Exhibit 10.4
                                   HCIA INC.

                 1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

                       As Amended Through August 7, 1996


         1.       Definitions

                  For purposes of the Plan:

                           (a)      "Annual  Award"  means  an  award of Options
pursuant to Section 5(b) of the Plan.

                           (b)      "Annual Meeting" means an annual meeting  of
the Company's stockholders.

                           (c)      "Board" means the Board of Directors of  the
Company.

                           (d)      Change in Control" means

                                    (i)     the  acquisition by  an  individual,
entity or group (within the meaning of  Section  13(d)(3) of the Exchange  Act),
other  than (A)  an  employee  benefit  plan  (or  related  trust)  sponsored or
maintained by the Company or any of its affiliates or (B) AMBAC Inc., a Delaware
corporation ("AMBAC"), AMBAC Indemnity Corporation, a Wisconsin  stock insurance
corporation  ("AIC")  or  any  of  their  respective  affiliates,  of beneficial
ownership (within  the  meaning  of Rule 13d-3 promulgated  under  the  Exchange
Act) of 30% or more of the  then  outstanding  voting  securities of the Company
entitled to vote generally in the election of directors  or of equity securities
having a value  equal to 30% or more of the total value of all equity securities
of the Company, provided, however, that any  securities of the Company  acquired
by any individual,  entity or group directly from AMBAC,  AIC  or  any  of their
respective  affiliates,  or  from  an  underwriter or placement  agent (or other
person or entity  performing  similar  services)  who  acquired such  securities
directly from AMBAC,  AIC or any of their  respective  affiliates,  shall not be
included  in the  number of shares acquired  by such individual, entity or grou
for  purposes  of  determining  whether a Change in Control has occurred; or

                                    (ii)    individuals  who as of the  Offering
Date constitute the Board, and subsequently elected  members  of the Board whose
election  is  approved  or recommended by at least  a  majority  of such current
members or their  successors whose  election  was so  approved  or  recommended,
cease  for  any  reason  to constitute at least a majority of such Board.

                           (e)      "Code" means the Internal  Revenue  Code  of
1986, as amended.

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                           (f)      "Committee"  means the committee  designated
by the Board  pursuant to Section 3(c) of the Plan.

                           (g)      "Common  Stock"  means the  Common  Stock of
the  Company,  par value  $.01 per share, or such other class or kind of  shares
or other  securities  as may be applicable under Section 12.

                           (h)      "Company"  means  HCIA  Inc.,   a   Maryland
corporation,  or any  successor  to substantially all its business.

                           (i)      "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.

                           (j)      "Exchange Act" means the Securities Exchange
Act of 1934, as amended.

                           (k)      "Fair Market Value" means the average of the
highest and the lowest  quoted selling  prices of the Common Stock  as  reported
on the National Association of Securities  Dealers  Automated  Quotation  System
National Market System or such  other  national  securities  exchange  as may be
designated by the Committee or, in  the  event  that  the  Common  Stock  is not
listed  for  trading  on a  national securities exchange,  the  average  of  the
highest and lowest quoted selling prices of the Common  Stock as reported by the
National  Association  of   Securities  Dealers   Automated   Quotation   System
("NASDAQ"),  in any  such  case  for  the applicable valuation date or, if there
were no sales on such valuation date, for the most recent day  for  which  there
was such a sale.

                           (l)      "Initial Award" means an  award  of  Options
pursuant to Section 5(a) of the Plan.

                           (m)      "Non-Employee  Director"  means a member  of
the Board who is not an employee of the Company or any of its  subsidiaries  and
is not an employee of AMBAC, AIC or any of their  respective subsidiaries  while
AMBAC  and AIC  maintain,  in the aggregate,  an equity  interest in the Company
representing 25% or more of the voting power of the Company's outstanding voting
stock.

                           (n)      "Offering  Date"  means  the  effective date
of  the  Company's  registration statement no. 33-88226 relating to  the initial
public offering of the Common Stock.

                           (o)      "Option"  means an option to purchase shares
of  Common  Stock  awarded  to a Non-Employee Director pursuant to the Plan.

                           (p)      "Option  Shares" means the shares of  Common
stock  issuable upon exercise of an Option.

                                      -2-

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                           (q)      "Permanent  Disability"  means a physical or
mental  impairment  rendering  a Non-Employee Director  substantially unable  to
function as a member of the Board for  any  period  of  six  consecutive months.
Any  dispute  as to  whether  a Non-Employee  Director  is Permanently  Disabled
shall  be  resolved  by  a  physician  mutually  acceptable  to the Non-Employee
Director and the Company, whose decision shall be final  and  binding  upon  the
Non-Employee Director and the Company.

