<PAGE>


   <PAGE>  1
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                                   FORM 10-K

     [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES     
         EXCHANGE ACT OF 1934 [FEE REQUIRED]
                      For fiscal year ended DECEMBER 31, 1995

                                          OR

     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES 
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                      For the transition period from        to       

     Commission file number 1-13340

     Mid Atlantic Medical Services, Inc.                   
     (Exact name of registrant as specified in its charter)

     Delaware                                             52-1481661   
     (State or other jurisdiction of                   (I.R.S. Employer
     incorporation or organization)                    Identification No.)

     4 Taft Court, Rockville, Maryland                      20850       
     (Address of principal executive offices)             (Zip Code)

     (301) 294-5140                                                
     (Registrant's telephone number, including area code)

     Securities registered pursuant to Section 12(b) of the Act:
                                                 Name of Each Exchange
     Title of Each Class                          on Which Registered
     -------------------                         ---------------------
     Common Stock, $0.01 par value               The New York Stock
       per share.                                  Exchange, Inc.

     Securities registered pursuant to Section 12(g) of the Act:  None.

     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 [ ].

     Indicate by check  mark if  disclosure of delinquent  filers pursuant  to
     Item  405  of  Regulation  S-K (Sec.  229.405  of  this  chapter) is  not
     contained  herein,  and  will  not be  contained,  to  the  best  of  the
     registrant's  knowledge, in  definitive  proxy or  information statements
     incorporated by reference in Part III of this Form 10-K  or any amendment
     to this Form 10-K.  [  ]

     Aggregate  market value  of voting  stock held  by non-affiliates  of the
     Registrant as of February 28, 1996:  Approximately $974 million.

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS:
     Indicate the number  of shares  outstanding of each  of the  registrant's
     classes of common stock, as of the latest practicable date.<PAGE>


            46,595,187 shares of common stock as of February 28, 1996

                        DOCUMENTS INCORPORATED BY REFERENCE
     The Proxy  Statement for the Registrant's annual  meeting of shareholders
     to be held on April 15,  1996 is incorporated by reference into  Part III
     of this Form 10-K.<PAGE>


     <PAGE>  2
                                    FORM 10-K


                                      INDEX

     ITEM NO.   DISCLOSURE REQUIRED                                    PAGE

                                      PART I

     Item 1     Business ..............................................   3
     Item 2     Properties ............................................  14
     Item 3     Legal Proceedings .....................................  15
     Item 4     Submission of Matters to a Vote of Security Holders ...  15

                                      PART II

     Item 5     Market for Registrant's Common Equity and Related
                  Stockholder Matters ................................   16
     Item 6     Selected Financial Data ..............................   17
     Item 7     Management's Discussion and Analysis of Financial
                  Condition and Results of Operation .................   18
     Item 8     Financial Statements and Supplementary Data ..........   24
     Item 9     Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure ................   45

                                      PART III

     Item 10    Directors and Executive Officers of the Registrant ...   46
     Item 11    Executive Compensation ...............................   46
     Item 12    Security Ownership of Certain Beneficial Owners
                  and Management .....................................   46
     Item 13    Certain Relationships and Related Transactions .......   46

                                      PART IV

     Item 14    Exhibits, Financial Statement Schedules
                  and Reports on Form 8-K ............................   47<PAGE>


     <PAGE>  3
                                      PART I
     ITEM 1. BUSINESS

     Mid  Atlantic Medical Services, Inc.  ("MAMSI") is a  holding company for
     subsidiaries  active in  managed health  care and  other life  and health
     insurance  related   activities.     MAMSI  and  its   subsidiaries  (the
     "Company")  have developed  a  broad range  of  managed health  care  and
     related  ancillary products  and  deliver these  services through  health
     maintenance  organizations  ("HMOs"),  preferred  provider  organizations
     ("PPOs"), a life  and health insurance  company and home health  care and
     home infusion services  companies.   The Company also  has a  partnership
     interest in an outpatient surgery center.

     GENERAL DEVELOPMENT OF BUSINESS

     MAMSI was incorporated in Delaware in  1986 to serve as a holding company
     for   MD  -  Individual  Practice  Association,  Inc.  ("M.D.  IPA")  and
     Physicians  Health  Plan of  Maryland, Inc.  ("PHP-MD").   MAMSI  made an
     exchange offer for  all of the  issued and outstanding  shares of  common
     stock of M.D. IPA and PHP-MD in 1987.

     M.D.  IPA, a  Federally  qualified  HMO,  was  organized  as  a  nonstock
     corporation  in 1979.   M.D.  IPA operated  as a  non-profit organization
     until  1985 when  it  amended  its  articles  of  incorporation  and  was
     reorganized into a stock corporation.

     PHP-MD, an individual  practice association ("IPA"),  was organized as  a
     nonstock  corporation in  1979  to provide  physician  and other  medical
     services  to M.D.  IPA  enrollees.    PHP-MD  operated  as  a  non-profit
     organization  until  it amended  its  articles of  incorporation  and was
     reorganized into a stock corporation in 1984.

     HEALTH MAINTENANCE ORGANIZATIONS

     MAMSI's primary business is  the delivery of managed health  care through
     its HMOs.   MAMSI currently  offers HMO coverage  through three  licensed
     HMO  subsidiaries - M.D. IPA,  Optimum Choice, Inc.  ("OCI"), and Optimum
     Choice of the Carolinas, Inc. ("OCCI").

     M.D. IPA  became a licensed  HMO in Maryland  in 1981 and in  Virginia in
     1985.  M.D.  IPA's present  service area (which  includes all  geographic
     areas  where the HMO has  received regulatory approval  to provide health
     care services) includes  the entire  state of Maryland,  the District  of
     Columbia  and most counties and cities in Virginia including the Northern
     Virginia, Richmond/Tidewater and  Roanoke areas ("HMO Service Area").  In
     addition to  serving governmental  entities, M.D. IPA  generally provides
     coverage to the larger commercial group market.

     OCI, a non-Federally  qualified HMO, became a licensed HMO in Maryland in
     1988,  in Virginia in 1990,  in Delaware in 1993  and in West Virginia in
     1994.  OCI generally  operates within the small business  market segment,
     which is  comprised  of employers  with 50  or fewer  employees and  also
     covers  Medicaid and  Medicare  recipients.   OCI's present  service area
     includes  the entire  states of  Maryland and  Delaware, the  District of
     Columbia,  most counties  and cities  in Virginia,  and certain  areas of
     West Virginia.

     OCCI,  a  non-Federally qualified  HMO, became  a  licensed HMO  in North
     Carolina  in  1995.   OCCI operates  in  both the  small and  large group<PAGE>


     commercial market.   OCCI's present service  area includes certain  areas
     of North Carolina.

     The  Company is currently  seeking an HMO  license in South  Carolina and
     Pennsylvania.

     GENERAL

     HMOs provide or arrange  for the provision of comprehensive  medical care
     (including  physician  and  hospital care)  to  enrollees  for  a  fixed,
     prepaid premium regardless  of the  amount of care  provided.   Enrollees
     generally  receive  care  from  participating  primary  care   physicians
     ("PCPs") who,  as required, refer enrollees  to participating specialists
     and  hospitals.     HMOs   require  patients  to   utilize  participating
     physicians  and other  participating health  care providers.  This allows
     HMOs  to negotiate favorable rates  and control utilization  to a greater
     extent than  traditional health insurers, while  monitoring and enhancing
     the quality of care provided to enrollees.<PAGE>


     <PAGE>  4

     The goal  of an HMO  is to  combine quality health  care with  management
     controls  designed to  encourage efficient and  economical use  of health
     care  services.   Such  controls include  monitoring physician  services,
     hospital admissions and lengths  of stay and  maximizing the use of  non-
     hospital  based  medical services.    Because an  HMO  generally receives
     fixed monthly premiums from  its enrollees regardless of the  health care
     services provided,  an HMO has an incentive to maintain the health of its
     enrollees,    while   carefully    monitoring   expenses    through   the
     implementation  of   various  cost   control  strategies   and  effective
     management.

     MAMSI's  HMO provider  network is  organized as  an IPA.   Under  the IPA
     model, the HMO contracts with a broadly dispersed group of  physicians to
     provide  medical services to enrollees in the physicians' own offices and
     in  hospitals; the  physicians are  generally paid  on  a capitated  or a
     negotiated fee-for-service basis.   Physicians may contract directly with
     the HMO or  through a  designated organization that,  in turn,  contracts
     with the HMO.

     HMOs have been  operating in the  United States for  more than 50  years.
     Their  popularity  has  markedly  increased  since  the  early  1970s  in
     response to rapidly  escalating health  care costs and  the enactment  of
     the Federal  Health Maintenance  Organization Act  of 1973  ("HMO  Act").
     The HMO Act and its regulations grant "qualified" status to  HMOs meeting
     comprehensive standards.  Although  qualification status is not required,
     its  "mandate"  provisions  originally  provided  a  marketing  advantage
     because  employers  with  more  than  25 employees  that  offered  health
     benefits to  employees  were  generally required  to  offer  employees  a
     Federally  qualified  HMO  if  mandated  by  a  Federally  qualified  HMO
     operating within  the relevant service  area.  Moreover,  if a number  of
     such HMOs mandated such an  employer, the employer was required to  offer
     its employees at  least one Federally qualified HMO  organized as a staff
     or group model  and at least one Federally qualified  HMO organized as an
     IPA, network or hybrid model.   The advantages of mandating as  described
     above  ceased on  October 24,  1995 because  the mandate  provisions were
     repealed effective  on that date.   This repeal  is not expected  to have
     any  significant  effect  on  MAMSI's  operations  due  to the  increased
     knowledge about and acceptance of HMOs in the marketplace.

     The HMO  movement began to experience a "shake-out" in the latter part of
     the  1980s.   After  reaching  an  industry high  of  707  HMOs in  1987,
     mergers,   acquisitions  and   closures   resulted  in   a  decrease   to
     approximately 541  operating HMOs in 1993.   In 1994, the  number of HMOs
     increased by  23 to  564.  As  the concept  of managed care  continues to
     gain  acceptance, the  number of  managed care  type  organizations being
     formed  should increase  in  response to  the  marketplace, in  both  the
     commercial  and government  (Medicare and  Medicaid) segments.   However,
     the  consolidation  trend  should  also  continue  as  HMOs,  traditional
     indemnity  insurers  and  others seek  to  gain  market  share and  size.
     National  enrollment  in  HMOs  increased  to  an  estimated  55  million
     enrollees in 1994, up from a total of 31 million in 1987.   Year-end 1994
     enrollment of  55  million people  represents  approximately 21%  of  the
     total  U.S. population.  Industry experts expect this enrollment trend to
     continue.   (Source  of  industry data  -  Hoechst Marion  Roussel,  Inc.
     Managed  Care Digest  Series; HMO-PPO  Digest, 1995;  and, SMG  Marketing
     Group, Inc.) 

     MAMSI'S HMO PRODUCTS<PAGE>


     MAMSI's HMOs offer a range of benefit plans for providing  health care to
     enrollees.    Generally, enrollees  arrange  for  coverage through  their
     employer.   However,  group enrollees  can convert  their coverage  to an
     individual contract upon  separation from  their employer.   There is  no
     assurance  that HMO agreements with employers will be renewed annually or
     that,  within   each  employer  group,   the  HMO  will   not  experience
     disenrollment  by   individual  enrollees.    MAMSI's   HMOs  also  offer
     individual coverage to the commercial, Medicaid and Medicare markets.

     Under  traditional  HMO coverage,  the enrollee  selects  a PCP  from the
     HMO's provider network.  All  medical care provided to the enrollee  must
     be authorized and  coordinated by the PCP.   Generally, the enrollee pays
     a  copayment for  all PCP and  specialist office  visits and  may also be
     required  to pay a copayment  for hospital admissions  and emergency room
     services.   Except in  emergencies, enrollees  are generally  required to
     utilize only  those participating  professional and institutional  health
     care  providers that have contracted with the IPA (see further discussion
     under "HMO Arrangements with Physician and Institutional Providers").<PAGE>


     <PAGE>  5

     MAMSI's  HMOs,  in  cooperation  with  MAMSI  Life  and Health  Insurance
     Company  ("MAMSI Life"), a wholly  owned subsidiary of  MAMSI, also offer
     point-of-service coverage  (the "preferred  plan"), which is  marketed to
     appeal to the following customers:

       1. Individuals who will not  consider a closed delivery system.   These
     individuals  prefer the flexibility of the traditional indemnity plan but
     are also seeking a lower-cost alternative such as an HMO.

       2. Small  to mid-sized employers who are looking to limit the number of
     health  care plan  options.   In  this case,  the  HMO would  seek  to be
     offered as an exclusive health care provider.

     In  the preferred  plan, enrollees have  the choice of  seeking care from
     the  PCP  or from  any  physician  of their  choice.    Whenever care  is
     provided  under the  point-of-service  option and  the enrollee  visits a
     provider outside of the  HMO network, MAMSI Life, which  underwrites this
     indemnity  benefit, generally  covers the lesser  of 80%  of the  bill or
     100%  of  the established  fee maximum  for  the service  provided.   The
     enrollee is responsible for the remainder of the charge.

     MAMSI's  hybrid products  provide large  employer groups  the  ability to
     tailor their employee health  care offerings by varying  benefit designs,
     funding methods  and insurance risk.   Hybrid products  generally compete
     in  the so-called self-funded employer plan marketplace.  A typical MAMSI
     hybrid  product  combines  the   use  of  capitated  PCPs  to   serve  as
     gatekeepers, employer  funding of specialist and  institutional claims on
     an  "as  paid" basis  and  MAMSI's  underwriting of  risk  of  loss on  a
     specific and/or aggregate stop loss basis.

     OCI offers HMO  coverage to  recipients of Title  XIX Medical  Assistance
     ("Medicaid").   The Medicaid  plan operates  in a  manner similar  to the
     traditional  HMO  plan. The  participating states  pay a  monthly premium
     based  upon the  age and  sex of  the recipients  for which  OCI provides
     comprehensive medical  coverage.  MAMSI's Medicaid  service area includes
     Maryland and certain areas of Virginia.

     Under  all  coverage  options,  enrollees  receive  the  following  basic
     benefits:   primary and specialist physician  services; hospital services
     such  as  diagnostic  tests,   x-rays,  drugs,  medication,  nursing  and
     maternity  services;  discounts on  dental  care  and prescription  drugs
     purchased at  a participating pharmacy; outpatient  diagnostic tests such
     as  laboratory tests,  x-rays,  and allergy  testing and  injections; and
     mental health, drug abuse and other medical services.

     OCI also  offers  health coverage  to  Title XVIII  Medicare  recipients.
     Under  a  contractual arrangement  with  the  United States  Health  Care
     Financing Administration  ("HCFA"), OCI receives a  monthly premium based
     upon age,  sex, county of residence  and enrollment status  for which OCI
     provides  comprehensive  medical  coverage  to  those   individuals  plus
     certain additional  benefits.  Currently,  approximately only  3% of  the
     one million Medicare  recipients in MAMSI's Medicare service  area (which
     includes  Maryland,  the  District of  Columbia,  and  certain  areas  of
     Virginia,  West Virginia and Delaware) are covered through MAMSI or other
     HMOs.

