<PAGE>


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

                                    FORM 10-Q

          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   FOR QUARTERLY PERIOD ENDED AUGUST 31, 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  4,705,237  shares of common stock  outstanding  as of September  25,
1998.

<PAGE>

                                TABLE OF CONTENTS

                                                                          PAGE



Part I     FINANCIAL INFORMATION


   Item 1. Financial Statements


           Consolidated Balance Sheets.......................................3


           Consolidated Statements of Income.................................4


           Consolidated Statements of Cash Flows.............................5


           Notes to Unaudited Consolidated Financial Statements..............6


   Item 2. Management's Discussion and Analysis of Financial Condition
           and Results of Operations.........................................8


Part II    OTHER INFORMATION


   Item 6. Exhibits and Reports on Form 8-K.................................11

                                       2
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

<TABLE>
                                   MANAGED CARE SOLUTIONS, INC.
                                   CONSOLIDATED BALANCE SHEETS

<CAPTION>
                                                               AUGUST 31,      MAY 31,
                                                                 1998           1998
                                                             -------------- -------------
<S>                                                          <C>            <C>
                                                             (UNAUDITED)
ASSETS
------

Current Assets:
  Cash and cash equivalents, including restricted cash of 
    $9,971,000 and $9,007,000                                $  12,130,000  $  12,764,000
  Short-term investments                                         1,507,000      1,510,000
  Accounts and notes receivable and unbilled services, net       4,623,000      3,169,000
  Prepaid expenses and other current assets                        538,000        483,000
  Deferred income taxes, net                                     1,087,000      1,066,000
                                                             -------------  -------------
     Total current assets                                       19,885,000     18,992,000

Related party notes receivable                                     563,000        694,000
Property and equipment, net                                      4,383,000      4,609,000
Performance bonds                                                3,894,000      3,794,000
Goodwill, net                                                    2,735,000      2,826,000
Other assets                                                       942,000        808,000
                                                             -------------  -------------
                                                             $  32,402,000  $  31,723,000
                                                             =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current Liabilities:
  Accounts payable                                           $     117,000  $     447,000
  Accrued medical claims                                         8,624,000      7,799,000
  Risk pool payable                                              1,519,000      1,540,000
  Related party risk pool payable                                  146,000        152,000
  Accrued compensation                                           1,648,000      1,862,000
  Other accrued expenses                                         2,139,000      2,153,000
  Current portion of long-term debt                                 17,000         67,000
                                                             -------------  -------------
     Total current liabilities                                  14,210,000     14,020,000

Related party long-term debt                                     3,895,000      3,961,000
Deferred income taxes, net                                         261,000        239,000
                                                             -------------  -------------
     Total liabilities                                          18,366,000     18,220,000
                                                             -------------  -------------

Commitments                                                              -              -

Stockholders' Equity:
  Common stock, $0.01 par value
   Authorized - 10,000,000 shares
   Issued and outstanding - 4,705,000 and 4,671,000 shares          47,000         47,000
  Capital in excess of par value                                15,813,000     15,702,000
  Accumulated deficit                                           (1,824,000)    (2,246,000)
                                                             -------------  -------------
     Total stockholders' equity                                 14,036,000     13,503,000
                                                             -------------  -------------
                                                             $  32,402,000  $  31,723,000
                                                             =============  =============

                                                3

                 The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>

                              MANAGED CARE SOLUTIONS, INC.
                            CONSOLIDATED STATEMENTS OF INCOME
                                       (UNAUDITED)

<TABLE>

<CAPTION>
                                                         THREE MONTHS ENDED
                                                  ----------------------------------
                                                    AUGUST 31,           AUGUST 31,
                                                       1998                 1997
                                                  -------------        -------------
<S>                                               <C>                  <C>

Revenues                                          $  19,244,000        $  14,742,000
                                                  -------------        -------------

Direct cost of operations                            14,300,000           11,780,000
Marketing, sales and administrative                   4,387,000            2,757,000
                                                  -------------        -------------

  Total costs and expenses                           18,687,000           14,537,000
                                                  -------------        -------------

Operating income                                        557,000              205,000
                                                  -------------        -------------

Interest income                                         253,000              191,000
Interest expense                                        (90,000)             (91,000)
                                                  -------------        -------------