                           (r)      "Plan" means the HCIA Inc. 1995 Non-Employee
Directors  Stock Option Plan as described herein.

                           (s)      "Retirement"  means a  Non-Employee Director
ceasing  to be a  member  of the Board as a result of retirement from the  Board
in accordance with the retirement policy then applicable to Board members.

                           (t)      "1933 Act" means the Securities Act of 1933,
as amended.

         2.       Purpose

                  The purpose of the Plan is to retain the services of qualified
persons  who are not  employees  of the Company to serve as members of the Board
and to secure  for the  Company  the  benefits  of the  incentives  inherent  in
increased Common Stock ownership by Non-Employee  Directors, by granting to such
person options to purchase shares of Common Stock.

         3.       Shares Available; Administration

                  (a) Subject to the  provisions of Section 12 of the Plan,  the
maximum  number of shares of  Common  Stock  which may be issued  under the Plan
shall not exceed 200,000 shares. Either authorized and unissued shares of Common
Stock or treasury  shares may be  delivered  upon  exercise  of Options  awarded
pursuant to the Plan.

                  (b) If Options have been forfeited to the Company as described
in Section  6(d),  the Options  Shares  underlying  such Options  shall again be
available for issuance in connection with future awards under the Plan.

                  (c) The Plan will be administered by a committee designated by
the  Board  and  composed  exclusively  of  members  of the  Board  who  are not
Non-Employee  Directors  (the  "Committee").  The  Committee may adopt rules and
regulations  necessary  to  carry  out  the  Plan's  purposes.  The  Committee's
interpretation  and  construction  of any Plan  provision  shall  be  final  and
conclusive.

         4.       Eligibility

                  Options awarded  pursuant to the Plan shall be granted only to
Non-Employee Directors.

                                      -3-

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         5.       Awards

                  (a) Initial Award.  On the date of a  Non-Employee  Director's
initial  election or  appointment to the Board (or in the case of a Non-Employee
Director who is a member of the Board as of the Offering  Date,  on the Offering
Date), such Non-Employee Director (including any Non-Employee Director reelected
or reappointed after a period of at least 12 calendar months during which he did
not serve on the  Board)  shall be granted an  Initial  Award  consisting  of an
Option to purchase  5,000 shares of Common  Stock.  Such Option shall have a per
share  exercise  price equal to the Fair Market Value of the Common Stock on the
date of award and shall be  subject  to the  vesting  schedule  provided  for in
Section 6(a) and the other terms and conditions provided for herein.

                  (b) Annual Awards. At each Annual Meeting, commencing with the
Annual Meeting held in 1995 subsequent to the Offering Date, each person who has
served as a member of the Board during the period elapsed since the  immediately
preceding  Annual  Meeting (or in the case of the Annual  Meeting  held in 1995,
each  person who has served as a member of the Board since the  Offering  Date),
and who has,  during  all or a  portion  of such  service,  been a  Non-Employee
Director for purposes of the Plan shall be granted as of the date of such Annual
Meeting an Annual  Award  consisting  of an Option to purchase  5,000  shares of
Common  Stock  (or such  lesser  number  determined  by  multiplying  5,000 by a
fraction,  the numerator of which is the number of full or partial  months since
the  immediately  preceding  Annual  Meeting (or Offering  Date, if  applicable)
during which such person  served on the Board in the capacity of a  Non-Employee
Director,  and the  denominator of which is the number of full or partial months
since  the   immediately   preceding   Annual  Meeting  (or  Offering  Date,  if
applicable)).  Such Option  shall have a per share  exercise  price equal to the
Fair Market  Value of the Common Stock on the date of award and shall be subject
to the vesting  schedule  provided  for in Section  6(b) and the other terms and
conditions provided for herein.

         6.       Vesting

                  (a)      Vesting  of  Initial  Awards.  Initial  Awards  shall
vest and  become  exercisable  as follows:

                           (i)    An Initial Award made other than in connection
with a Non-Employee  Director's initial  election  to the  Board  at  an  Annual
Meeting  shall  vest and  become exercisable in two equal installments as of the
first  and  second  anniversaries  of  the  date  of  grant,  provided  that the
Non-Employee Director remains in service  as  a  member  of  the Board until the
relevant vesting date.