     The Company's total health  plan (managed care, ASO and  indemnity health
     insurance)  membership in the HMOs  and MAMSI Life  grew to approximately<PAGE>


     658,000  at December  31,  1995 from  508,000  at December  31, 1994,  an
     increase of 30%.   The Company believes that enrollment  will continue to
     grow  as the  Company  expands  into  new  service  areas,  continues  to
     increase  the size  of its  sales force  and maintains  its focus  on the
     Medicaid and Medicare markets.<PAGE>


     <PAGE>  6

     The  following table sets forth  information relevant to  MAMSI's HMO and
     indemnity health plans as of December 31, 1995:

     Employer Groups Served              16,845
     Population of Aggregate HMO
       Service Area                  17,000,000
     Service Area Penetration               3.9%
     Primary Care Physicians              3,650
     Specialist Physicians               11,987
     Other Affiliated Health
       Care Providers                     5,440
     Hospitals and Outpatient
       Facilities                         1,198
     Pharmacies                           3,500

     A  significant portion of the  Company's premium revenue  is derived from
     Federal,  state  and  local  government  agencies  including governmental
     employees  and Medicaid  and Medicare  recipients.   For the  years ended
     December  31,  1995,  1994  and  1993,  approximately  7%,  9%  and  11%,
     respectively,  of premium  revenue  was derived  from Federal  government
     agencies, and approximately 21%,  18% and 11%, respectively, was  derived
     from  state  and  local  government  agencies located  in  the  Company's
     service area.

     HMO ARRANGEMENTS WITH PHYSICIAN AND INSTITUTIONAL PROVIDERS

     MAMSI's  HMOs contract with PHP-MD to provide physician services to their
     enrollees  except within  North  Carolina where  OCCI contracts  directly
     with  providers.  The HMOs  are ultimately responsible  for ensuring that
     an  adequate number  of physicians  and other  health care  providers are
     maintained in order to service enrollees.

     The   Company  contracts  with  many  different   kinds  of  health  care
     providers, including primary  care and  specialist physicians,  dentists,
     social  workers,  psychologists,  physical  therapists  and  podiatrists.
     PCPs are  paid a  monthly capitation  payment for each  enrollee who  has
     chosen that PCP.   This  capitation payment varies  according to the  age
     and sex of the enrollee and according to the primary  care designation of
     the provider chosen by  the enrollee.  The  primary care designations  on
     which  premiums are based  fall into one  of two  types:  (1)  family and
     general practice,  pediatrics and  internal medicine, and  (2) obstetrics
     and gynecology.

     PCPs may receive, in  addition to capitation payments, an  annual payment
     that  is  based  on  a  Quality  Review  Reconciliation.    This  payment
     generally does not  exceed 3% of their  annual capitation payments.   The
     reconciliation evaluates the physician's  practice performance as well as
     quality  issues  such as  grievance rates  from  members, sanctions  by a
     MAMSI  HMO, and  member transfer  rate.   As part  of the  Quality Review
     Reconciliation,  the Company provides a quarterly report to each PCP that
     compares  the physician's  practice performance  based on  outpatient and
     inpatient expenses  to those of his/her peers and allows the PCP not only
     to monitor  the  number  of  referrals consistent  with  quality  medical
     standards, but also  to evaluate the most  cost-effective consultants and
     facilities within each specialty area.

     Prior  to July,  1,  1995, specialist  providers  and participating  non-
     physician providers  were compensated on  a fee-for-service basis.   This<PAGE>


     compensation was limited  to an established  maximum rate that  reflected
     the  amount that similar providers  of a similar  service would typically
     charge.  Effective  July 1,  1995, the Company  implemented the  Medicare
     Resource   Based   Relative   Value   Scale   methodology   of   provider
     reimbursement.   This methodology, which applies  generally to specialist
     health  claims,  has  resulted  in  the lowering  of  some  reimbursement
     levels,  mainly  those  having  to  do  with  office  and  hospital-based
     procedures, while increasing payments  for many evaluation and management
     tasks.   Management believes that this  change will allow the  Company to
     continue to be competitive within its marketplace.

     The HMOs have  contractual arrangements  with a combined  total of  1,198
     facilities,   consisting  of   188  hospitals   and   1,010  non-hospital
     facilities, as  of December 31,  1995.  These  facilities are  located in
     the  Company's HMO Service Area.  Contracts with facilities are renewable
     annually.  These  hospitals have provided  assurance that, if  discharged
     enrollees  require transfer to another facility,  they will transfer such
     enrollees to participating providers.<PAGE>


     <PAGE>  7

     HMO ARRANGEMENTS FOR OTHER SERVICES

     The HMOs  have contracted with  a number of  entities to arrange  for the
     provision of other services:

     EMERGENCY  CARE  -  Enrollees may  receive  urgent  care  services as  an
     alternative  to hospital  emergency  room treatment.   Enrollees  can use
     local  urgent care centers and  any hospital emergency  room in emergency
     situations.

     HOME  HEALTH CARE  - A number  of medical  care providers  are engaged to
     provide  health  care services  (such  as  nursing, pediatric,  neonatal,
     orthopedic,   psychiatric,   geriatric,  dialysis   treatments,  physical
     therapy,  speech  therapy and  respiratory therapy)  at  the home  of the
     enrollee.     MAMSI's  home   health  care  subsidiary,   HomeCall,  Inc.
     ("HomeCall"), provides  these services  throughout much of  the Company's
     service area.

     PHARMACEUTICAL   ASSISTANCE   -  The   Company   has  arrangements   with
     participating  pharmacies so that an enrollee is only responsible for the
     deductibles  and/or  copayments  that   are  indicated  on  his  or   her
     enrollment card.

     LABORATORY TESTING -  The Company  has an arrangement  with a  laboratory
     that  conducts much  of the  laboratory work  required by  HMO providers.
     Enrollees  in MAMSI's PPO are  similarly referred to  this laboratory for
     testing.

     DENTAL  - In addition to a dental  indemnity product available from MAMSI
     Life, the Company  has an arrangement with an association  of dentists to
     provide discounted  dental services through a dental PPO.  The Company is
     also working toward offering a capitated dental HMO plan in 1996. 

     QUALITY ASSESSMENT/IMPROVEMENT AND COST CONTAINMENT

     MAMSI   conducts   a   multidisciplinary   approach   to    its   Quality
     Assessment/Quality   Improvement   ("QA/QI")   Program,   utilizing   the
     resources of all  of its subsidiaries to ensure  the provision of quality
     health  care and  services to  its HMO  enrollees in  an appropriate  and
     cost-efficient manner.

     MAMSI  recognizes  the importance  of  a  Continuous Quality  Improvement
     Program  to determine and  allocate appropriate resources  that will have
     the greatest  impact for the members.   The QA/QI Program  is designed to
     meet and serve  the needs of employers, members and  providers as well as
     to monitor the timeliness,  appropriateness and effectiveness of services
     via  ongoing  and systematic  reviews of  key  indicators and  aspects of
     care.     The  QA/QI   Program  conducts  member   satisfaction  surveys,
     identifies  opportunities for  improvements  in  providing  care,  adopts
     strategies to improve  outcomes and  monitors the  improvement to  report
     progress.

     MAMSI's QA/QI  Committee, which  operates under  the auspices of  MAMSI's
     Board of  Directors,  includes  administrative,  clinical,  provider  and
     community  representation.    The  Committee evaluates  numerous  quality
     related  issues  and  outcomes  measuring overall  services  provided  to
     enrollees.<PAGE>


     In  addition,  MAMSI utilizes  several  cost control  and  quality review
     mechanisms.    Provider  applications   are  reviewed  by  a  Credentials
     Committee in  order  to determine  whether  the applicant  meets  MAMSI's
     application criteria, including Board Certification or eligibility.  

     MAMSI  maintains a  physician  review process  to  determine whether  the
     needed  levels of  medical service  are being  provided in  a  timely and
     efficient manner.   The Company  conducts medical audits  to monitor  and
     review  the quality  of care  provided.   The Company's  Medical Director
     also monitors the  hospital and out-of-plan  referrals issued by  primary
     care providers.<PAGE>


     <PAGE>  8

     All   physicians  must  obtain   prior  authorization  for  non-emergency
     hospital admissions.   The Medical Director  may sanction physicians  who
     fail to secure prior  authorization for non-emergency hospital admissions
     of enrollees.   Prior to  admission for non-emergency  hospital services,
     MAMSI applies certain  medical criteria  to authorize  the admission  and
     the anticipated length of stay for the diagnosis under treatment.

     After  admission  of  an  HMO enrollee,  MAMSI's  Utilization  Management
     Department,  in cooperation  with  the Medical  Director,   monitors  the
     course  of   hospital  treatment  for  compliance   with  the  previously
     authorized  length of stay.  Although the Utilization Management staff is
     not permitted  to interfere with a physician's medical judgment regarding
     the   course  of  treatment,  if  the  physician  decides  to  extend  an
     enrollee's  stay  beyond  that  authorized, the  physician  must  provide
     medical  justification for  the  necessity of  such  proposed action  and
     obtain specific approval from the Medical Director or his designee.

     As  required  by Federal  and  state law,  the  HMOs  have established  a
     grievance  procedure to respond  to enrollee  complaints.   Enrollees are
     encouraged to  use  this  procedure  before  proceeding  further  with  a
     complaint.   Once this procedure  is exhausted, any  unresolved complaint
     or  grievance may be settled  by binding arbitration  rather than through
     the  courts.    There is  a  similar  grievance  procedure for  physician
     complaints.

     In  1993,  MAMSI invited  the  National Committee  for  Quality Assurance
     ("NCQA"), a  private, non-profit organization, to  evaluate the Company's
     methodologies  in  an  effort  to  receive  NCQA   accreditation.    NCQA
     accreditation  is a voluntary process.  The  Company did not meet certain
     of NCQA's  criteria and, therefore,  did not receive  NCQA accreditation.
     MAMSI believes  that it has  adopted methodologies and  programs designed
     to respond to  the concerns  and questions raised  in NCQA's  assessment.
     The Company believes  that, based on its  success with large  group sales
     since  the  denial   of  accreditation,  the  failure  to   receive  NCQA
     accreditation  has not had a  significant adverse effect  on its business
     or financial condition.   It is MAMSI's intention to  request the NCQA to
     review  its current methodologies sometime in 1996.  Although the Company
     believes that the likelihood of  NCQA accreditation is high, there can be
     no assurance that accreditation will  be received or that MAMSI  will not
     experience disenrollment  if  accreditation is  not ultimately  received.
     MAMSI has implemented the  Health Plan and Employer Data  and Information
     Set  ("HEDIS") 2.5, which represents  a core set  of performance measures
     developed by NCQA to serve the employer as a purchaser.

     The Company's home  health care and home  infusion subsidiaries underwent
     voluntary accreditation  review by the Joint  Commission on Accreditation
     of Healthcare  Organizations ("JCAHO")  during 1995.   Full accreditation
     status was awarded as a result of this process.

     COMPETITION AND MARKETING STRATEGY

     The  HMO  industry  is  characterized  by  intense  competition.    MAMSI
     recognizes the possibility  that other firms  with greater resources  may
     enter into  competition with MAMSI in  the future by  either entering its
     HMO  Service  Area  or  by  designing  alternative  health care  delivery
     systems.  HMOs compete not only with other HMOs, but  also with insurance
     companies that offer indemnity insurance products.<PAGE>


     <PAGE>  9

     MAMSI's  HMOs  compete  with  approximately  25  HMOs  or  other  prepaid
     alternative  health  care delivery  systems that  have  a presence  in at
     least  one of  the  cities or  counties  in MAMSI's  service  area.   The
     following  table sets forth MAMSI's  best estimate of  the HMO enrollment
     in  1995 of HMOs operating in its HMO  Service Area.  Certain of the HMOs
     are part of a  larger entity and the  enrollees estimated herein  include
     only those in MAMSI's HMO Service Area.

     <TABLE>
     <CAPTION>
                                                                             Approximate
                                                                                Number
     HMO                                             Plan Type              of Enrollees
     -------------                                   ---------              ------------
     <S>                                             <C>                    <C>
     Mid Atlantic Medical Services, Inc.* ..........     IPA                    622,000       
     Kaiser Permanente Health Care Program .........   Group                    359,000
     Health Plus (Sanus Healthcare).................     IPA                    255,000
     FreeState Health Plan** .......................     IPA                    201,000
     Humana Group Health ...........................   Staff                    117,000
     Healthkeepers of Virginia*** ..................     IPA                    112,000
     Capital Care**** ..............................     IPA                     97,000
     George Washington University Health Plan ......   Group                     82,000
     Optima Health Plan ............................     IPA                     76,000
     Chesapeake Health Plan (Healthwise of
       America, Inc.) ..............................     IPA                     66,000
     Aetna Choice Healthcare Plan ..................     IPA                     62,000
     CIGNA Health Plan of Virginia .................     IPA                     56,000
     Southern Health Services (Coventry Corp.) .....     IPA                     51,000
     U.S. Healthcare ...............................     IPA                     46,000
     Sentara Health Plan ...........................   Staff                     45,000
     Other HMOs (11) ............................... Various                    257,000
     </TABLE>

     * - Includes individuals covered by the Company's HMOs only.

     ** - This company is owned by Blue Cross/Blue Shield of Maryland.

     *** - This company is owned by Blue Cross/Blue Shield of Virginia.

     **** -  This company is owned  by Blue Cross/Blue Shield  of the National
     Capital Area. 

     MAMSI's  HMOs  compete with  other HMOs  and  insurance companies  on the
     basis  of price  and  range of  services  offered to  enrollees.   PHP-MD
     competes  with  the  same entities  and  with  other  IPAs for  physician
     services.   PHP-MD believes that the capitation payments it makes to PCPs
     are  competitive.  MAMSI believes  that the freedom  IPA-model HMOs offer
     their  enrollees   in  choosing   their  own  physicians   constitutes  a
     competitive  advantage over group  or staff model  HMOs.   The ability to
     retain  and  attract  enrollees will  depend,  in  part,  on how  present
     enrollees  assess their benefit  packages, quality of  service, rates and
     the  HMOs' responsiveness  to enrollee  needs.   Nevertheless, physicians
     increasingly provide  health care  services to health  care organizations
     that compete with  MAMSI, and  this trend  may, over  time, diminish  any
     competitive advantage presently enjoyed by MAMSI.

     MAMSI subsidiaries  employed approximately 613 full-time  individuals who<PAGE>


     provided  marketing  services  for its  HMOs  as  of  December 31,  1995.
     MAMSI's marketing  strategy includes identifying and contacting employers
     with  more  than 50  employees in  its  HMO Service  Area in  addition to
     prospecting and telemarketing, employer  group consultation, referrals by
     consultants,  and the use of selected brokers.  The Company's strategy in
     1995  included reducing  the  use  of  brokers  for  new  business  while
     increasing  its  internal  sales force.    New  members  acquired by  the
     Company's dedicated sales force accounted for approximately 88%  of total
     new members in 1995.

     RISK MANAGEMENT

     With the  exceptions of  the large  group market  and the  certain  small
     group  markets,  OCI uses  underwriting criteria  as a  part of  its risk
     management  efforts.  Underwriting is  the process of  analyzing the risk
     of  enrolling  employer  groups  in  order  to establish  an  appropriate
     premium  rate.   Utilizing  underwriting  criteria, OCI  seeks  to  avoid
     contracting with employers  that are likely to experience  an actuarially
     higher than expected need  for medical care.   OCI's use of  underwriting
     techniques  is restricted  in  certain situations  by  state small  group
     reform   legislation   (see   further   discussion    under   "Government
     Regulation").<PAGE>


     <PAGE> 10

     The Company  maintains professional,  directors and officers,  errors and
     omissions, general  liability and property insurance  coverage in amounts
     believed to  be adequate.   The Company requires  participating hospitals
     to  maintain  professional  liability  coverage and  physicians  to  have
     malpractice   insurance.    A  professional  liability  insurance  policy
     provides  coverage in the  event that legal  action is  taken against any
     entity as a result of medical malpractice committed by a physician.

     In addition, MAMSI's HMOs shift  part of the risk of catastrophic  losses
     by  maintaining reinsurance coverage  for hospital costs.   The reinsurer
     indemnifies  80%  of the  eligible  in and  out  of service  area medical
     expenses in  excess of $200,000  per enrollee per  year up to  a lifetime
     maximum of $2,000,000 in eligible medical costs.