  Net interest income                                   163,000              100,000
                                                  -------------        -------------

Income before income taxes                              720,000              305,000

Provision for income taxes                              298,000              117,000
                                                  -------------        -------------

Net income                                        $     422,000        $     188,000
                                                  =============        =============

Net income per share - basic                      $        0.09        $        0.04
                                                  =============        =============

Weighted average common shares outstanding            4,694,000            4,394,000
                                                  =============        =============

Net income per share - assuming dilution          $        0.08        $        0.04
                                                  =============        =============

Weighted average common and common
  equivalent shares outstanding                       6,044,000            4,506,000
                                                  =============        =============
</TABLE>
                                           4

            The accompanying notes are an integral part of these statements.
<PAGE>

                             MANAGED CARE SOLUTIONS, INC.
                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      (UNAUDITED)

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED
                                                         --------------------------
                                                          AUGUST 31,    AUGUST 31,
                                                             1998          1997
                                                         ------------  ------------
<S>                                                      <C>           <C>

Cash flows from operating activities:
  Net income                                             $    422,000  $    188,000
  Adjustments to reconcile net income to net cash  
   provided  by  operating activities:
   Depreciation and amortization                              560,000       422,000
   Loss on sale of property and equipment                           -         4,000
   Deferred income taxes                                        1,000        38,000
   Interest on long-term debt                                  41,000        69,000
   Changes in assets and liabilities:
     Accounts receivable and unbilled services             (1,454,000)     (775,000)
     Prepaid expenses and other current assets                (55,000)      247,000
     Other assets                                            (134,000)       47,000
     Accounts payable                                        (330,000)       93,000
     Accrued medical claims                                   825,000      (458,000)
     Risk pool payable                                        (21,000)      218,000
     Related party risk pool payable                           (6,000)      (10,000)
     Accrued compensation                                    (214,000)      468,000
     Accrued expenses                                         (14,000)      (52,000)
                                                         ------------   -----------
Net cash provided by (used in) operating activities          (379,000)      499,000
                                                         ------------   -----------

Cash flows from investing activities:
  Purchase of property and equipment                         (265,000)     (680,000)
  Proceeds from sale of property and equipment                 32,000         1,000
  Proceeds from maturity/sale of short-term investments         3,000         1,000
  Net payments on notes receivable                            131,000       300,000
  Increases in assets securing performance bond              (100,000)       (1,000)
                                                         ------------   -----------
Net cash used in investing activities                        (199,000)     (379,000)
                                                         ------------   -----------

Cash flows from financing activities:
  Net decrease in long-term debt                             (167,000)      (39,000)
  Proceeds from common stock issuance                         111,000             -
                                                         ------------   -----------
Net cash used in financing activities                         (56,000)      (39,000)
                                                         ------------   -----------

Net increase (decrease) in cash and cash equivalents         (634,000)       81,000
Cash and cash equivalents, beginning of period             12,764,000     7,212,000
                                                         ------------   -----------
Cash and cash equivalents, end of period                 $ 12,130,000   $ 7,293,000
                                                         ============   ===========
</TABLE>

                                          5

               The accompanying notes are an integral part of these statements.
<PAGE>

                          MANAGED CARE SOLUTIONS, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS

In management's  opinion,  the  accompanying  unaudited  consolidated  financial
statements  contain  all  adjustments   (consisting  of  only  normal  recurring
adjustments)  considered  necessary for a fair  statement of the results for the
interim  periods presented.   The results  of operations for  the  period  ended
August 31, 1998 are not  necessarily  indicative  of  the results to be expected
for the full fiscal year.  The interim consolidated  financial statements should
be read in conjunction with Managed Care  Solutions, Inc. ("MCS"  or  "Company")
consolidated  financial  statements and notes thereto  included in the Company's
Form 10-K for the fiscal year ended May 31, 1998.

NOTE 2 - NET INCOME PER SHARE

Basic net income per share is computed by  dividing  net income by the  weighted
average number of common shares  outstanding  during each period. Net income per
share  assuming  dilution is computed  by  dividing  net income by the  weighted
average  number of common  shares  outstanding  during the period  after  giving
effect to dilutive  stock options and warrants and adjusted for dilutive  common
shares assumed to be issued on conversion of the Company's convertible loans.