                           (ii)     An Initial  Award made in connection  with a
Non-Employee Director's initial election to the Board at an Annual Meeting shall
vest  and  become  exercisable as  to 50% of the Options  Shares  subject to the
Option  constituting  such Initial Award as of the  date  of  the  first  Annual
Meeting  following  the date of  award,  and  as  to  the  remaining  50% of the
Option  Shares  subject to such  Option  as  of  the  date  of the second Annual
Meeting following the date of award,  provided the Non-Employee Director to whom
such Annual Award was made

                                      -4-

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continues in service as a member of the Board until the  relevant  vesting  date
(whether  or not the Non-Employee  Director is  nominated for  reelection at the
Annual Meeting held on either vesting date, and whether or not, if nominated, he
is reelected).

                  (b) Vesting of Annual Awards. Each Annual Award shall vest and
become exercisable as of the date of the first Annual Meeting following the date
of award,  provided the Non-Employee Director to whom such Annual Award was made
continues in service as a member of the Board until the vesting date (whether or
not the Non-Employee  Director is nominated for reelection at the Annual Meeting
held on such vesting date, and whether or not, if nominated, he is reelected).

                  (c)  Accelerated  Vesting.  Notwithstanding  anything  to  the
contrary in Sections  6(a) and 6(b),  an Option  shall  become  fully vested and
exercisable upon the first to occur of (i) a Non-Employee ceasing to be a member
of the Board as a result of death, Permanent Disability or Retirement, or (ii) a
Change in Control of the Company.

                  (d)  Forfeiture.  In the  event of a  Non-Employee  Director's
termination of service as a member of the Board for any reason other than death,
Permanent  Disability or  Retirement  prior to the  satisfaction  of any vesting
period  requirement  hereof,  the unvested portion of any Options awarded to the
Non-Employee  Director  shall  be  forfeited  to the  Company  as of the date of
termination  of service,  and the  Non-Employee  Director  shall have no further
right or interest therein.

         7.       Term of Options

                  (a)      Ten-Year  Term.  Each Option shall  expire ten  years
from its date of award,  subject to earlier termination as provided herein.

                  (b) Exercise Following Certain  Terminations of Service.  If a
Non-Employee  Director's  service  as a member of the Board  terminates  for any
reason other than death,  Permanent  Disability or Retirement,  the Non-Employee
Director shall have the right,  subject to the terms and conditions  hereof,  to
exercise  the  Option,  to the  extent  it has  vested  as of the  date  of such
termination  of service,  at any time  within six months  after the date of such
termination,  subject to the  earlier  expiration  of the Option as  provided in
Section 7(a). At the end of such six-month period the Option shall expire.

                  (c) Exercise  Following  Termination  of Service Due to Death,
Permanent  Disability or Retirement.  If a Non-Employee  Director's service as a
member of the Board  terminates  by reason  of death,  Permanent  Disability  or
Retirement,  all Options awarded to such Non-Employee  Director may be exercised
by such Non-Employee Director, or by his or her estate,  personal representative
or  beneficiary,  as the case may be, at any time within one year after the date
of  termination of service,  subject to the earlier  expiration of the Option as
provided in Section 7(a).  At the end of such  one-year  period the Option shall
expire.

                                      -5-

<PAGE>

                 (d)  Exercise  Following  Termination  of  Service  Subject  to
Company  Policies and Procedures on Insider  Trading.  Any exercise of an Option
pursuant  to  Section  7(b)  or 7(c)  following  termination  of a  Non-Employee
Director's  service  as a member of the Board for any  reason  other  than death
shall be subject to, and shall be  permitted  only to the extent  such  exercise
complies  with, the policies and  procedures of the Company  concerning  insider
trading that were  applicable to the  Non-Employee  Director on the date of such
termination  of service (as such policies and  procedures  may be amended by the
Company during the period  provided in Section 7(b) or 7(c), as the case may be,
for exercise of the Option).

