment of the Company or any subsidiary of the
Company,  or  interfere  in  any  way  with  the  right  of the  Company  or its
subsidiaries to terminate his employment at any time.

      8. Neither the Optionee nor his heirs,  legatees,  or legal representative
shall have any rights of stockholders with respect to the shares subject to this
option until such shares are actually issued upon exercise of this option.

      9. (a) This option is granted  pursuant to the Managed Care Solutions 1998
CEO Stock Option Plan,  and is  explicitly  not granted  pursuant to or under an
Incentive  Stock Option Plan as defined in the Internal  Revenue Code. Thus this
option is  intended  not to qualify as an  "incentive  stock  option"  under the
Internal  Revenue Code. THIS OPTION SHALL NOT BE EXERCISABLE  UNLESS AND UNTIL A
MAJORITY OF  STOCKHOLDERS  OF THE COMPANY HAS  APPROVED THE  COMPANY'S  1998 CEO
STOCK OPTION PLAN.

      (b) This option shall be administered by a disinterested  committee of the
Board of  Directors  of the  Company,  whose  interpretation  of the  terms  and
provisions of this option shall be final and conclusive.

      This  certificate is executed as of the date on which the option evidenced
by it is granted as stated above.


                                          Managed Care Solutions, Inc.


                                          By:  /s/ James A. Burns
                                               -------------------------------
                                               President

<PAGE>