The following is the  computation  of the  reconciliation  of the numerators and
denominators  of net income  per common  share - basic and net income per common
share - assuming  dilution in accordance with Statement of Financial  Accounting
Standards No. 128, "Earnings Per Share".

<TABLE>
<CAPTION>

                                                              THREE MONTHS ENDED
                                 ----------------------------------------------------------------------------
                                            AUGUST 31, 1998                        AUGUST 31, 1997
                                 -------------------------------------  -------------------------------------

                                   Income        Shares      Per Share    Income        Shares      Per Share
                                 (Numerator)  (Denominator)    Amount   (Numerator)  (Denominator)    Amount
                                 -----------  -------------  ---------  -----------  -------------  ---------
<S>                              <C>          <C>            <C>        <C>          <C>            <C>

Net income per share -- basic:
  Income available to common 
    stockholders                 $   422,000    4,694,000      $ 0.09   $   188,000    4,394,000     $ 0.04
Effect of dilutive securities:
  Stock options and warrants               -      494,000                         -      112,000
  Convertible notes                   40,000      856,000                         -            -
                                 -----------    ---------               -----------    ---------

Net income per share -- 
  assuming dilution:
  Income available to common
    stockholders and assumed
    conversions                  $   462,000    6,044,000      $ 0.08   $   188,000    4,506,000     $ 0.04
                                 ===========    =========      ======   ===========    =========     ======
</TABLE>

At August 31, 1998, no shares of common stock had been issued upon conversion of
the two  convertible  notes issued in October 1996.  These notes are convertible
into an aggregate of 857,000 shares of common stock.

                                       6
<PAGE>

NOTE 3 - RESTRICTIONS ON FUND TRANSFERS

Certain  of  the  Company's   operating   subsidiaries   are  subject  to  state
regulations,  which  require  compliance  with  certain  net worth,  reserve and
deposit requirements.  To the extent the operating subsidiaries must comply with
these regulations, they may not have the financial flexibility to transfer funds
to the parent organization, MCS. Net assets of subsidiaries (after inter-company
eliminations)  which,  at August  31,  1998,  may not be  transferred  to MCS by
subsidiaries  in the form of  loans,  advances  or cash  dividends  without  the
consent of a third  party are  referred to as  "Restricted  Net  Assets".  Total
Restricted  Net  Assets of  these  operating  subsidiaries  were  $9,638,000  at
August  31, 1998, with  deposit  and  reserve  requirements  (performance bonds)
representing $3,894,000 of the Restricted Net Assets and net worth requirements,
in  excess  of  deposit and  reserve requirements,  representing  the  remaining
$5,744,000.

NOTE 4 - BUSINESS SEGMENTS

The Company's business segments consist of management  services,  long-term care
health services and acute care health services.  The management services segment
is engaged in the business of  administering  risk-based  managed care plans and
programs in seven states. Long-term care health services is comprised of Ventana
Health Systems, Inc. ("Ventana"), which is a long-term care Medicaid health plan
operating in seven counties in Arizona and Community Health USA, Inc. ("CHUSA"),
which provides in-home personal, respite,  companionship and homemaking services
to recipients in Arizona.  Acute care health services consists of Arizona Health
Concepts,  Inc. ("AHC"),  an acute care Medicaid health plan currently operating
in two counties in Arizona.

Information concerning operations by business segment follows:
<TABLE>
<CAPTION>

                                                   For the Three Months Ended August 31, 1998
                                          ------------------------------------------------------------

                                          Management   Long-Term Care      Acute Care
                                           Services    Health Services   Health Services     Totals
                                           --------    ---------------   ---------------     ------
<S>                                        <C>         <C>               <C>                 <C>   

Total revenues from reportable segments   $ 9,855,000    $ 6,880,000       $ 3,931,000     $20,666,000
Intersegment revenues                      (1,152,000)      (270,000)                -      (1,422,000)
                                          -----------    -----------       -----------     -----------
   Total consolidated revenues              8,703,000      6,610,000         3,931,000      19,244,000
                                          ===========    ===========       ===========     ===========