     During 1995,  PHP-MD generally placed  5% to 15%  of the payments  due to
     participating  physicians  in a  Claims Reserve  Risk  Pool.   The Claims
     Reserve Risk Pool constitutes  a financial risk-sharing arrangement among
     the  participating physicians  and PHP-MD.   Amounts  held in  the Claims
     Reserve  Risk Pool  may be  distributed from  time to  time by  PHP-MD to
     participating physicians  if,  in  the  judgment  of  PHP-MD's  Board  of
     Directors, PHP-MD's  financial condition permits such  distribution.  The
     following  table sets  forth  information regarding  the  portion of  the
     amount   in  the  Claims  Reserve  Risk  Pool  that  was  distributed  to
     participating physicians in each calendar year.

                           Percentage
                          Distributed
     Year                 to Providers
     ----                 ------------
     1990                     16
     1991                      5
     1992                      4
     1993                     59
     1994                     58
     1995                      4

     GOVERNMENT REGULATION

     MAMSI's  HMOs  are  subject to  state  and,  in  some instances,  Federal
     regulation.   Among the areas regulated  are:  (i) premium  rate setting;
     (ii)  benefits provided;  (iii) marketing;  (iv) provider  contracts; (v)
     quality  assurance and  utilization  review programs;  (vi) adherence  to
     confidentiality  and  medical  records  requirements;   (vii)  enrollment
     requirements;  and (viii)  financial reserves  and other  fiscal solvency
     requirements.

     Under applicable  law, HMOs must generally provide  services to enrollees
     substantially  on a  fixed, prepaid  basis without  regard to  the actual
     degree  of  utilization of  services.   The  Company generally  fixes the
     premiums  charged to  employers for  a 12  month period  and revises  the
     premium  with each renewal.   In setting premiums,  the Company forecasts
     health  care utilization  rates  based on  the relevant  demographics and
     also  considers   competitive  conditions  and  the   average  number  of
     enrollees  in the  employer  group.    In  addition  to  these  premiums,
     enrollees also make copayments to providers as required.

     Although premiums  established may vary  from account to  account through
     composite  rate factors and special treatment of certain broad classes of<PAGE>


     enrollees,  Federal regulations generally prohibit traditional experience
     rating  of  accounts  on a  retrospective  basis.    Consistent with  the
     practices  of  other  Federally  qualified   HMOs,  M.D.  IPA,  in   some
     situations, bases the  premiums it charges employers  in part on the  age
     and sex of  the enrolled employees.  M.D. IPA  believes that its premiums
     are  competitive with  other  HMOs and  health  insurers and  its  health
     coverage is a better value for members because of the  range of physician
     and hospital selection and other benefits provided.

     M.D. IPA contracts  with the  Office of Personnel  Management ("OPM")  to
     provide or  arrange health  services under  the Federal  Employees Health
     Benefit  Program  ("FEHBP").    The  contract  with  OPM  and  applicable
     government  regulations establish  premium  rating  requirements for  the
     FEHBP.   The premiums established  under the OPM contract  are subject to
     periodic  review and  audit  to determine  if  they were  established  in
     compliance with the  community rating  and other  requirements under  the
     program.<PAGE>


     <PAGE> 11

     MAMSI's  HMOs must  file  periodic  reports  with,  and  are  subject  to
     periodic review by, state regulatory authorities.  Although MAMSI's  HMOs
     are not regulated specifically  as insurance companies, they must  comply
     with certain provisions  of state  insurance laws as  well as other  laws
     specifically enacted to regulate HMOs.

     MAMSI  Life, the Company's insurance subsidiary, is domiciled in Maryland
     and is licensed in over  30 states.  MAMSI Life is  subject to regulation
     by the  department of insurance  in each state  in which it  is licensed.
     These  regulations subject MAMSI Life  to extensive review  of the terms,
     administration and  marketing of  insurance products offered  and minimum
     net worth and deposit requirements.  In addition,  MAMSI Life is required
     to   file  periodic  reports  and  is  subject  to  periodic  audits  and
     continuing oversight.   The offering  of certain  new insurance  products
     may require the approval of regulatory agencies.

     The Company's home  health care operations  are regulated principally  in
     four areas:  home health  care licensing; certification for participation
     in  private  insurance and  government  reimbursement programs;  employee
     licensure  and  training requirements;  and  Federal  occupational safety
     guidelines.   The  Company believes  that it  is in  compliance  with all
     applicable   regulations,   which   include   possessing   the   required
     Certificates  of Need  in all  locations in  which such  certificates are
     required.   Additionally,  the Company's  infusion business  has obtained
     the  necessary  licenses  and  permits  to  operate  as  a  full  service
     pharmacy.

     MAMSI's  customers include employee  health benefit plans  subject to the
     Employee  Retirement Income  Security  Act of  1974  ("ERISA").   To  the
     extent that the Company  has discretionary authority in the  operation of
     these  plans,  the Company  could be  considered  a plan  fiduciary under
     ERISA.  Plan fiduciaries  are barred from engaging in  various prohibited
     transactions, including self-dealing.  They are also required  to conduct
     the operations of employee  benefit plans in accordance with  each plan's
     terms.

     Due to the continued  escalation of health  care costs and the  inability
     of many  individuals to obtain health care  insurance, numerous proposals
     relating to health care  reform have been made, and  additional proposals
     may be introduced, in the United States Congress and  the legislatures of
     the states in which the Company operates or may seek to operate.

     The  United  States  Congress  recently passed  a  budget  reconciliation
     package  ("Budget  Package")  that   included  provisions  reforming  the
     Medicare  program.   Under  the  Budget  Package, Medicare  beneficiaries
     would be  offered a  variety of new  health care  options, including  the
     ability  to enroll in private plans, such as HMOs, PPOs, point-of-service
     plans, medical savings accounts  and provider-sponsored organizations.  A
     traditional fee-for-service  Medicare program would, however, continue to
     be offered through HCFA.   The Budget Package  also amended current  laws
     that prohibit physician self-referral, guard against fraud and  abuse and
     eliminate  the  requirement  that  HMOs  participating  in  the  Medicare
     program  have membership  that is  composed of  at least 50  percent non-
     government  program beneficiaries.   In  addition, HMOs  would be  paid a
     monthly  capitation  rate  that  blends  local  and  national costs  with
     greater  weight  given  to  the  local  component.    A  floor  would  be
     established for payment to rural areas.<PAGE>


     The Budget Package  was submitted  to President Clinton  and was  vetoed.
     Accordingly,  the  ultimate form  in  which  this  legislation will  take
     effect  and  the impact  of this  legislation  on the  Company's business
     cannot be  predicted.  Management believes that a  portion of the managed
     care  provisions will  be  included in  the  final legislation  and  that
     programs similar  to the  Company's Medicare  program would  be favorably
     impacted  by Medicare reform.  It may,  however, result in an increase in
     the number of competitors.

     The  Budget  Package  also  aimed  to  modify  the  Medicaid  program  by
     converting the existing Medicaid program  from a federal entitlement into
     a block  grant payment to the states.  In addition, federal standards for
     nursing homes would  be revoked and  states would  have to establish  and
     maintain their own standards.  As stated above,  ultimate passage of this
     legislation  and the  impact  that this  legislation  would have  on  the
     Company's business cannot be predicted.<PAGE>


     <PAGE> 12

     In  recent years, state legislatures  in the Company's  service area have
     been  active  in health  care reform  legislation  targeted at  the small
     group market, i.e., usually for groups of 2  to 50 employees.  This small
     group reform is now  in place in  Maryland, Virginia, Delaware and  North
     Carolina,  but  not  in Washington,  D.C.  or  West  Virginia.   Although
     different  in many  of the  details, this  type of  legislation generally
     requires all HMOs and insurers that offer small group  coverage to accept
     all small employers  who apply for coverage and to  guarantee coverage to
     their  employees seeking coverage regardless of their health status.  The
     legislation  also requires renewal  of these small  group employer plans,
     limits  rate renewal  increases, mandates  adjusted community  rating and
     eliminates pre-existing condition  limitations either entirely  or within
     a short period of time, usually six months.  

     The Company believes that  the current political environment in  which it
     operates will  result in  continued legislative scrutiny  of health  care
     reform and may lead  to additional legislative initiatives.   The Company
     is unable to predict the ultimate  impact upon the Company of any federal
     or  state  restructuring  of the  health  care  delivery  or health  care
     financing  systems, but such changes could have a material adverse impact
     on the operations and financial condition of the Company.

     The  District of Columbia, which  has not previously  regulated HMOs, has
     proposed  and may  enact legislation  providing for  regulatory oversight
     similar  to that  currently provided by  other states.   The Company does
     not anticipate any  significant negative impact on its operations because
     of possible new regulatory oversight in the District of Columbia.

     PREFERRED PROVIDER ORGANIZATIONS

     MAMSI offers PPO coverage  through two subsidiaries:  Alliance  PPO, Inc.
     ("Alliance") and Mid Atlantic Psychiatric Services, Inc. ("MAPSI").

     PPOs allow  enrollees to  receive care from  participating physicians  at
     contractually  negotiated rates.  A PPO is  different from an HMO in that
     a  PPO does  not assume any  financial risk from  medical utilization nor
     does it process claims  payments to providers.   All medical charges  are
     passed  directly  to  the  payor,  which  can  be  either  a  self-funded
     employer,  a  health  benefits  trust fund  or  another  health insurance
     company.  In return for access to the PPO's network, the  PPO charges the
     employer either a  per employee rate  or a percentage  of the savings  of
     actual  claims processed for the services accessed.  MAMSI's PPOs provide
     access to substantially the same provider network as MAMSI's HMOs.

     A PPO operates by  being incorporated into an employer's  current benefit
     program, and offers some or  all of the following:  access  to physician,
     hospital  and  facility  services;  utilization  management  and  quality
     assurance; and claims screening  and repricing.  The employer  determines
     the level of the benefits and any applicable copayments.

     Alliance  is marketed  primarily through  insurance  companies, insurance
     brokers,  consultants, third party  administrators ("TPAs"), self-insured
     employers and union trusts.   The advantages of a TPA marketing  approach
     are  minimized  marketing costs  and  maximized  market coverage  through
     established TPA-employer  relationships.   Alliance also  works  directly
     with  employers  and  unions  that  are  self-insured  and  uses   direct
     marketing  efforts.   The  major competition  comes  from other  PPOs and
     individual  insurance  carriers.   At  December  31,  1995, Alliance  had<PAGE>


     contracts with approximately  19,000 employer groups  that had access  to
     the entire IPA provider network.

     The MAPSI PPO  is comprised  of providers specializing  in mental  health
     and  substance abuse  care.   MAPSI's products  are marketed  directly to
     TPAs,  self-insured groups,  brokers,  indemnity plans,  union funds  and
     consultants.  In addition,  MAPSI contracts with indemnity  insurers that
     want to  offer  groups a  managed  care  mental health  product.    MAPSI
     believes it has  a competitive  advantage with its  unique mental  health
     screening process  that  offers  the  employer the  benefit  of  enhanced
     coordinated treatment  for employees as  well as increased  cost savings.
     MAPSI's major competitors include CMG  Health, Inc., Green Spring  Mental
     Health and MCC Inc.  At December  31, 1995, MAPSI had a provider  network
     of  approximately 2,600 psychiatrists, psychologists, social workers, and
     other affiliated licensed mental health providers.<PAGE>


     <PAGE> 13

     Alliance  and MAPSI are most  often marketed jointly  and the prospective
     purchaser  usually also purchases  the MAPSI PPO  if the Alliance  PPO is
     purchased.  The total number of lives covered  under one or both of these
     PPO products as of December 31, 1995 was approximately 825,000.

     PPOs  are not subject  to HMO  regulations by  virtue of  their business.
     However,  PPOs are  subject  to certain  state regulations  governing the
     provision  of PPO services  such as mandatory state  registration.  It is
     possible  that PPOs may be  subject to increased  regulatory oversight in
     the future.

     OTHER PRODUCTS

     MAMSI Life  currently underwrites  the indemnity  coverage of  the  HMO's
     preferred plans in addition to offering stand-alone indemnity  health and
     dental  insurance, aggregate and  specific stop loss  insurance for self-
     insured  groups,   and  group  life,  accidental   death  and  short-term
     disability policies.  In addition, in 1995 MAMSI Life  began providing an
     administrative  services only ("ASO")  product to the  State of Maryland.
     ASO  business consists  of allowing access  to MAMSI's  provider network,
     without  gatekeeper PCPs,  and  the  payment of  claims.    MAMSI has  no
     insurance risk on this  product.  MAMSI Life holds  insurance licenses in
     over  30  jurisdictions including  Maryland,  Virginia,  the District  of
     Columbia,   West Virginia, Delaware and North Carolina.   MAMSI Life also
     became licensed in Pennsylvania in 1995.

     On  October 7,  1994,  MAMSI acquired  all  of the  outstanding stock  of
     HomeCall and its wholly  owned subsidiary, FirstCall, Inc. ("FirstCall"),
     for  approximately $10 million, including direct expenses.  HomeCall is a
     state licensed,  Medicare certified  home  health agency.   The  combined
     operations of  HomeCall and  FirstCall include  16 branch  locations that
     serve  virtually  all of  Maryland,  the District  of  Columbia, Northern
     Virginia and the Panhandle area of West Virginia.

     Also  during  the  fourth quarter  of  1994, the  Company  formed  a home
     infusion services  company,  HomeCall Infusion  Services,  Inc.  ("HIS"),
     which received its  pharmacy license in 1994 and its Federal license from
     the Drug Enforcement Agency in 1995.

     Homecall, FirstCall  and HIS  provide services  that are  generally lower
     cost  alternatives  to institutional  treatment  and care.    The Company
     believes that it  will provide better care to its  members and reduce its
     medical  costs  by  substituting,  where  medically appropriate,  in-home
     medical treatment for treatment in an institutional setting.

     Medical services provided by HomeCall, FirstCall and  HIS include skilled
     nursing,   high   tech   nursing   in  support   of   infusion   therapy,
     maternal/infant  nursing,  physical,  speech  and  occupational  therapy,
     medical social work,  nutrition consultation and home  health care aides.
     Medical  services provided  by HIS  include a  comprehensive range  of in
     home drug  infusion therapies as well  as the delivery of  infusion ready
     drugs for physician office based infusion therapy.

     In addition to providing  in-home medical care to the  Company's members,
     HomeCall,  FirstCall and HIS will  continue to provide  services to other
     payors, including insurance companies, other HMOs and individuals.

     The Company also has  an equity interest in an ambulatory  surgery center<PAGE>


     located  in Rockville, Maryland.   The surgery center conducts outpatient
     surgery and services to HMO enrollees and other patients.<PAGE>


     <PAGE> 14

     A summary  of MAMSI's membership  enrollment in all  product lines  is as
     follows:

     <TABLE>
     <CAPTION>
                                     MEMBERSHIP DATA AT DECEMBER 31
                                    ---------------------------------
     PRODUCT LINE                     1993        1994        1995
     ------------                   ---------------------------------
                                              (in thousands)
     <S>                            <C>         <C>         <C>
     Commercial HMO (1)               382.6       393.2       430.1
     Hybrid HMO (2)                    48.7        82.5        94.5
     Medicaid                           8.7        28.0        91.0
     Medicare                            --          .3         6.0
     Indemnity                           --         4.0        23.6
     ASO (3)                             --          --        13.2
                                    -------     -------     -------
                                      440.0       508.0       658.4
     PPO (4)                          510.0       698.0       825.0
                                    -------     -------     -------
     Total Membership                 950.0     1,206.0     1,483.4
                                    =======     =======     =======
     </TABLE>

     (1)  Commercial  HMO   includes  traditional  HMO   and  point-of-service
     members.