         8.       Time and Manner of Exercise

                  (a)  Notice  of  Exercise.  Subject  to the  other  terms  and
conditions  hereof,  a  Non-Employee  Director  may exercise any Options (to the
extent vested) by giving  written  notice of exercise to the Company,  provided,
however,  that no less than 10 Option Shares may be purchased  upon any exercise
of the Option unless the number of Option  Shares  purchased at such time is the
total number of Option Shares in respect of which an Option is then exercisable,
and provided,  further,  that in no event shall an Option be  exercisable  for a
fractional  share.  The date of exercise of an Option  shall be the later of (i)
the date on which the Company  receives such written  notice or (ii) the date on
which the conditions provided in Section 8(b) are satisfied. Notwithstanding any
other  provision  of the Plan or of the  notice of award  relating  to an Option
provided  for in Section 9, no Option may be  exercised,  whether in whole or in
part,  and no Option Shares will be issued by the Company in respect of any such
attempted  exercise,  at any time when such  exercise is  prohibited  by Company
policy then in effect concerning  transactions by a Non-Employee Director in the
Company's  securities.  In the event that a Non-Employee  Director gives written
notice of exercise to the Company at a time when such  exercise is prohibited by
such policy,  the Company in its sole  discretion  may disregard  such notice of
exercise or may  consider  such notice to be delivered as of the first date that
the  Non-Employee  Director is permitted to exercise  such option in  accordance
with such Company policy.

                  (b) Payment.  Prior to the issuance of a certificate  pursuant
to Section 8(e) hereof evidencing the Option Shares in respect of which all or a
portion of an Option shall have been  exercised,  a Non-Employee  Director shall
have paid to the  Company  the  Option  Price for all  Option  Shares  purchased
pursuant to the exercise of such Option.  Payment may be made by personal check,
bank  draft or  postal  or  express  money  order  (such  modes of  payment  are
collectively  referred to as "cash") payable to the order of the Company in U.S.
dollars or in shares of Common Stock already owned by the Non-Employee  Director
valued at their Fair Market Value as of the last business day preceding the date
of exercise,  or in any  combination of cash or such shares as the  compensation
committee  of the  Board  in it sole  discretion  may  approve.  Payment  of the
exercise  price in shares of Common  Stock  shall be made by  delivering  to the
Company the share  certificate(s)  representing  the required  number of shares,
with  the  Non-Employee  Director  signing  his or her name on the  back,  or by
attaching executed stock powers (the signature of the Non-Employee Director must
be guaranteed in either case).

                                      -6-

<PAGE>


                  (c) Stockholder Rights. A Non-Employee  Director shall have no
rights as a stockholder with respect to any shares of Common Stock issuable upon
exercise of an Option until a certificate evidencing such shares shall have been
issued to the Non-Employee  Director pursuant to Section 8(e), and no adjustment
shall be made for dividends or  distributions  or other rights in respect of any
share for which the record date is prior to the date upon which the Non-Employee
Director shall become the holder of record thereof.

                  (d)  Limitation  on Exercise.  No Option shall be  exercisable
unless the Common Stock subject thereto has been registered under the Securities
Act and qualified under  applicable state "blue sky" laws in connection with the
offer and sale thereof,  or the Company has  determined  that an exemption  from
registration  under the Securities Act and from  qualification  under such state
"blue sky" laws is available.

                  (e) Issuance of Shares.  Subject to the foregoing  conditions,
as soon as is  reasonably  practicable  after its receipt of a proper  notice of
exercise  and payment of the Option  Price for the number of shares with respect
to which the Option is exercised,  the Company shall deliver to the Non-Employee
Director (or  following the  Non-Employee  Director's  death,  such other person
entitled to exercise the Option),  at the principal  office of the Company or at
such other  location as may be  acceptable  to the Company and the  Non-Employee
Director  (or  such  other  person),  one or  more  stock  certificates  for the
appropriate  number of shares of Common  Stock  issued in  connection  with such
exercise.  Such shares shall be fully paid and nonassessable and shall be issued
in the name of the Non-Employee Director (or such other person).

                  (f) Tax Withholding.  The Company shall have the right,  prior
to the  delivery of any  certificates  evidencing  shares of Common  Stock to be
issued  upon full or partial  exercise of an Option,  to require a  Non-Employee
Director to remit to the Company any amount  sufficient  to satisfy any Federal,
state  or local  tax  withholding  requirements.  The  Company  may  permit  the
Non-Employee  Director to satisfy, in whole or in part, such obligation to remit
taxes,  by directing  the Company to withhold  shares of Common Stock that would
otherwise be received by the  Non-Employee  Director,  pursuant to such rules as
the Committee may establish  from time to time.  The Company shall also have the
right to deduct from all cash payments  made  pursuant to or in connection  with
the Option any  Federal,  state or local  taxes  required  to be  withheld  with
respect to such payments.