Interest income                                49,000        121,000            93,000         263,000
Intersegment interest income                        -        (10,000)                -         (10,000)
Interest expense                             (100,000)             -                 -        (100,000)
Intersegment interest expense                  10,000              -                 -          10,000
                                          -----------    -----------       -----------     -----------
   Net interest income (expense)              (41,000)       111,000            93,000         163,000
                                          ===========    ===========       ===========     ===========

Depreciation and amortization                 560,000              -                 -         560,000

Segment income (loss) before taxes             99,000        552,000            69,000         720,000
Income tax expense                            (57,000)      (214,000)          (27,000)       (298,000)
                                          -----------    -----------       -----------     -----------
   Net income (loss)                           42,000        338,000            42,000         422,000
                                          ===========    ===========       ===========     ===========

Expenditures for capital assets               265,000              -                 -         265,000

Segment total assets                       21,953,000     11,008,000         7,947,000      40,908,000
Intersegment assets                        (7,901,000)      (572,000)          (33,000)     (8,506,000)
                                          -----------    -----------       -----------     -----------
   Total assets                           $14,052,000    $10,436,000       $ 7,914,000     $32,402,000
                                          ===========    ===========       ===========     ===========
</TABLE>

                                       7
<PAGE>

<TABLE>
<CAPTION>

                                                   For the Three Months Ended August 31, 1997
                                          ------------------------------------------------------------

                                          Management   Long-Term Care      Acute Care
                                           Services    Health Services   Health Services     Totals
                                           --------    ---------------   ---------------     ------
<S>                                        <C>         <C>               <C>                 <C>   

Total revenues from reportable segments   $ 6,493,000    $ 6,179,000       $ 3,363,000     $16,035,000
Intersegment revenues                      (1,058,000)      (235,000)                -      (1,293,000)
                                          -----------    -----------       -----------     -----------
   Total consolidated revenues              5,435,000      5,944,000         3,363,000      14,742,000
                                          ===========    ===========       ===========     ===========

Interest income                                35,000        108,000            64,000         207,000
Intersegment interest income                        -        (16,000)                -         (16,000)
Interest expense                             (107,000)             -                 -        (107,000)
Intersegment interest expense                  16,000              -                 -          16,000
                                          -----------    -----------       -----------     -----------
   Net interest income (expense)              (56,000)        92,000            64,000         100,000
                                          ===========    ===========       ===========     ===========

Depreciation and amortization                 422,000              -                 -         422,000

Segment income (loss) before taxes           (217,000)       356,000           166,000         305,000
Income tax (expense) benefit                   96,000       (148,000)          (65,000)       (117,000)
                                          -----------    -----------       -----------     -----------
   Net income (loss)                         (121,000)       208,000           101,000         188,000
                                          ===========    ===========       ===========     ===========

Expenditures for capital assets               680,000              -                 -         680,000

Segment total assets                       19,424,000      8,709,000         6,909,000      35,042,000
Intersegment assets                        (5,847,000)      (816,000)          115,000      (6,548,000)
                                          -----------    -----------       -----------     -----------
   Total assets                           $13,577,000    $ 7,893,000       $ 7,024,000     $28,494,000
                                          ===========    ===========       ===========     ===========
</TABLE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

INTRODUCTION

MCS is  involved  in a variety  of health  care  programs,  many of which  serve
indigent and Medicaid populations.  The Company's operations include a long-term
care Arizona based health plan, Ventana; an Arizona based primary and acute care
health plan, AHC; management contracts pursuant to which the Company administers
privately owned health plans located in Hawaii, Michigan, New Mexico, and Texas;
the management of healthcare  services for an indigent population for the County
of San Diego;  a  contractual  arrangement  with the State of  Indiana  Medicaid
Agency;  and  a  subsidiary  providing  home  healthcare  and  community  worker
services; CHUSA.

RESULTS OF OPERATIONS

Revenues for the three-month  period ended August 31, 1998 increased  $4,502,000
to  $19,244,000 as compared to the same period of the prior fiscal year. For the
three-month  period  ended  August 31, 1998,  revenues  generated  from fees for
management of health plans not owned by the Company  increased 60% to $8,702,000
from $5,435,000 for the same period of the previous fiscal year. The increase is
primarily  due to the  addition  of two new plans,  Rio Grande HMO and  Lovelace
Community Health Plan, during fiscal year 1998.  Capitation  revenue for Ventana
and AHC for the  three-month  period  ending  August 31, 1998  increased  13% to
$10,542,000 versus $9,307,000 for the comparable period in the prior fiscal year
due to growth in membership and an increase in capitation rates.