     (2)  Hybrid HMO  includes  any business  that  uses MAMSI's  network  and
     gatekeeper  PCPs, utilization  management  services, claims  adjudication
     and  payment services and that  has a self-funded  component.  Generally,
     these products include specific and/or aggregate stop loss provisions.

     (3)  ASO   includes  administrative   services  only   business   without
     gatekeeper  PCPs and  no  assumption  of  insurance  risk  by  any  MAMSI
     affiliate.

     (4)  PPO includes  all  business whereby  access  is granted  to  MAMSI's
     provider  network.  MAMSI  assumes no  risk and  does not  provide claims
     payment services on this business.

     INVESTMENTS

     The  majority  of  the  Company's  investments  are  held  by  its  state
     regulated entities to provide capital  for those entities' operations and
     to  satisfy  capital, surplus  and deposit  requirements  of the  HMO and
     insurance laws  of the various  states in which the  Company is licensed.
     HMO and  insurance laws generally protect consumers of insurance products
     with one  of the  principal focuses  being on  financial solvency  of the
     company's underwriting insurance risk.  These  laws and regulations limit
     the types of investments that can  be made by the regulated entities with
     appropriate investments being deemed  "admitted assets."  Admitted assets
     are  those  assets  that  can  be used  to  fulfill  capital  and surplus
     requirements.    The   Company's  current  investment   policy  generally
     prohibits  investments  that   would  be  "non-admitted"  for   statutory
     reporting purposes.    The  Company  has  no  investments  in  derivative
     financial  instruments  and has  no  current  intention  of  owning  such
     investments.<PAGE>


     EMPLOYEES

     As of  December 31, 1995,  the Company  had a total  of 2,374  employees,
     including 1,839  full-time  and 535  part-time employees.   MAMSI's  home
     health  care subsidiaries employed 799 of these employees (394 on a full-
     time  basis  and 405  on  a  part-time basis).    None  of the  Company's
     employees  are  covered  by a  collective  bargaining  agreement  and the
     Company has not experienced any  work stoppage since its inception.   The
     Company believes that it has a good relationship with its employees.


     ITEM 2. PROPERTIES

     To  accommodate the Company's rapid growth, the Company has purchased six
     office  buildings since  1988.    These  buildings  are  all  located  in
     Rockville,  Maryland  and  total  approximately 244,000  square  feet  of
     office  and warehouse space.  The  Company's headquarters is located at 4
     Taft Court, Rockville, Maryland 20850.<PAGE>


     <PAGE> 15

     In  addition, the  Company leases  approximately 176,000  square feet  of
     office  space and approximately 5,200  square feet of  warehouse space in
     various  locations   within  its  service  areas  to  support  sales  and
     administrative operations. 


     ITEM 3. LEGAL PROCEEDINGS

     During the third  quarter of  1995, certain shareholders  of MAMSI  filed
     lawsuits  in the  United  States  District  Court  for  the  District  of
     Maryland  against  MAMSI and  certain  current and  former  directors and
     officers.   (Ivan D. Wesley,  et al.  v. Mid  Atlantic Medical  Services,
     Inc.,  et  al.,  No.  PJM-95-2098;  Charles Rittenberg  v.  Mid  Atlantic
     Medical Services, Inc.,  et al.,  No. PJM-95-2319; Joseph  J. Szlavik  v.
     Mid  Atlantic Medical Services, Inc., et al., No. PJM-95-2346; and Robert
     V. Bruchs Trust v. Mid  Atlantic Medical Services, Inc., et al.,  No. JFM
     95-2763.)    These actions  have been  consolidated  and, on  November 1,
     1995, a consolidated Amended  Class Action Complaint was filed  on behalf
     of all plaintiffs under the caption In Re Mid Atlantic Medical  Services,
     Inc.  Securities  Litigation, No.  PJM  95-2098.   The  amended complaint
     alleges  that MAMSI  is  liable under  Section  10(b) of  the  Securities
     Exchange  Act  of 1934  and  Rule  10b-5 thereunder  for  its  failure to
     disclose in  a timely fashion  that it had  been denied  accreditation by
     the NCQA  and that  the officers and  directors named  as defendants  are
     liable  under Section 10(b) and  Rule 10b-5, directly  and as controlling
     persons  of  MAMSI, for  the  failure to  disclose.   Plaintiffs  seek to
     represent a class of all persons  who purchased the common stock of MAMSI
     from March 1, 1995 through  June 15, 1995.  The Court has set a discovery
     schedule, and has set a trial  date of December 2, 1996.   Currently, the
     parties  have undertaken limited  discovery.  The Company  is not able to
     predict  the probability  of a  favorable or  unfavorable outcome  or the
     amount of potential loss, in the event of an unfavorable  outcome.  MAMSI
     believes it has meritorious defenses to  the claims raised in the Amended
     Complaint and intends to defend the action vigorously.

     The staff  of the Securities  and Exchange Commission has  asked MAMSI to
     provide  certain information relating  to the denial  of accreditation by
     the NCQA  and to sales of  stock by certain officers  and directors prior
     to  the announcement  of  the  NCQA's  action.    MAMSI  has  voluntarily
     complied with the Commission's requests.

     The Company  is involved  in various other  legal actions arising  in the
     normal  course  of  business, some  of  which  seek substantial  monetary
     damages.    After  review,  including consultation  with  legal  counsel,
     management  believes that  any ultimate  liability in  excess  of amounts
     accrued  for these other actions will not materially affect the Company's
     consolidated financial position or results of operation.


     ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There  were no  matters  submitted for  shareholder  vote in  the  fourth
     quarter of 1995.<PAGE>


     <PAGE> 16

                                      Part II

     ITEM  5. MARKET  FOR REGISTRANT'S  COMMON EQUITY AND  RELATED STOCKHOLDER
     MATTERS

     The  Company's common stock  is currently  listed on  the New  York Stock
     Exchange  ("NYSE") under the trading symbol MME.   Prior to September 29,
     1994,  the common stock of the Company  was listed on the Nasdaq National
     Market System under  the trading symbol  MAMS.  The following  table sets
     forth for  the indicated periods  the high  and low reported  sale prices
     (adjusted  for stock dividends; see Note 12 to the consolidated financial
     statements) of the common stock as furnished by the NYSE and Nasdaq.

                                          1995                     1994
                                    HIGH        LOW          HIGH        LOW
                                   -----------------        -----------------
     First Quarter                 $26.13     $19.75        $22.50     $12.06
     Second Quarter                 25.00      16.63         28.31      18.13
     Third Quarter                  21.00      17.13         30.13      18.44
     Fourth Quarter                 25.13      17.50         30.25      18.75

     The  Company has never  paid any cash  dividends on its  common stock and
     presently  anticipates that  no cash  dividends will  be declared  in the
     foreseeable  future.  Any dividends  will depend on  future earnings, the
     financial condition of the Company and regulatory requirements.

     As of February  28, 1996,  there were approximately  747 stockholders  of
     record of the Company's common stock.<PAGE>


     <PAGE> 17

     ITEM 6. SELECTED FINANCIAL DATA

     <TABLE>
     <CAPTION>
                                                                       Year Ended December 31,
                                                  1995           1994           1993           1992           1991
                                                  ----           ----           ----           ----           ----
                                                                 (in thousands except share amounts)
     <S>                                      <C>           <C>            <C>            <C>            <C>
     SELECTED INCOME STATEMENT DATA

     Revenue                                  $ 955,395     $  749,898     $  648,225     $  582,489     $  400,370
     Expense                                    859,055        663,343        605,779        561,176        385,813
     Income before income tax and cumulative
       effect of accounting change               96,340         86,555         42,446         21,313         14,557
     Income before cumulative effect
       of accounting change                      61,124         54,530         25,496         13,460          9,687
     Net income                                  61,124         54,530         24,833         13,460          9,687

     Earnings per common and common
       equivalent share (1):

       Income before cumulative effect of
         accounting change                         1.28           1.15           0.57           0.31           0.23
       Net income (2)                              1.28           1.15           0.55           0.31           0.23

     Weighted average common and
       common equivalent shares 
       outstanding (1)                       47,908,379     47,370,211     45,109,230     43,067,144     42,852,570

     SELECTED BALANCE SHEET DATA (AT DECEMBER 31)

     Working capital                            153,668         91,983         39,758          9,722          8,335
     Total assets                               354,182        268,522        189,561        130,356        100,779
     Long-term debt                                 194          5,331          5,763          6,416          7,064
     Stockholders' equity                       217,216        141,326         71,963         40,389         24,859
     Cash dividends per common share (3)            ---            ---            ---            ---            --- 

     KEY RATIOS

     Medical loss ratio                           81.9%          80.8%          86.3%          89.9%          90.1%
     Administrative expense ratio                 10.6%           9.4%           8.3%           7.4%           7.3%
     Net income margin                             6.4%           7.3%           3.9%           2.3%           2.4%
      
     OPERATING DATA

     Annualized hospital days per
       1,000 enrollees:
       All products and health services             313            312            321            326            336
       HMO only (4)                                 222            238            251            281            281
       Medicare                                   2,531            ---            ---            ---            ---
       Medicaid                                     405            466            ---            ---            ---

     Annualized hospital admissions per
       1,000 enrollees                               80             76             69             71             69

     HMO, hybrid, ASO and indemnity 
       health enrollees at year end             658,000        508,000        440,000        448,000        386,000<PAGE>


     PPO enrollees at year end                  825,000        698,000        510,000        327,000        205,000

     Participating providers at year end         21,077         16,950         15,500         11,900         10,000
     </TABLE>

     Notes

     1.  Earnings per  common  share  are  computed  after  giving  effect  to
     dilutive  stock  options.   All per  share  amounts and  weighted average
     common and common  equivalent shares  have been adjusted  to reflect  all
     stock dividends on a retroactive  basis. See Note 12 to the  consolidated
     financial statements.

     2. See Note 8 to the consolidated financial statements.

     3. MAMSI has not declared or paid cash dividends on its common stock.

     4.  Days are presented  exclusive of skilled  nursing, neonatal intensive
     care and psychiatric inpatient care.<PAGE>


     <PAGE> 18

     ITEM 7. MANAGEMENT'S DISCUSSION AND  ANALYSIS OF FINANCIAL CONDITION  AND
     RESULTS OF OPERATION

     FORWARD-LOOKING INFORMATION

     All   forward-looking   information   contained  in   this   Management's
     Discussion  and Analysis of Financial Condition and Results of Operations
     is  based on management's current  knowledge of factors affecting MAMSI's
     business.    MAMSI's  actual  results  may  differ  materially  if  these
     assumptions prove  invalid.   Significant  risk  factors, while  not  all
     inclusive, are:

     1.  The possibility  of  increasing price  competition  in the  Company's
     market place.

     2.  The  possibility of  state or  Federal  budget related  mandates that
     reduce premiums for Medicaid or Medicare recipients.

     3. The potential for increased medical expenses due to:
        - Increased utilization by the Company's membership.
        - Inflation of costs in the provider community.
        - Federal or state mandates that increase benefits.

     4. The  possibility that the  Company is not  able to expand  its service
     territory  as planned  due  to  regulatory  delays  and/or  inability  to
     contract with appropriate providers.

     GENERAL

     During the  three year  period  ended December  31, 1995,  MAMSI and  its
     subsidiaries (the "Company") have experienced substantial revenue  growth
     due to  increased HMO and PPO  membership.  The Company  has achieved its
     membership growth  by expanding its  product line, which  includes point-
     of-service, small group, indemnity  health, hybrid products, Medicaid and
     Medicare  products and  through  expansion into  new geographic  markets.
     Premium  rates  during this  time have  remained  at or  near competitive
     levels  for the Company's  marketplace.  Operating  margins have remained
     positive due  to  the  control  of  medical  expenses  and,  accordingly,
     profits and earnings  per share  have increased.   The Company  currently
     anticipates  that there may be  slight increases in  premium rates during
     1996 and that  the Company's operating margins will remain  stable.  This
     is  a  forward-looking  statement,  and the  Company's  actual  operating
     margins  may differ  from  management's current  expectation due  to risk
     factors which may affect either the  Company's revenues or expenses.  See
     "Forward-Looking  Information"  above for  a  description  of these  risk
     factors.

     The  Company generally  receives a  fixed premium  amount per  member per
     month  while   the  majority  of   medical  expenses  are   variable  and
     significantly  affected by  spontaneous  member utilization.   Even  with
     managed care controls, unusual  medical conditions can occur, such  as an
     outbreak  of influenza  or a  higher than normal  incidence of  high cost
     cases (such as  premature births, complex  surgeries, or rare  diseases).
     As a result, the  Company's quarterly results can be  materially affected
     and  irregular.   However, over  the longer  business cycle,  the Company
     believes that  its managed care control  systems, underwriting procedures
     (when allowed) and network  of providers will result in  continued strong
     profitability.<PAGE>


     The  United  States  Congress  recently passed  a  budget  reconciliation
     package  ("Budget   Package")  that  included  provisions  reforming  the
     Medicare  program.   Under  the  Budget  Package, Medicare  beneficiaries
     would be  offered a  variety of new  health care  options, including  the
     ability  to enroll in private plans, such as HMOs, PPOs, point-of-service
     plans, medical savings accounts  and provider-sponsored organizations.  A
     traditional  fee-for-service Medicare program would, however, continue to
     be  offered through the Health Care Financing Administration.  The Budget
     Package also amended current  laws that prohibit physician self-referral,
     guard against fraud  and abuse  and eliminate the  requirement that  HMOs
     participating in  the Medicare program  have membership that  is composed
     of  at  least  50  percent  non-government  program  beneficiaries.    In
     addition, HMOs would be paid a  monthly capitation rate that blends local
     and national costs  with greater weight given to the  local component.  A
     floor would be established for payment to rural areas.<PAGE>


     <PAGE> 19 

     The Budget Package  was submitted  to President Clinton  and was  vetoed.
     Accordingly,  the  ultimate form  in  which  this legislation  will  take
     effect  and  the impact  of this  legislation  on the  Company's business
     cannot  be predicted.  Management believes  that a portion of the managed
     care  provisions will  be  included in  the  final legislation  and  that
     programs similar  to the Company's  Medicare program  would be  favorably
     impacted by Medicare reform.   It may, however, result in an  increase in
     the number of competitors.

     The  Budget  Package  also  aimed  to  modify  the  Medicaid  program  by
     converting the existing Medicaid program from a federal entitlement  into
     a block grant payment to the  states.  In addition, federal standards for
     nursing  homes would be  revoked and states  would have to  establish and
     maintain  their own standards.  As stated above, ultimate passage of this
     legislation  and the  impact  that this  legislation  would have  on  the
     Company's business cannot be predicted.

     In  recent years, state legislatures  in the Company's  service area have
     been  active  in health  care reform  legislation  targeted at  the small
     group market,  i.e., usually for groups of 2 to 50 employees.  This small
     group reform  is now in place  in Maryland, Virginia,  Delaware and North
     Carolina,  but  not  in Washington,  D.C.  or  West  Virginia.   Although
     different  in many  of the  details, this  type of  legislation generally
     requires all HMOs and insurers that offer small group coverage  to accept
     all small employers who  apply for coverage and to guarantee  coverage to
     their  employees seeking coverage regardless of their health status.  The
     legislation also  requires renewal of  these small group  employer plans,
     limits  rate renewal  increases, mandates  adjusted community  rating and
     eliminates  pre-existing condition limitations  either entirely or within
     a short period of time, usually six months.  

     The Company believes that  the current political environment in  which it
     operates will  result in continued  legislative scrutiny  of health  care
     reform and may lead  to additional legislative initiatives.   The Company
     is unable to predict the ultimate impact upon the Company  of any federal
     or  state  restructuring  of the  health  care  delivery  or health  care
     financing  systems, but such changes could have a material adverse impact
     on the operations and financial condition of the Company.