                  (g)   Restrictions   on   Transfer.   An  Option  may  not  be
transferred,  pledged,  assigned, or otherwise disposed of, except by will or by
the laws of  descent  and  distribution  or  pursuant  to a  qualified  domestic
relations order as defined in the Code or Title I of ERISA ("QDRO").  The Option
shall be exercisable, during the Participant's lifetime, only by the Participant
or by the person to whom the Option has been transferred  pursuant to a QDRO. No
assignment  or  transfer of the Option,  or of the rights  represented  thereby,
whether  voluntary or involuntary,  by operation of law or otherwise,  except by
will or the laws of descent and  distribution or pursuant to a QDRO,  shall vest
in the  assignee  or  transferee  any  interest  or  right  in the  Option,  but
immediately  upon any  attempt to assign or  transfer  the Option the same shall
terminate and be of no force or effect.

                                      -7-

<PAGE>

                  (h)      Non-qualified  Status of Options.   Options   awarded
under the Plan are not  intended to qualify,  and shall not be  treated,  as  an
"incentive  stock  options"  within the  meaning of Section 422 of the  Internal
Revenue Code of 1986, as amended.

         9.       Notice of Award

                  The terms and  conditions  of each award of  Options  shall be
embodied in a notice of award  which  shall  contain  terms and  conditions  not
inconsistent  with the Plan and which shall  incorporate  the Plan by reference.
Each notice of award shall state the date on which the Options were granted, the
number  of shares  subject  to such  Option  and the per  share  exercise  price
therefor.

         10.      Effective Date; Term of the Plan

                  The  effective  date of the Plan shall be the  Offering  Date.
Unless earlier  terminated in accordance with Section 11 below,  the term of the
Plan shall  expire on the tenth  anniversary  of the Offering  Date.  After such
date, no further awards of Options may be made hereunder, but previously granted
awards shall remain outstanding subject to the terms hereof.

         11.      Amendments

                  The Board may at any time and from time to time alter,  amend,
suspend or terminate the Plan in whole or in part, provided, however, that in no
event may the  provisions of the Plan  respecting  eligibility to participate or
the timing or amount of awards be amended  more  frequently  than once every six
months,  other than to comport with  changes in the Code,  ERISA or any rules or
regulations  thereunder,  provided,  further, that any amendment which under the
requirements  of  applicable  law must be  approved by the  stockholders  of the
Company shall not be effective  unless and until such  stockholder  approval has
been  obtained in  compliance  with such law, and  provided,  further,  that any
amendment that must be approved by the  stockholders  of the Company in order to
maintain  the  continued  qualification  of the Plan under Rule 16b-3  under the
Exchange  Act, or any  successor  provision,  shall not be effective  unless and
until such stockholder  approval has been obtained in compliance with such rule.
No  termination  or  amendment  of the Plan  may,  without  the  consent  of the
Non-Employee  Director,  affect any such person's rights under the provisions of
the Plan with respect to awards of Options which were made prior to such action.

         12.      Adjustment of and Changes in Common Stock

                  In the event of any merger,  consolidation,  recapitalization,
reclassification,   stock  dividend,  distribution  of  property,  special  cash
dividend, or other change in corporate structure affecting the Common Stock, the
Committee  shall make such  adjustments,  if any, as it  considers  necessary or
appropriate  in the number and class of shares  subject to Options or authorized
to be awarded hereunder,  in order to prevent dilution or enlargement of rights.
Any new or additional

                                      -8-

<PAGE>

Options  awarded  pursuant to such  adjustments  shall be  subject to all of the
terms and conditions of the Plan.

         13.      No Right to Reelection

                  Nothing in the Plan  shall be deemed to create any  obligation
on the part of the Board to nominate  any of its members for  reelection  by the
Company's  stockholders,  nor confer upon any Non-Employee Director the right to
remain a member of the Board for any period of time, or at any  particular  rate
of compensation.

         14.      Governing Law

                  The Plan and all notices  issued or  agreements  entered  into
under the Plan shall be construed in accordance with and governed by the laws of
the State of Maryland.

         15.      No Restriction on Right of Company to Effect Corporate Changes

                  The Plan shall not affect in any way the right or power of the
Company  or its  stockholders  to  make  or  authorize  any or all  adjustments,
recapitalizations,  reorganizations  or other changes in the  Company's  capital
structure or its business, or any merger or consolidation of the Company, or any
issue of stock or of options,  warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Common Stock or the rights thereof or which are  convertible  into or
exchangeable for Common Stock, or the dissolution or liquidation of the Company,
or any sale or  transfer  of all or any part of its assets or  business,  or any
other corporate act or proceeding, whether of a similar character or otherwise.