                                       8
<PAGE>

Direct costs of operations  increased to $14,300,000 for the three-month  period
ended August 31, 1998 from $11,780,000 for the corresponding period of the prior
fiscal year. Direct costs of operations for the periods August 31, 1998 and 1997
consisted of $5,345,000 and $3,937,000,  respectively, related to fees generated
from  management  of health  plans not owned by the Company and  $8,955,000  and
$7,843,000, respectively, from operating expenses of Ventana and AHC. The direct
costs of operations to manage plans as a percentage of related revenue decreased
from 72% to 61% for the period  ended  August 31, 1998 versus the same period of
the prior  fiscal  year.  The  decrease is  primarily  due to  additional  costs
incurred  during the period  ended  August  31,  1997  related to start up of an
additional plan in New Mexico which became  operational in October 1997.  Direct
costs  as  a  percentage  of  related revenue for the three-month  period  ended
August 31, 1998 and 1997 were 82% and 84%, respectively, for Ventana and 91% and
85%, respectively, for AHC.  The increase is  due  to  AHC  experiencing  higher
utilization  in the new  counties  it  services  as a result  of a new  contract
effective October 1, 1997.

Marketing,  sales and administrative expenses as a percent of revenues increased
from 19% to 23% for the  three-month  periods  ended  August 31,  1997 and 1998,
respectively.  The increase is primarily  due to separation  agreement  accruals
related to the resignation of James Burns, the Company's former  President,  the
addition of a new Chief Executive  Officer and expenses  related to a management
contract.

Net  interest  income for the  three-month  period  ended  August  31,  1998 was
$163,000 versus $100,000 for the same period of the prior fiscal year.  Interest
income is primarily  related to  investments  held by Ventana and AHC,  which is
partially  offset by interest expense on the Company's  outstanding  convertible
debt. The increase is due to growth in cash and cash equivalents.

Net  income  was  $422,000  and  $188,000  for  the  three-month  periods  ended
August 31,  1998 and 1997,  respectively.  The primary reason for the change was
the  addition of  two management  contracts in  Texas and New Mexico, as well as
growth in membership in plans managed by the Company.

LIQUIDITY AND CAPITAL RESOURCES

During the three-month period ended August 31, 1998, the Company's cash and cash
equivalents  decreased  $634,000  to  $12,130,000.   Operating  activities  used
$379,000 for the  three-month  period ended  August 31, 1998,  versus  providing
$499,000 during the three-month period ended August 31, 1997. The primary use of
cash  during the  three-month  period  ended  August 31, 1998 was an increase in
accounts receivable  primarily as a result of the delay in receipt of June, July
and August management fees from the State of Indiana.  Additional uses include a
decrease in accounts  payable and other accrued  liabilities  principally due to
the  payment of fiscal  year 1998  bonuses,  partially  offset by an increase in
accrued medical claims.  During the comparable  period of the prior fiscal year,
cash was provided from income from  operations  and growth in risk pool payables
partially offset by an increase in accounts receivable.

Investing   activities  used   $199,000  for   the  three-month   period   ended
August 31, 1998  as  compared  to  $379,000  for  the same  period of  the prior
fiscal  year.   During the  three-month  period  ended August 31, 1998, cash was
used to  purchase $265,000 of fixed assets and  $100,000  was  used to  increase
performance  bonds, partially offset by payments received on notes receivable of
$131,000.

Financing   activities   used   $56,000  for   the  three-month   period   ended
August 31, 1998  versus  $39,000 in the same  period of the prior  fiscal  year.
Principal  payments  on  long-term  debt  were   the  primary   uses  of  funds.
During  the three-month period ended August 31,  1998, the payments on long-term
debt of $167,000  were  partially  offset by $111,000 of proceeds  received from
common stock issuance related to stock option exercises.