     The  District of Columbia, which  has not previously  regulated HMOs, has
     proposed  and may  enact legislation  providing for  regulatory oversight
     similar to  that currently  provided by other  states.  The  Company does
     not  anticipate any significant negative impact on its operations because
     of possible new regulatory oversight in the District of Columbia.

     -----------------------------------------------------------------------
     THE YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE YEAR  ENDED DECEMBER 31,
     1994
     -----------------------------------------------------------------------

     RESULTS OF OPERATIONS

     Consolidated  net income for the  Company was $61,124,000 and $54,530,000
     in 1995 and 1994, respectively, an  increase of 12 percent.  Earnings per
     share on net income increased 11  percent from $1.15 in 1994 to  $1.28 in
     1995.   All earnings per  share amounts reflect  the 100%  stock dividend
     paid to stockholders  on August 5, 1994 (see Note  12 to the consolidated
     financial   statements).     The  increase   in  earnings   is  primarily<PAGE>


     attributable to  an increase  in membership, increased  investment income
     from higher invested balances and realized  gains, and a reduction in per
     member per month medical expenses (principally due to  a reduction in the
     return of  physician  withhold),  partially  offset  by  a  reduction  in
     premiums  per  enrollee  and   an  increase  in  administrative  expenses
     principally  due to  additions  to the  Company's  internal sales  force,
     expansion  into new geographic territories and the operations of the home
     health care subsidiaries that were purchased in late 1994.<PAGE>



     <PAGE> 20

     Revenue  in 1995  increased  27 percent  to  $955.4 million  from  $749.9
     million in 1994.   A 27 percent increase in net average HMO and indemnity
     enrollment  resulted in  an increase  of approximately $197.2  million in
     health  premium revenue and a 2  percent decrease in average premiums per
     HMO   and  indemnity   enrollee   reduced  health   premium  revenue   by
     approximately $18.2 million.  Health premiums per enrollee  have declined
     due  to  the combined  effects of  an  increasing relative  percentage of
     Virginia  Medicaid HMO members with  lower per enrollee  revenues and the
     volatility of revenues from  groups with alternative funding arrangements
     (i.e., revenues vary  in a more direct way  with medical expense) coupled
     with  management's plan  to price  its commercial  products competitively
     (see Note 1 to  the consolidated financial statements).   Although health
     premiums  per member declined  in the current  period as compared  to the
     prior year period, management  does not believe that future  periods will
     necessarily follow  this pattern.   This is a  forward-looking statement.
     See "Forward-Looking  Information" above  for a description  of the  risk
     factors that may affect health premiums per member.

     Fee and other revenue increased $5.6 million or 57 percent primarily  due
     to membership  increases in PPO and administrative  services only ("ASO")
     products.   Total PPO and  ASO membership  grew from 698,000  at December
     31, 1994  to 838,200 at  December 31,  1995, an increase  of 20  percent.
     Service  revenue  from  the   Company's  home  health  care  subsidiaries
     contributed $18.9 million  in revenue  in 1995, and  the introduction  of
     indemnity  life,  accidental  death   and  disability  products  in  1995
     contributed $1.4 million in revenue.

     The Company  currently  has one  of  the  largest HMO  and  managed  care
     enrollments  in its  service area  (which includes  the entire  states of
     Maryland  and  Delaware,  the  District of  Columbia,  most  counties and
     cities  in Virginia,  and  certain  parts  of  West  Virginia  and  North
     Carolina),  and also the largest network of contract providers of medical
     care.    Because of  the  full range  of  managed care  products, service
     reputation,  strong provider  delivery system,  trained sales  force, and
     competitive premiums, management believes  that the Company will continue
     to  increase its  membership in 1996.   Management's goal  is to increase
     membership in all products by 25 percent to 35 percent in 1996.   This is
     a forward-looking statement,  and the actual  membership may differ  from
     management's current  expectation due to  risk factors such  as increased
     competition  in  the  Company's   service  area.    See  "Forward-Looking
     Information" above for a description of these risk factors.

     In 1993,  MAMSI  invited the  National  Committee for  Quality  Assurance
     ("NCQA"), a  private, non-profit organization, to  evaluate the Company's
     methodologies  in  an  effort  to   receive  NCQA  accreditation.    NCQA
     accreditation is  a voluntary process.  The Company  did not meet certain
     of NCQA's criteria  and, therefore, did  not receive NCQA  accreditation.
     MAMSI believes  that it has  adopted methodologies and  programs designed
     to respond to  the concerns  and questions raised  in NCQA's  assessment.
     The  Company currently  believes that,  based on  its success  with large
     group sales since  the denial  of accreditation, the  failure to  receive
     NCQA  accreditation has  not  had a  significant  adverse effect  on  its
     business or  financial condition.  It is MAMSI's intention to request the
     NCQA to review its current  methodologies sometime in 1996.  Although the
     Company believes  that  the likelihood  of  NCQA accreditation  is  high,
     there can  be no assurance  that accreditation will  be received  or that
     MAMSI  will   not  experience  disenrollment  if   accreditation  is  not
     ultimately received.<PAGE>


     The  Company's home health care  and home infusion subsidiaries underwent
     voluntary accreditation  review by the Joint  Commission on Accreditation
     of Healthcare  Organizations ("JCAHO")  during 1995.   Full accreditation
     status was awarded as a result of this process.

     Medical  expenses  as a  percentage  of  premium  revenue ("medical  loss
     ratio") increased to 81.9 percent in 1995 as compared to  80.8 percent in
     1994, principally due to a decrease in  average premiums per enrollee and
     also higher than  anticipated medical expenses in the  Company's Medicare
     risk  product.    On a  per  member  per  month basis,  medical  expenses
     declined  approximately  .6  percent  over  the  same  period  due  to  a
     reduction  in the  return  of physician  withhold  and offset  by  higher
     member  utilization, particularly  in the  Medicare product.   Management
     does not  believe that this  necessarily represents a  sustainable trend.
     Total  medical costs may increase  in future periods  due to inflationary
     pressures, governmentally mandated benefit  increases and/or the  Company
     may experience increased utilization by its membership.<PAGE>


     <PAGE> 21

     Over  the  past  two  years,  the  Company  has  achieved  year-over-year
     reductions  in  per  member per  month  medical expenses.    In  order to
     continue to  reimburse providers at  a fair level in  a manner consistent
     with  the  current  medical  environment,  the  Company  implemented  the
     Medicare  Resource Based  Relative  Value Scale  methodology of  provider
     reimbursement effective  July 1, 1995.   This methodology,  which applies
     generally  to specialist health claims,  has resulted in  the lowering of
     some  reimbursement levels,  mainly those  having to  do with  office and
     hospital-based procedures, while increasing  payments for many evaluation
     and  management tasks.  Management  believes that this  change will allow
     the Company to continue to be competitive within its marketplace.

     Administrative  expenses  as  a  percentage of  revenue  ("administrative
     expense ratio")  increased to  10.6 percent  in 1995 as  compared to  9.4
     percent  in  1994.   Administrative expenses  increased 43  percent, from
     $70.5  million in 1994  to $100.8 million  in 1995.   The increase in the
     administrative  expense ratio  is primarily  attributable to  expenses of
     the  Company's home  health care  subsidiaries, which  were  purchased in
     late 1994,  the Company's  territorial expansion into  additional service
     areas within  currently served states as  well as into the  new states of
     North  Carolina (approved),  South  Carolina (pending),  and Pennsylvania
     (pending),  the continued  implementation  of its  plan to  significantly
     increase its employee sales  force and the higher costs  of administering
     the  Medicaid product, which became  a more significant  line of business
     for the Company in 1995.

     Investment income increased $5.4  million or 81 percent primarily  due to
     significantly  greater  invested balances  and  an  increase in  realized
     gains on sales of marketable equity securities.

     Deferred tax  assets are recognized for  deductible temporary differences
     that, in  management's opinion, are more  likely than not  to be realized
     in the current  or future periods.   The  Company's history of  operating
     revenue  and income growth,  and expectation of  future operating income,
     provides  strong positive evidence that these deferred tax assets will be
     realized.   A  valuation allowance  has been  recorded for  net operating
     loss  carryforwards  generated  by  certain  subsidiaries  that  are  not
     deductible  on a consolidated tax return.  Management intends to continue
     to monitor the realizability  of deferred tax assets  in light of  future
     circumstances and  assess the  reasonableness of the  valuation allowance
     on a quarterly basis.

     The net margin rate decreased from 7.3 percent in 1994 to 6.4 percent  in
     1995.   This decrease is primarily due  to lower premium rates on certain
     products and increased administrative expenses.

     LIQUIDITY AND CAPITAL RESOURCES

     The Company's business  is not capital intensive and  the majority of the
     Company's  expenses   are  payments  to  health   care  providers,  which
     generally vary in direct  proportion to the premium revenues  received by
     the  Company.   Although medical  utilization rates  vary by  season, the
     payments for such expenses  lag behind cash inflow from  premiums because
     of the  lag in provider billing  procedures.  In the  past, the Company's
     cash  requirements have been met principally from operating cash flow and
     it is anticipated that this source will continue to be  sufficient in the
     future.<PAGE>


     Cash  and  short-term  investments   increased  from  $154.0  million  at
     December 31, 1994 to  $215.6 million at December 31,  1995, primarily due
     to operating profits  and proceeds  from the exercise  of employee  stock
     options.  Accounts  receivable increased from  $37.0 million at  December
     31, 1994  to $61.3  million at  December 31, 1995,  primarily due  to the
     significant  increase in membership during  1995 and also  an increase in
     medical recoverable receivables related to new products.

     Effective January  1, 1994,  the Company adopted  Statement of  Financial
     Accounting  Standards No.  115,  "Accounting for  Certain Investments  in
     Debt and Equity  Securities" ("Statement  No. 115").   Statement No.  115
     requires that investments in all  debt securities plus equity  securities
     with  readily determinable  fair  values be  classified into  categories,
     which then  establish the appropriate  accounting treatment.   At January
     1,  1994,  the  Company's  entire  short-term  investment  portfolio  was
     classified as available-for-sale  and, as  a result,  the net  unrealized
     gain associated with these  securities of $1.1  million, net of tax,  was
     recorded as  a separate component of  stockholders' equity.   Also on the
     same   date,  the   Company's  statutory   deposits,  which   consist  of
     investments  held in  custodial  accounts by  state regulatory  agencies,
     were  classified as held-to-maturity and  will continue to  be carried at
     amortized cost.<PAGE>


     <PAGE> 22

     Short-term investments are marked to market  at the end of every  quarter
     and the  resulting unrealized  gain or loss  is reflected  in the  ending
     stockholders'  equity  balance.    Accordingly,  stockholders'  equity at
     December 31, 1995  reflects an  unrealized gain of  $1.5 million, net  of
     tax,   on  the   Company's  short-term   investments  primarily   due  to
     significant  gains during  the year in national  equity markets plus  the
     impact of falling  interest rates on  the market value  of the  Company's
     debt securities.

     Net  deferred income taxes decreased  from $14.0 million  at December 31,
     1994 to  $6.5 million at December  31, 1995, principally due  to a change
     in  the  tax  filing  status of  certain  subsidiary  corporations, which
     impacted the  calculation of  certain deductible  temporary  differences,
     and also  the  effect of  the tax  recognized  for unrealized  gains  and
     losses on the Company's short-term investments.
      
     Medical  claims payable increased from $85.0 million at December 31, 1994
     to $108.5 million at December 31, 1995, primarily due  to the significant
     increase in membership and related claim volume during 1995.

     Long-term debt  decreased from $5.3 million  at December 31,  1994 to $.2
     million  at  December  31, 1995,  primarily  due  to  the  payoff of  the
     Company's mortgage note payable without prepayment  penalty.  The Company
     has access to total  revolving credit facilities of $10.0  million, which
     is used to  provide short-term  capital resources for  routine cash  flow
     fluctuations.   At  December 31,  1995,  approximately $1.65  million was
     drawn  against  the   lines-of-credit  and  approximately  $469,000   was
     outstanding in letters-of-credit.

     Additional paid-in capital increased  from $29.4 million at December  31,
     1994 to  $40.4 million at  December 31,  1995, due to  proceeds from  the
     exercise and related tax benefits of stock options.

     Following  is a schedule of the short-term capital resources available to
     the Company:

                                                          December 31
     (in thousands)                                    1995          1994
                                                    ------------------------
     Cash and cash equivalents                            $   10,874         $
     17,054
     Short-term investments                           204,734        136,901
     Working capital advances to Maryland
       hospitals                                        4,053          3,982
                                                     --------       --------
     Total available liquid assets                    219,661        157,937
     Credit line availability                           7,880          8,452
                                                     --------       --------
     Total short-term capital resources             $ 227,541      $ 166,389
                                                     ========       ========

     Certain  MAMSI  subsidiaries  that are  subject  to  regulation by  state
     insurance departments must  notify state regulators before the payment of
     any  dividends  to MAMSI  and,  in  certain  circumstances, must  receive
     positive  affirmation  prior to  such payment.    Due to  the substantial
     statutory  net worth of these subsidiaries, the Company does not perceive
     these requirements to be a significant restriction on its ability  to pay
     future dividends.<PAGE>


     The  Company does not anticipate  any adverse impact  on future liquidity
     due   to  medical   malpractice  issues   because  the   Company  carries
     substantial professional liability insurance.

     The Company believes that  the cash flow generated from  operations along
     with its  current liquidity and  borrowing capabilities are  adequate for
     both current and  planned expanded  operations.  In  October 1995,  MAMSI
     announced  the  approval  of a  stock  repurchase  program.   Under  this
     program,  MAMSI  may  currently  expend  up  to  $60  million  (including
     brokerage  commissions) to repurchase shares  of its common  stock over a
     twelve  month period  at  prices not  to  exceed $24.00  per  share.   At
     December 31, 1995,  no shares of common stock  had been repurchased under
     this  program.  This program will be  financed through cash flow from the
     Company's operations.  Other  capital expenditures will be made  over the
     next  year  to  enhance  the  Company's computer  systems,  to  establish
     additional sales offices and  to make necessary improvements  to existing
     administrative offices.<PAGE>


     <PAGE> 23

     -----------------------------------------------------------------------
     THE YEAR ENDED DECEMBER 31, 1994 COMPARED TO THE YEAR  ENDED DECEMBER 31,
     1993
     -----------------------------------------------------------------------

     RESULTS OF OPERATIONS

     For  the year  ended December  31, 1994, the  Company had  $54,530,000 in
     consolidated  net  income compared  to  $24,833,000  for  the year  ended
     December 31,  1993, an increase of 120 percent.  The increase in earnings
     is attributable to  an increase in  membership and  per member per  month
     premiums and a significant reduction in  the medical loss ratio over  the
     prior  year,  partially  offset  by  an increase  in  the  administrative
     expense ratio.

     Revenues  for 1994  increased 16  percent to  $749.9 million  from $648.2
     million in  1993.   An  8  percent  increase in  average  HMO  enrollment
     resulted in  approximately a  $48.1 million  increase in  premium revenue
     and a 6  percent increase  in average premiums  per enrollee  contributed
     $40.8 million in premium revenue.   Premiums per enrollee were higher  in
     1994  due  to a  combination of  premium  price increases  and membership
     gains in certain higher-priced  benefit packages.  Fee revenues  from PPO
     products and  other service  fees, including  revenue from  MAMSI's  home
     health  care subsidiary  that  was acquired  in  October 1994,  increased
     approximately $8.7 million or 148 percent.

     The  medical loss  ratio for  1994 decreased  to 80.8  percent  from 86.3
     percent in  1993 and, on a  per member per month  basis, medical expenses
     decreased  .5 percent.  This decrease in  the medical loss ratio reflects
     higher  premiums, a  reduction in  membership utilization levels  in 1994
     and the efficacy of managed  care controls developed and expanded by  the
     Company over the preceding three years.