                                       9
<PAGE>

Certain  of  the  Company's   operating   subsidiaries   are  subject  to  state
regulations,  which  require  compliance  with net worth,  reserve  and  deposit
requirements.  To the extent the operating  subsidiaries  must comply with these
regulations,  they may not have the financial  flexibility  to transfer funds to
MCS. Net assets of subsidiaries  (after  inter-company  eliminations)  which, at
August 31, 1998, may not be transferred  to MCS by  subsidiaries  in the form of
loans,  advances  or cash  dividends  without  the  consent of a third party are
referred to as  "Restricted  Net Assets".  Total  Restricted Net Assets of these
operating  subsidiaries  was  $9,638,000  at August 31,  1998,  with deposit and
reserve  requirements   (performance  bonds)  representing   $3,894,000  of  the
Restricted  Net Assets  and net worth  requirements,  in excess of  deposit  and
reserve requirements,  representing the remaining $5,744,000.  Funds provided by
Ventana to MCS under loan  agreements  totaled  $423,000 at August 31, 1998. VHS
provided  these loans in the normal course of  operations.  All such  agreements
were pre-approved as required by the Arizona Health Care Cost Containment System
Administration.

The Company believes that its existing capital resources and cash flow generated
from  future  operations  will  enable  it to  maintain  its  current  level  of
operations and its planned operations, including capital expenditures, in fiscal
year 1999.

YEAR 2000 ISSUES

Many existing computer systems do not properly recognize and process dates after
December 31, 1999.  Therefore,  certain  hardware and software,  including  that
utilized by the Company, may have to be modified and/or reprogrammed to properly
function in year 2000 and beyond.  The Company has created an internal year 2000
committee  to  manage  the  project of addressing year 2000 related  issues.  In
May  1998,  the   Committee   began   to  assess   its  internal-use   hardware,
software, non-information systems equipment, procedures and business  processes.
The Company also began communicating  with State agencies,  clients and  vendors
about  year  2000  issues.   The  phases of  the  year 2000  project  consist of
awareness, inventory  analysis,  assessment,  project management, conversion and
testing.  Different aspects of  the Company operations are  in various stages of
the project and overall completion date is targeted for August 1999.

The Company's  operations are highly dependent on automated  systems and systems
applications.  Currently,  the Company utilizes an internally developed software
("MC1") to process claims and pay providers, and considers the software critical
to  its  operations.   The  current  version  of the  MC1  software  is based on
Oracle v. 7.3.3.0.0  which was announced by Oracle  Corporation to be  year 2000
compliant.  The Company is also in the process of deciding whether to enhance or
replace MC1 with other software.  The vendors  currently being reviewed all have
represented that their  software is year 2000  compliant.  The Company  plans to
further test hardware and software  to  assess these  representations  of Oracle
Corporation and other vendors.

The Company also realizes that there are outside influences relative to its year
2000 efforts,  over which it has little or no control.  The year 2000  committee
has  begun to  communicate  with  State  agencies  to  assess  their  year  2000
readiness.  The Company has been  notified by the State of Hawaii that the State
may not  address  all of its year 2000  problems  prior to  December  31,  1999.
However, the Company will attempt to reduce the impact of other parties' failure
to resolve year 2000 problems.

Based on the  Company's  analysis to date,  year 2000 problems and costs are not
expected to have a materially adverse effect on the Company's business,  results
of  operations  or  financial  condition.  The Company  has spent  approximately
$23,000  to date  preparing  and  analyzing  year 2000  issues.  There can be no
assurances that the Company's current systems or those acquired in the future do
not or will not contain undetected defects associated with year 2000 issues that
may result in material costs to the Company. The Company is currently developing
contingency  plans to recover from any undetected  defects and expects to have a
plan in place by the end of January 1999.

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FORWARD LOOKING INFORMATION

This report contains statements that may be considered forward-looking,  such as
the discussion of the Company's  strategic  goals,  new contracts and cash flow.
These statements speak of the Company's plans,  goals or expectations,  refer to
estimates, or use similar terms. Actual results could differ materially from the
results  indicated by these statements  because the realization of those results
is subject to many uncertainties.

Some of these uncertainties that may affect future results are discussed in more
detail above. All forward-looking statements included in this document are based
upon information  presently available,  and the Company assumes no obligation to
update any forward-looking statement.

PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits
              (27)   Financial data schedule.

         (b)  Reports on Form 8-K

              None

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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/ Micheal J. Kennedy
                                -------------------------------------------
                                Michael J. Kennedy, Chief Financial Officer

                        Dated:  October 14, 1998
                                


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