     The  administrative expense ratio increased  from 8.3 percent  in 1993 to
     9.4 percent in  1994.  The increase  in the administrative expense  ratio
     is primarily  attributable to increased sales,  marketing and advertising
     expenses and the development of new products and territories.

     Effective  January 1,  1993, the  Company adopted Statement  of Financial
     Accounting Standards No. 109,  "Accounting for Income Taxes."   Under the
     new rules,  deferred taxes  are recognized  using the  liability  method,
     whereby  tax rates are applied to  cumulative temporary differences based
     on  when  and how  they  are expected  to  affect the  tax  return.   The
     cumulative effect of  the change  for the  year ended  December 31,  1993
     reduced net income by approximately $663,000 or $.02 per share.

     The net margin rate increased from 3.9  percent in 1993 to 7.3 percent in
     1994.   This increase is  primarily due to  medical expenses rising  at a
     lesser rate than  premium revenues,  partially offset by  an increase  in
     administrative expenses.<PAGE>


     <PAGE> 24

     ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA              PAGE
                                                                       ----
     Consolidated Balance Sheets as of December 31, 1995 and 1994 ...    25
     Consolidated Statements of Income for the years ended 
       December 31, 1995, 1994 and 1993 .............................    26
     Consolidated Statements of Changes in Stockholders' Equity
       for the years ended December 31, 1995, 1994 and 1993 .........    27
     Consolidated Statements of Cash Flows for the years ended
       December 31, 1995, 1994 and 1993 .............................    28
     Notes to Consolidated Financial Statements .....................    29
     Report of Ernst & Young LLP Independent Auditors ...............    43
     Selected Quarterly Financial Data for Fiscal Years 1995
       and 1994 (Unaudited) .........................................    44<PAGE>


     <PAGE> 25
                               Mid Atlantic Medical Services, Inc.
                                  Consolidated Balance Sheets
     <TABLE>
     <CAPTION>
                                                                       December 31,
     (in thousands except share amounts)                          1995              1994
                                                               ----------        ----------
     <S>                                                       <C>               <C>         
     ASSETS
     Current assets
       Cash and cash equivalents                               $   10,874        $   17,054
       Short-term investments (Note 2)                            204,734           136,901
       Accounts receivable, net (Note 3)                           61,263            37,031
       Prepaid expenses, advances and other                         8,974             5,743
       Deferred income taxes (Note 8)                               4,379            15,540
                                                                 --------          --------   
         Total current assets                                     290,224           212,269

     Property and equipment, net (Note 4)                          38,704            33,668
     Statutory deposits (Note 2)                                   10,543             9,877
     Other assets                                                  11,373            12,708
     Deferred income taxes (Note 8)                                 3,338
                                                                 --------          --------
         Total assets                                           $ 354,182         $ 268,522
                                                                 ========          ========
     LIABILITIES AND STOCKHOLDERS' EQUITY
     Current liabilities
       Notes payable (Note 5)                                   $     210         $     726
       Short-term borrowings (Note 5)                               1,651             1,048
       Accounts payable                                            15,075            17,565
       Income taxes payable (Note 8)                                                  2,589
       Medical claims payable, net (Note 6)                       108,490            85,014
       Deferred premium revenue                                    10,125            13,344
       Deferred income taxes (Note 8)                               1,005
                                                                 --------          --------
         Total current liabilities                                136,556           120,286

     Notes payable (Note 5)                                           194             5,331
     Deferred income taxes (Note 8)                                   216             1,579
                                                                 --------          --------
         Total liabilities                                        136,966           127,196

     Stockholders' equity (Notes 11, 12 and 14)
       Common stock, $0.01 par, 100,000,000 shares authorized,
       46,631,327 issued and 46,585,387 outstanding at
       December 31, 1995; 45,663,527 issued and 45,617,587
       outstanding at December 31, 1994                               466               456
     Additional paid-in capital                                    40,374            29,431
     Treasury stock                                                   (33)              (33)
     Unrealized gains and (losses) on investments, net of tax
       of $1,004 and $(1,490) (Note 2)                              1,535            (2,278)
     Retained earnings                                            174,874           113,750
                                                                 --------          --------
         Total stockholders' equity                               217,216           141,326
                                                                 --------          --------
         Total liabilities and stockholders' equity             $ 354,182         $ 268,522
                                                                 ========          ========
     The accompanying notes are an integral part of these consolidated financial statements.
     /TABLE
<PAGE>


     <PAGE> 26
                               Mid Atlantic Medical Services, Inc.
                                Consolidated Statements of Income
     <TABLE>
     <CAPTION>
                                                                                            Year Ended December 31,
     (in thousands except share amounts)                                           1995            1994            1993
                                                                                ----------      ----------      ----------
     <S>                                                                        <C>             <C>             <C>
     Revenue
       Health premium                                                           $  907,694      $  728,743      $  639,875
       Fee and other                                                                15,334           9,760           5,845
       Life, accidental death and disability premium                                 1,449
       Home health services                                                         18,910           4,745
       Investment                                                                   12,008           6,650           2,505
                                                                                 ---------       ---------       ---------
     Total revenue                                                                 955,395         749,898         648,225
                                                                                 ---------       ---------       ---------
     Expense
       Medical expense
         Referral and ancillary care (Notes 9 and 10)                              320,412         271,042         249,750
         Hospitalization, net of coordination of benefits                          247,870         191,902         185,422
         Primary care (Notes 9 and 10)                                              93,320          70,960          64,546
         Prescription drugs                                                         80,438          56,246          51,903
         Reinsurance premiums, net (Note 7)                                          1,587          (1,160)            584
                                                                                 ---------       ---------       ---------
                                                                                   743,627         588,990         552,205
                                                                                 ---------       ---------       ---------
       Life, accidental death and disability settlements                               934  
                                                                                 ---------       ---------       ---------
       Home health patient services                                                 13,684           3,817
                                                                                 ---------       ---------       ---------
       Administrative expense
         Salaries and benefits                                                      63,194          42,740          34,188
         Promotion and advertising                                                   3,246           4,504           1,670
         Facilities, maintenance and supplies                                       19,134          11,990          10,081
         Professional services                                                       3,717           2,701           2,092
         Other (including interest expense of $1,010, $1,208 and $781)              11,519           8,601           5,543
                                                                                 ---------       ---------       ---------
                                                                                   100,810          70,536          53,574
                                                                                 ---------       ---------       ---------
     Total expense                                                                 859,055         663,343         605,779
                                                                                 ---------       ---------       ---------
     Income before income taxes and cumulative effect of accounting change          96,340          86,555          42,446
     Provision for income taxes (Note 8)                                           (35,216)        (32,025)        (16,950)
                                                                                 ---------       ---------       ---------
     Income before cumulative effect of accounting change                           61,124          54,530          25,496
     Cumulative effect as of December 31, 1992 of change
       in method of accounting for income taxes (Note 8)                                                              (663)
                                                                                 ---------       ---------       ---------
     Net Income                                                                 $   61,124      $   54,530      $   24,833
                                                                                 =========       =========       =========
     Earnings per common and common equivalent share (Notes 11 and 12):
     Income before cumulative effect of accounting change                       $     1.28      $     1.15      $      .57
     Cumulative effect of accounting change                                                                           (.02)
                                                                                 ---------       ---------       ---------
     Net Income                                                                 $     1.28      $     1.15      $      .55
                                                                                 =========       =========       =========
     Weighted average common and common equivalent shares outstanding (Note 12) 47,908,379      47,370,211      45,109,230
                                                                                ==========      ==========      ==========<PAGE>


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


     <PAGE> 27
                               Mid Atlantic Medical Services, Inc.
                  Consolidated Statements of Changes in Stockholders' Equity
     <TABLE>
     <CAPTION>
                                              Common      Additional                  Unrealized
                                               Stock        Paid-In      Treasury      Gains and      Retained
     (in thousands except share amounts)     $0.01 Par      Capital        Stock       (Losses)       Earnings       Total
                                             ---------     ---------     ---------     ---------     ---------     ---------
     <S>                                     <C>           <C>           <C>           <C>           <C>           <C>
     Balance, December 31, 1992              $     143     $   5,889     $     (30)                  $  34,387     $  40,389

     Exercise of stock options for
       1,212,050 shares of MAMSI
       common stock                                  4         3,198                                                   3,202
     Recognition of the granting of
       non-qualified stock options                             1,957                                                   1,957
     Stock option tax benefit                                  1,584                                                   1,584
     50% stock dividend ($2 paid in
       lieu of fractional shares)                   73           (75)                                                     (2)
     Net income                                                                                         24,833        24,833
                                              --------      --------      --------      --------      --------      --------
     Balance, December 31, 1993                    220        12,553           (30)                     59,220        71,963

     Adjustment to beginning balance
       for change in accounting
       method, net of tax of $718
         (Note 2)                                                                      $   1,099                       1,099
     Exercise of stock options for
       1,520,975 shares of MAMSI
       common stock                                 10         6,127                                                   6,137
     Stock option tax benefit                                 10,973                                                  10,973
     100% stock dividend                           226          (226)
     Change in unrealized gains
       and (losses), net of tax
       benefit of $2,208                                                                  (3,377)                     (3,377)
     Other                                                         4            (3)                                        1
     Net income                                                                                         54,530        54,530
                                              --------      --------      --------      --------      --------      --------
     Balance, December 31, 1994                    456        29,431           (33)       (2,278)      113,750       141,326

     Exercise of stock options for
       967,800 shares of MAMSI
       common stock                                 10         4,533                                                   4,543
     Stock option tax benefit                                  6,410                                                   6,410
     Change in unrealized gains
       and (losses), net of tax
       of $2,494                                                                           3,813                       3,813
     Net income                                                                                         61,124        61,124
                                              --------      --------      --------      --------      --------      --------
     Balance, December 31, 1995              $     466     $  40,374     $     (33)    $   1,535     $ 174,874     $ 217,216
                                              ========      ========      ========      ========      ========      ========
     The accompanying notes are an integral part of these consolidated financial statements.
     /TABLE
<PAGE>


     <PAGE> 28
                               Mid Atlantic Medical Services, Inc.
                              Consolidated Statements of Cash Flows
     <TABLE>
     <CAPTION>
                                                                                          Year Ended December 31,
     (in thousands)                                                                1995            1994            1993
                                                                                ---------       ---------       ---------
     <S>                                                                        <C>             <C>             <C>
     Cash flows from operating activities:
       Net income                                                               $  61,124       $  54,530       $  24,833
     Adjustments to reconcile net income to net cash provided by
       operating activities:
       Depreciation and amortization                                                6,026           4,225           3,702
       Provision for bad debts                                                         47             370           1,018
       Provision for deferred income taxes                                          4,971          (2,435)         (1,868)
       Loss on sale and disposal of assets                                             78           1,126             993
       Cumulative effect of change in accounting principle                                                            663
       Recognition of the granting of non-qualified stock options                                                   1,957
       Other operating activities                                                                                     (15)
       Changes in operating assets and liabilities, net of effects
         of acquisition of subsidiary:
         Increase in accounts receivable                                          (24,279)         (6,575)           (532)
         Decrease (increase) in prepaid expenses, advances and other               (3,231)            726          (1,601)
         Increase (decrease) in accounts payable                                   (1,887)          5,016            (899)
         Increase (decrease) in income taxes payable                               (2,589)           (465)          1,654
         Increase (decrease) in medical claims payable, net                        23,476          (2,346)         25,763
         Increase (decrease) in deferred premium revenue                           (3,219)          4,936           1,374
                                                                                 --------        --------        --------
       Total adjustments                                                             (607)          4,578          32,209
                                                                                 --------        --------        --------
       Net cash provided by operating activities                                   60,517          59,108          57,042
                                                                                 --------        --------        --------
     Cash flows used in investing activities:
       Purchases of short-term investments                                       (426,601)       (220,410)       (228,414)
       Sales of short-term investments                                            365,076         184,826         166,119
       Purchases of property and equipment                                        (10,027)         (8,317)         (7,162)
       Acquisition of subsidiary                                                                   (9,958)
       Purchases of statutory deposits                                             (1,405)         (5,219)         (1,381)
       Maturities of statutory deposits                                               739              23           2,814
       Purchases of other assets                                                     (725)         (1,997)           (553)
       Proceeds from sale of assets                                                   946           1,392             534
                                                                                 --------        --------        --------
       Net cash used in investing activities                                      (71,997)        (59,660)        (68,043)
                                                                                 --------        --------        --------
     Cash flows provided by financing activities:
       Proceeds from notes payable                                                    300             200
       Principal payments on notes payable                                         (5,953)           (678)           (648)
       Exercise of stock options                                                    4,543           6,137           3,202
       Stock option tax benefit                                                     6,410          10,973           1,584
       Other financing activities                                                                       1              (2)
                                                                                 --------        --------        --------
       Net cash provided by financing activities                                    5,300          16,633           4,136
                                                                                 --------        --------        --------
     Net increase (decrease) in cash and cash equivalents                          (6,180)         16,081          (6,865)
     Cash and cash equivalents at beginning of year                                17,054             973           7,838
                                                                                 --------        --------        --------
     Cash and cash equivalents at end of year                                   $  10,874       $  17,054       $     973
                                                                                 ========        ========        ========
     The accompanying notes are an integral part of these consolidated financial statements.<PAGE>


     /TABLE
<PAGE>


     <PAGE> 29

                        Mid Atlantic Medical Services, Inc.
                   Notes to Consolidated Financial Statements

     NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

     Mid  Atlantic Medical Services, Inc. ("MAMSI") is a holding company whose
     subsidiaries are active in managed health care and other  life and health
     insurance  related  activities.    MAMSI's  principle  markets  currently
     include  Maryland, Virginia,  the  District of  Columbia, Delaware,  West
     Virginia  and North Carolina.   MAMSI and  its subsidiaries (collectively
     referred to as  the "Company") have  developed a  broad range of  managed
     health  care and  related ancillary  products and deliver  these services
     through health  maintenance  organizations ("HMOs"),  preferred  provider
     organizations ("PPOs"), a life and health  insurance company, home health
     care  and home  infusion  services companies  and  an outpatient  surgery
     center.

     MAMSI  delivers managed  health care  services principally  through HMOs.
     The HMOs, MD-Individual Practice  Association, Inc. ("M.D. IPA"), Optimum
     Choice,  Inc. ("OCI") and Optimum Choice of the Carolinas, Inc. ("OCCI"),
     arrange  for health  care  services  to  be  provided  to  a  voluntarily
     enrolled population for  a predetermined, prepaid fee,  regardless of the
     extent  or nature of services provided to  the enrollees.  The HMOs offer
     a  full complement of health benefits,  including physician, hospital and
     prescription drug services.

     The following are other significant wholly owned subsidiaries of MAMSI:

     Physicians Health  Plan  of Maryland,  Inc. ("PHP-MD")  is an  individual
     practice association ("IPA") that  provides physician services to certain
     of the Company's HMOs.

     Alliance  PPO,   Inc.  ("Alliance")   provides  a  delivery   network  of
     physicians (called  a preferred  provider organization) to  employers and
     insurance companies in association with various health plans.  

     Mid Atlantic  Psychiatric Services,  Inc. ("MAPSI")  provides psychiatric
     services to third party payors or self-insured employer groups.  

     MAMSI  Life and  Health Insurance  Company   ("MAMSI Life")  develops and
     markets indemnity health products  in addition to life,  accidental death
     and disability insurance.

     HomeCall,  Inc.   and  its  wholly  owned   subsidiary,  FirstCall,  Inc.
     (collectively  referred to as "HomeCall"), were acquired by MAMSI in 1994
     for  approximately  $10  million,   including  direct  expenses.    MAMSI
     accounted for the acquisition using the purchase method of accounting.

     HomeCall  and HomeCall  Infusion Services,  Inc. ("HIS")  provide in-home
     medical care  including skilled  nursing, infusion  and therapy  to  both
     MAMSI's HMO members and other payors.

     The   significant  accounting   policies  followed   by  MAMSI   and  its
     subsidiaries are described below.

     PRINCIPLES OF CONSOLIDATION

     The consolidated financial  statements include the accounts  of MAMSI and<PAGE>


     its  subsidiaries.    All  significant intercompany  balances  have  been
     eliminated in consolidation. 
      
     MAJOR CUSTOMERS

     The  Company's operations are conducted  within one business  segment.  A
     significant portion  of the  Company's premium  revenue is  derived  from
     federal,  state  and  local  government agencies  including  governmental
     employees  and Medicaid  and Medicare  recipients.   For the  years ended
     December  31, 1995,  1994,  and  1993,  approximately  7%,  9%  and  11%,
     respectively,  of premium  revenue  was derived  from federal  government
     agencies, and approximately 21%, 18%, and 11%,  respectively, was derived
     from state and local government agencies.

     CASH EQUIVALENTS

     Floating  rate municipal  putable bonds,  which possess  an insignificant
     risk  of loss from  changes in interest  rates, that have  been held less
     than three months are classified as cash equivalents.<PAGE>


     <PAGE> 30

     SHORT-TERM INVESTMENTS

     Short-term  investments,  consisting  principally  of  marketable  equity
     securities, municipal  bonds and tax-free  bond funds, are  classified as
     available-for-sale.  These  securities are carried  at fair market  value
     plus  accrued interest and any  unrealized gains and  losses are reported
     as  a separate component of stockholders' equity,  net of the related tax
     effect.  Gains and losses are reported in earnings when  realized.  Gains
     and  losses  on  sales of  securities  are  computed  using the  specific
     identification method.

     PROPERTY AND EQUIPMENT

     Property and equipment is  stated at cost less  accumulated depreciation.
     Depreciation  is  provided on  a straight-line  basis over  the estimated
     useful lives of the  property and equipment.  Leasehold  improvements are
     amortized on a  straight-line basis over  the lesser of  the life of  the
     improvement or the term of the related lease.

     STATUTORY DEPOSITS

     Statutory  deposits,  consisting  principally  of  municipal   bonds  and
     treasury notes held in  custodial accounts by state  regulatory agencies,
     are  classified as  held-to-maturity.   These  securities  are stated  at
     amortized cost.

     GOODWILL

     The  excess of cost  over the  fair value of  net assets  of the acquired
     company in the  1994 purchase transaction is recorded as  goodwill and is
     classified  in  the  consolidated  balance  sheets  as  an  other  asset.
     Goodwill is amortized on a straight-line basis over 15 years.

     HEALTH PREMIUM

     Amounts  charged  for health  care  services  are  recognized as  premium
     revenue in the month  for which enrollees  are entitled to receive  care.
     Included  in premium revenue are  amounts due from  entities that utilize
     the  Company's  capitated primary  care  physician  network, its  medical
     utilization  management services  and  other services  related to  health
     management and who self-fund,  generally up to specified  limits, certain
     elements  of  medical  costs,  such  as  hospitalization  and  specialist
     physicians.   Premium revenue received in advance is recorded as deferred
     premium revenue.

     FEE AND OTHER

     Amounts charged to  third party  payors solely for  use of the  Company's
     provider  network and its discounted  fee for service  rate structure are
     recognized as fee revenue.   Amounts charged for  administrative services
     only arrangements entailing only  claims payment services and utilization
     of  the provider  network  without utilization  of the  Company's primary
     care  physician network  and  utilization management  services and  under
     which the Company bears no risk are recognized as fee revenue.

     HOME HEALTH SERVICES

     Amounts  charged  to patients,  third party  payors  and others  for home<PAGE>


     health  services  are  recorded  at  net  realizable  amounts,  including
     retroactive adjustments  under cost  reimbursement agreements with  third
     party payors.

     MEDICAL EXPENSE

     Medical  expense consists  principally of  medical claims  and capitation
     costs.  Medical claims include payments  to be made on claims reported as
     of the balance sheet date and estimates of health  care services incurred
     but not  reported ("IBNR") to the  Company as of the  balance sheet date.
     The IBNR is  estimated using an  expense forecasting model that  is based
     on  historical claims  incurrence patterns  modified to  consider current
     trends in  enrollment, member utilization patterns,  timeliness of claims
     submissions and other factors.   This estimate includes medical  costs to
     be  incurred  beyond  the  premium  paying date  that  are  contractually
     required.

     Capitation   costs  represent   monthly  fixed   fees   to  participating
     physicians  and  other  medical  providers  as  retainers  for  providing
     continuing medical care.<PAGE>


     <PAGE> 31

     The  Company  believes that  its IBNR  claims  estimates are  adequate to
     satisfy its  ultimate claims liabilities; however, the  IBNR liability as
     established  may  vary significantly  from  actual  claims amounts,  both
     negatively or  positively, and as  such adjustments are  deemed necessary
     they are included in current operations.

     COORDINATION OF BENEFITS

     Coordination of benefits ("COB") results  from the determination that the
     Company has paid for medical  claims expenses for which an enrollee   has
     duplicate  coverage and  for which another  insurer is  primarily liable.
     In  the consolidated  statements of  income, such identified  amounts are
     classified  as  a  reduction  of  hospitalization  expense  and,  in  the
     consolidated balance sheets, such  amounts are classified as  a reduction
     of medical claims payable.

     INCOME TAXES

     The income tax  provision includes  Federal and state  income taxes  both
     currently payable  and deferred because of  differences between financial
     reporting and tax  bases of assets and liabilities.   Deferred tax assets
     and liabilities are  measured using the enacted  tax rates and  laws that
     will be in effect when the differences are expected to reverse.  

     EARNINGS PER COMMON SHARE

     Earnings  per  common  and common  equivalent  share  is  based upon  the
     weighted  average   number  of   common  and  common   equivalent  shares
     outstanding.   Common equivalent shares result from  the assumed exercise
     of  outstanding stock options that  have a dilutive  effect when applying
     the treasury stock method.

     FAIR VALUE OF FINANCIAL INSTRUMENTS

     Statement of  Financial Accounting  Standards No. 107,  "Disclosure about
     Fair  Value of  Financial  Instruments" ("Statement  No. 107"),  requires
     disclosure  of  fair  value   information  about  financial  instruments,
     whether  or  not  recognized  in  the  balance sheet,  for  which  it  is
     practicable to estimate that  value.  Statement No. 107  excludes certain
     financial   instruments  and   all  nonfinancial  instruments   from  its
     disclosure  requirements.   The  following methods  and assumptions  were
     used  by the  Company  in  estimating  its  fair  value  disclosures  for
     financial instruments:

     Cash  and  cash  equivalents  -  The  carrying  amount  reported  in  the
     consolidated balance sheets approximates fair value.

     Short-term investments - Fair values are based on quoted market prices.

     Statutory deposits - Fair values are based on quoted market prices.

     Short-term  borrowings - The carrying amount reported in the consolidated
     balance sheets approximates fair value.

     ESTIMATES

     The  preparation of  financial  statements in  conformity with  generally
     accepted accounting principles requires  management to make estimates and<PAGE>


     assumptions that affect  the reported amounts  of assets and  liabilities
     and disclosure of  contingent assets and liabilities  at the date  of the
     financial  statements and the  reported amounts of  revenues and expenses
     during  the  reporting period.    Such  estimates and  assumptions  could
     change  in  the future  as more  information  becomes known,  which could
     impact the amounts reported and disclosed herein.

     RECLASSIFICATIONS

     Certain  balances in  the 1994  and 1993  financial statements  have been
     reclassified to conform to the 1995 presentation.<PAGE>


     <PAGE> 32

     NOTE 2 - INVESTMENTS

     Effective January  1, 1994  the  Company adopted  Statement of  Financial
     Accounting  Standards No.  115,  "Accounting for  Certain Investments  in
     Debt  and  Equity  Securities"   ("Statement  No.  115").     Under  this
     statement,  securities  are classified  into  categories  and are  valued
     based  upon this  designation.   Securities classified  as available-for-
     sale, which include debt and equity securities that the Company does  not
     have the positive  intent to hold to maturity, are  marked to market with
     the resulting unrealized gain or loss reflected  in stockholders' equity.
     Securities   classified  as   held-to-maturity,   which   includes   debt
     securities that the Company has both  the positive intent and ability  to
     hold to maturity, are carried at amortized cost.

     On  January 1, 1994, the Company classified its short-term investments as
     available-for-sale.   As a  result, the Company  recorded net  unrealized
     gains  of  $1.1  million,  net  of  tax,   as  a  separate  component  of
     stockholders  equity.  In addition,  the Company classified its statutory
     deposits  as  held to  maturity with  no  effect on  the  recorded value.
     Management  re-evaluated  these designations  at  December  31, 1995  and
     determined that they continue to be appropriate.

     The  following is  a summary  of available-for-sale  and held-to-maturity
     securities at December 31, 1995:

     <TABLE>
     <CAPTION>
                                                        -------------------------------------------------------
                                                                          Gross         Gross        Estimated
     (in thousands)                                                    Unrealized     Unrealized        Fair
                                                           Cost           Gains         Losses         Value
                                                        -------------------------------------------------------
     <C>                                                <S>            <S>            <S>            <S>
     AVAILABLE-FOR-SALE SECURITIES
     U.S. Treasury securities and obligations
       of U.S. government agencies                      $       20                                   $       20
     Obligations of states and political subdivisions       98,681     $    1,306     $       30         99,957
     Municipal bond funds                                   68,204                                       68,204
     Other debt securities                                   2,587             94                         2,681
     Accrued interest                                        1,163                                        1,163
                                                         ---------      ---------      ---------      ---------
     Debt securities                                       170,655          1,400             30        172,025
     Equity securities                                      27,343          2,270          1,112         28,501
     Mutual funds                                            4,197             11                         4,208
                                                         ---------      ---------      ---------      ---------
     Short-term investments                             $  202,195     $    3,681     $    1,142     $  204,734
                                                         =========      =========      =========      =========
     HELD-TO-MATURITY SECURITIES
     U.S. Treasury securities and obligations
       of U.S. government agencies                      $    5,542     $      167     $        1     $    5,708
     Obligations of states and political subdivisions        4,103            181                         4,284
     Other investments                                         898                                          898
                                                         ---------      ---------      ---------      ---------
     Statutory deposits                                 $   10,543     $      348     $        1     $   10,890
                                                         =========      =========      =========      =========
     /TABLE
<PAGE>


     <PAGE> 33

     The  following is  a summary  of available-for-sale  and held-to-maturity
     securities at December 31, 1994:

     <TABLE>
     <CAPTION>
                                                        -------------------------------------------------------
                                                                          Gross         Gross        Estimated
     (in thousands)                                                    Unrealized     Unrealized        Fair
                                                           Cost           Gains         Losses         Value
                                                        -------------------------------------------------------
     <C>                                                <S>            <S>            <S>            <S>
     AVAILABLE-FOR-SALE SECURITIES
     U.S. Treasury securities and obligations
       of U.S. government agencies                      $      610                    $       28     $      582
     Obligations of states and political subdivisions       75,229     $      100          2,523         72,806
     Municipal bond funds                                   38,089                                       38,089
     Other debt securities                                   1,509              9             38          1,480
     Accrued interest                                          868                                          868
                                                         ---------      ---------      ---------      ---------
     Debt securities                                       116,305            109          2,589        113,825
     Equity securities                                      24,365            338          1,627         23,076
                                                         ---------      ---------      ---------      ---------
     Short-term investments                             $  140,670     $      447     $    4,216     $  136,901
                                                         =========      =========      =========      =========
     HELD-TO-MATURITY SECURITIES
     U.S. Treasury securities and obligations
       of U.S. government agencies                      $    6,000                    $      236     $    5,764
     Obligations of states and political subdivisions        3,611     $       76             49          3,638
     Other investments                                         266                                          266
                                                         ---------      ---------      ---------      ---------
     Statutory deposits                                 $    9,877     $       76     $      285     $    9,668
                                                         =========      =========      =========      =========
     </TABLE>

     For  the  years  ended December  31,  1995  and  1994, marketable  equity
     available-for-sale securities  with a fair  value at the date  of sale of
     $30,676,000  and  $19,830,000,  respectively,   were  sold.    The  gross
     realized gains on such  sales totaled $5,943,000 and $3,303,000,  and the
     gross realized losses  totaled $1,149,000  and $794,000 for  each of  the
     respective  periods.     Realized  gains  and  losses   are  included  in
     investment  income.   Other  sales  of  short-term investments  consisted
     principally of redemptions from municipal bond funds.

     During  1994, statutory  deposit investments  with  an amortized  cost of
     $2,384,000 were released by state  regulatory agencies and transferred to
     the  Company's short-term investment  portfolio.  The  unrealized gain at
     the date of transfer for these investments was $46,000.

     The  amortized cost  and  estimated fair  value  of debt  and  marketable
     equity securities  at December  31, 1995,  by contractual  maturity,  are
     shown  below.     Expected   maturities  will  differ   from  contractual
     maturities  because the issuers  of the securities may  have the right to
     prepay obligations without prepayment penalties.<PAGE>


     <PAGE> 34

     <TABLE>
     <CAPTION>
                                                     -------------------------
                                                                   Estimated
                                                                      Fair
     (in thousands)                                     Cost         Value
                                                     -------------------------
     <C>                                             <S>            <S>
     AVAILABLE-FOR-SALE
     Due in one year or less                         $   78,158     $   78,201
     Due after one year through five years               33,502         33,841
     Due after five years through ten years              40,312         41,220
     Due after ten years                                 18,683         18,763
                                                      ---------      ---------
     Debt securities                                    170,655        172,025
     Equity securities                                   27,343         28,501
     Mutual funds                                         4,197          4,208
                                                      ---------      ---------
                                                     $  202,195     $  204,734
                                                      =========      =========
     HELD-TO-MATURITY
     Due in one year or less                         $    3,707     $    3,717
     Due after one year through five years                4,324          4,476
     Due after five years through ten years               1,181          1,213
     Due after ten years                                  1,331          1,484
                                                      ---------      ---------
                                                     $   10,543     $   10,890
                                                      =========      =========
     </TABLE>

     Net  realized  gains  on  sales   of  marketable  equity  securities  was
     approximately $307,000 in 1993.


     NOTE 3 - ACCOUNTS RECEIVABLE

     Accounts receivable consists of the following at December 31:

     <TABLE>
     <CAPTION>
                                                     -------------------------
     (in thousands)                                     1995           1994
                                                     -------------------------
     <C>                                             <S>            <S>
     Premium and fee accounts                        $   43,737     $   29,844
     Home service accounts                                2,869          3,230
     Medical recoverables                                10,419          3,257
     Other                                                7,876          4,291
     Less: allowance for doubtful accounts               (3,638)        (3,591)
                                                      ---------      ---------
                                                     $   61,263     $   37,031
                                                      =========      =========
     </TABLE>

     Medical  recoverables consist of  refunds identified on  paid claims that
     will  be collected in the following year.   This amount has been recorded
     as  a  reduction of  medical expense  in  the consolidated  statements of
     income.    Other  receivables  consist   primarily  of  amounts  due  for<PAGE>


     reinsurance recoveries and pharmacy rebates.<PAGE>


     <PAGE> 35

     NOTE 4 - PROPERTY AND EQUIPMENT

     Property and equipment consists of the following at December 31:

     <TABLE>
     <CAPTION>
                                                     -------------------------
     (in thousands)                                     1995           1994
                                                     -------------------------
     <C>                                             <S>            <S>
     Land, buildings and improvements                $   20,004     $   18,061
     Computer equipment and software                     21,823         18,231
     Office furniture and equipment                      11,673          7,815
     Leasehold improvements                                 295            183
                                                      ---------      ---------
                                                         53,795         44,290
     Less: accumulated depreciation and
       amortization                                     (15,091)       (10,622)
                                                      ---------      ---------
                                                     $   38,704     $   33,668
                                                      =========      =========
     </TABLE>


     NOTE 5 - NOTES PAYABLE

     Notes payable consists of the following at December 31:

     <TABLE>
     <CAPTION>
                                                     -------------------------
     (in thousands)                                     1995           1994
                                                     -------------------------
     <C>                                             <S>            <S>
     Mortgage note payable secured by first deed
       of trust on land and buildings with interest
       due at 10.10 percent.  Principal and interest
       payments are due monthly based on a 27-year
       amortization                                                 $    5,013
     Equipment term loan secured by certain
       computer equipment with interest due at
       9.8%.  Principal is paid in equal monthly
       installments with interest until maturity
       in March 1996                                 $      150            750
     Other notes payable                                    254            294
     Current portion                                       (210)          (726)
                                                      ---------      ---------
     Noncurrent portion                              $      194     $    5,331
                                                      =========      =========
     </TABLE>

     On September  1, 1995, the Company paid off in full, from available cash,
     its mortgage note payable amounting to approximately $5.0 million.

     The noncurrent portion  of notes payable at  December 31, 1995  mature in
     future years as follows (in thousands):

       1997                  $     60<PAGE>


       1998                        60
       1999                        60
       2000                        14

     The  Company  has access  to  total  line-of-credit and  letter-of-credit
     facilities  of  $10  million,  which   are  subject  to  annual  renewal.
     Borrowings under facilities  totalling $8.0  million bear  interest at  a
     rate based  on either  the bank's  prime rate or  the Federal  Funds rate
     plus .75%  and are secured by  certain cash balances and  short-term non-
     equity securities.  The  remaining facility bears interest at  either the
     bank's prime rate or the Federal Funds rate plus 1.65% and is  secured by
     certain receivables.  At December  31, 1995, approximately $1.65  million
     was outstanding on  one of  the lines-of-credit  at an  interest rate  of
     6.38% and approximately $469,000 was outstanding in letters-of-credit.

     Interest   expense  paid  in  cash   during  1995,  1994   and  1993  was
     approximately $1,541,000, $708,000 and $781,000, respectively.<PAGE>


     <PAGE> 36

     NOTE 6 - MEDICAL CLAIMS PAYABLE

     Medical claims payable consists of the following at December 31:

     <TABLE>
     <CAPTION>
                                                     -------------------------
     (in thousands)                                     1995           1994
                                                     -------------------------
     <C>                                             <S>            <S>
     Medical claims payable                          $  112,362     $   90,326
     Coordination of benefits recoverable                (3,872)        (5,312)
                                                      ---------      ---------
                                                     $  108,490     $   85,014
                                                      =========      =========
     </TABLE>


     NOTE 7 - REINSURANCE

     M.D. IPA, OCI  and MAMSI  Life maintain reinsurance  coverage to  provide
     for reimbursement of  claims in  excess of certain  limits.   Reinsurance
     for  health claims generally covers  80% of all hospital  costs in excess
     of  a deductible amount  per enrollee per  year (subject to  a $2,000,000
     maximum lifetime reinsurance  limit per person) but excludes  coverage of
     costs  in excess of certain per diem  rates.  The deductible per enrollee
     was  raised  from  $100,000  to   $200,000  effective  October  1,  1994.
     Reinsurance  for life and  accidental death  claims generally  covers all
     settlements  in  excess of  $50,000 per  person  subject to  a $1,000,000
     maximum  recovery per person.  Reinsurance recoveries for the years ended
     December  31,  1995,   1994  and    1993   were  approximately  $128,000,
     $3,029,000 and $1,268,000, respectively.   In the consolidated statements
     of income, reinsurance premiums are shown net of the related recoveries.


     NOTE 8 - INCOME TAXES

     Effective January 1, 1993,  the Company changed its method  of accounting
     for  income  taxes  from the  deferred  method  to  the liability  method
     required by Statement No. 109,  "Accounting for Income Taxes" ("Statement
     No. 109").   The cumulative effect  of adopting Statement  No. 109 as  of
     January 1, 1993 was to reduce net income by approximately $663,000.

     At  December 31, 1995, the  Company has net  operating loss carryforwards
     of  approximately $1.7  million for  income tax  purposes that  expire in
     various years beginning in the year 2002.  Approximately $1.6  million of
     these  carryforwards  relate  to  HomeCall operations  prior  to  MAMSI's
     acquisition.  The Company's  ability to utilize these net  operating loss
     carryforwards is limited.<PAGE>


     <PAGE> 37

     Deferred  income  taxes  reflect  the   net  tax  effects  of   temporary
     differences between the  carrying amounts of  assets and liabilities  for
     financial  reporting  purposes  and  the  amounts  used  for  income  tax
     purposes.     Significant  components  of  the   Company's  deferred  tax
     liabilities and assets are as follows as of December 31:

     <TABLE>
     <CAPTION>
                                                     -------------------------
     (in thousands)                                     1995           1994
                                                     -------------------------
     <C>                                             <S>            <S>
     Deferred tax liabilities:
       Accelerated depreciation                      $    2,597     $    2,147
       Unrealized investment gains                        1,004
                                                      ---------      ---------
     Total deferred tax liabilities                       3,601          2,147
                                                      ---------      ---------
     Deferred tax assets:
       Accrued medical expenses                           6,040         10,333
       Premium revenue adjustments                          710          1,555
       Unrealized investment losses                                      1,490
       Allowance recapture                                1,229          1,322
       Accrued pension expenses                           1,199            661
       Other                                              1,047            886
                                                      ---------      ---------
     Total deferred tax assets                           10,225         16,247
     Valuation allowance for deferred tax assets           (128)          (139)
                                                      ---------      ---------
     Net deferred tax assets                             10,097         16,108
                                                      ---------      ---------
                                                     $    6,496     $   13,961
                                                      =========      =========
     Included in the consolidated balance sheets:

       Current assets - deferred income taxes        $    4,379     $   15,540
       Non-current assets - deferred income taxes         3,338
       Current liabilities - deferred income taxes       (1,005)
       Non-current liabilities - deferred
         income taxes                                      (216)        (1,579)
                                                      ---------      ---------
       Net deferred tax assets                       $    6,496     $   13,961
                                                      =========      =========
     </TABLE>

     Significant components of the provision for income  taxes attributable to
     continuing operations are as follows for the years ended December 31:

     <TABLE>
     <CAPTION>
     (in thousands)                                     1995           1994           1993
                                                     ----------------------------------------
     <C>                                             <S>            <S>            <S>
     Current:
       Federal                                       $   32,217     $   22,924     $   15,828
       State                                              5,844          3,861          2,990
                                                      ---------      ---------      ---------
       Total current                                     38,061         26,785         18,818<PAGE>


                                                      ---------      ---------      ---------
     Deferred:
       Federal                                           (2,207)         4,286         (1,755)
       State                                               (638)           954           (113)
                                                      ---------      ---------      ---------
       Total deferred                                    (2,845)         5,240         (1,868)
                                                      ---------      ---------      ---------
                                                     $   35,216     $   32,025     $   16,950
                                                      =========      =========      =========
     /TABLE
<PAGE>


     <PAGE> 38 

     The Company's tax provision  differs from the statutory rate  for Federal
     income taxes for the years ended December 31 as follows:

     <TABLE>
     <CAPTION>
     (in thousands)                                     1995           1994           1993
                                                     ----------------------------------------
     <C>                                             <S>            <S>            <S>
     Statutory rate (35%)                            $   33,719     $   30,294     $   14,856
     Tax-exempt interest                                 (1,872)        (1,171)          (676)
     State income taxes, net of Federal benefit           3,399          3,062          1,825
     Increase (decrease) in valuation allowance for 
       deferred tax assets                                  (11)          (244)           149
     Other, net                                             (19)            84            796
                                                      ---------      ---------      ---------
                                                     $   35,216     $   32,025     $   16,950
                                                      =========      =========      =========
     </TABLE>

     The  income tax  rate for 1993  was increased  to 35%  to reflect changes
     adopted  by  the Revenue  Reconciliation Act  of  1993.   This adjustment
     resulted in  an increase  in the  Company's net  deferred tax  assets  of
     $202,000 in 1993.

     Total  tax  deposits made  by the  Company  in 1995,  1994 and  1993 were
     approximately $27,266,000, $25,191,000 and $15,656,000, respectively.


     NOTE 9 - RISK POOL WITHHOLDINGS

     Contracts with participating physicians allow for withholdings  generally
     ranging from 5%  to 15%  from primary care  physicians and  participating
     specialists on capitation  and fee  for service payments.   The  withheld
     amounts ultimately  paid back to  providers may  be less  than the  total
     amount withheld.   Withheld liabilities and related medical expenses were
     reduced  by $22,802,000,  $8,719,000  and $7,111,000  in  1995, 1994  and
     1993, respectively.


     NOTE 10 - RELATED PARTIES

     For the years ended December 31,  1995, 1994 and 1993, certain members of
     the  Boards of  Directors of  MAMSI and  subsidiary corporations  who are
     also  participating physicians  provided  medical  services to  enrollees
     totaling  $9,699,000,  $6,450,000  and  $6,048,000,  respectively,  which
     represents approximately 2% in  all years of payments to  all physicians.
     Board  members are remunerated at the same contractual level as all other
     participating physicians  and are selected by enrollees to render medical
     services   under  the   same  guidelines   as  all   other  participating
     physicians.


     NOTE 11 - EMPLOYEE BENEFIT PLANS

     PENSION PLANS

     The Company has a  defined contribution 401(k) savings plan  covering all
     full-time employees.   Employees are  allowed to contribute up  to 10% of<PAGE>


     their  pre-tax  earnings  annually  and  the  Company  makes  a  matching
     contribution of 50% on  the first 4% of contributions  made by employees.
     Employees  vest immediately  in  the employee  contributions and  ratably
     over  six years  in  the Company  contributions.   During 1995,  1994 and
     1993, the  Company's contribution to the 401(k) plan aggregated $433,000,
     $231,000 and $247,000, respectively.

     Effective  December   31,  1994,   the  Company  discontinued   its  non-
     contributory  defined benefit pension plan (the "Plan").  Benefits earned
     to date under the  Plan, which covered substantially all  employees, were
     fully vested at that date.   The obligation to provide these benefits was
     satisfied  as of  December  31, 1995  through  a combination  of  annuity
     contracts, transfers  of vested  funds into  the   401(k) plan  and  cash
     withdrawals.   The Company recognized  a gain on  the curtailment  of the
     defined benefit pension plan of approximately $345,000.<PAGE>


     <PAGE> 39

     The  net pension  cost  for the  Plan  was approximately  $1,095,000  and
     $832,000 in 1994 and 1993, respectively.

     In  accordance  with  a  personal  service  contract  negotiated  by  the
     Company, its Chief Executive Officer is  entitled to supplemental pension
     benefits  based  upon  years  of  service  and  attained  salary  levels.
     Supplemental pension  benefits of $1,682,000, $844,000  and $187,000 were
     accrued  for  the  years   ended  December  31,  1995,  1994   and  1993,
     respectively.

     INCENTIVE AND STOCK OPTION PLANS

     In  1989, MAMSI  implemented a  non-qualified stock  option  plan whereby
     options for  the  purchase of  up to  750,000 shares  may  be granted  to
     officers and employees of  the Company.   Options issued under this  plan
     may be exercised  at 25% of the market value at  the time the options are
     fully vested.  The plan provides for reimbursement by the  Company to the
     recipients of the  stock options  for personal income  taxes that  result
     upon  the exercise of the options.  In  1993, options under this plan for
     439,800  shares  of MAMSI  stock  were  granted and  vested  immediately.
     These  options   were  exercised  in   1993  and  the   Company  recorded
     compensation   expense  approximating  $3,664,000   to  account  for  the
     granting and exercise of the options.  At December 31,  1995, all options
     that were  granted to  date under  this plan have  been exercised  and no
     further options will be granted under this plan.

     In each year 1990  through 1995, MAMSI implemented a  non-qualified stock
     option plan whereby options  for the purchase of  shares of common  stock
     may  be granted to officers and employees  of the Company.  Options under
     the plans generally vest over a three-year period and are exercisable  at
     100 percent of  the fair market value  per share on the  date the options
     are  granted.   The Company  accounts for  these stock  option  grants in
     accordance  with  APB Opinion  No. 25,  "Accounting  for Stock  Issued to
     Employees,"  and,  accordingly, recognizes  no  compensation  expense for
     these stock option grants.

     Transactions  involving the 1990  plan, which authorized  options for the
     purchase of  up to 1,800,000  shares of  common stock, are  summarized as
     follows:

     <TABLE>
     <CAPTION>
                                                        1995           1994           1993
                                                     ----------------------------------------
     <C>                                             <S>            <S>            <S>
     Outstanding, January 1                             326,300        714,750      1,074,000
     Granted                                                ---          5,700         30,000
     Exercised (1995 - $1.46 to $4.75 per share)        (97,400)      (394,150)      (372,750)
     Forfeited                                              ---            ---        (16,500)
     Outstanding, December 31                           228,900        326,300        714,750
     Exercisable, December 31 (1995 - $5.24
       weighted average exercise price per share)       226,900        289,400        563,550
     Available for grant, December 31                       ---            ---          5,700
     </TABLE>

     Transactions involving the  1991 plan, which  authorized options for  the
     purchase  of up to  1,800,000 shares of  common stock, are  summarized as
     follows:<PAGE>


     <TABLE>
     <CAPTION>
                                                        1995           1994           1993
                                                     ----------------------------------------
     <C>                                             <S>            <S>            <S>
     Outstanding, January 1                           1,134,800      1,531,100      1,681,500
     Granted                                              1,800         24,900         98,100
     Exercised (1995 - $2.58 to $14.38 per share)      (300,250)      (418,200)      (196,900)
     Forfeited                                           (2,400)        (3,000)       (51,600)
     Outstanding, December 31                           833,950      1,134,800      1,531,100
     Exercisable, December 31 (1995 - $5.68
       weighted average exercise price per share)       816,850        995,000        860,420
     Available for grant, December 31                       600            ---         21,900
     /TABLE
<PAGE>


     <PAGE> 40

     Transactions  involving the 1992  plan, which authorized  options for the
     purchase  of up to  1,950,000 shares of  common stock, are  summarized as
     follows:

     <TABLE>
     <CAPTION>
                                                        1995           1994           1993
                                                     ----------------------------------------
     <C>                                             <S>            <S>            <S>
     Outstanding, January 1                           1,253,050      1,655,400      1,784,100
     Granted                                             19,950        151,800        209,100
     Exercised (1995 - $3.13 to $18.75 per share)      (327,100)      (496,850)      (200,100)
     Forfeited                                          (21,100)       (57,300)      (137,700)
     Outstanding, December 31                           924,800      1,253,050      1,655,400
     Exercisable, December 31 (1995 - $5.21
       weighted average exercise price per share)       752,150        500,050        412,200
     Available for grant, December 31                     1,150            ---         94,500
     </TABLE>

     Transactions involving the  1993 plan, which  authorized options for  the
     purchase of  up to 1,950,000  shares of  common stock, are  summarized as
     follows:

     <TABLE>
     <CAPTION>
                                                        1995            1994           1993
                                                     ----------------------------------------
     <C>                                             <S>            <S>            <S>
     Outstanding, January 1                           1,727,175      1,933,400            ---
     Granted                                             69,150        104,550      2,038,500
     Exercised (1995 - $5.63 to $15.31 per share)      (243,050)      (211,775)        (2,500)
     Forfeited                                          (93,960)       (99,000)      (102,600)
     Outstanding, December 31                         1,459,315      1,727,175      1,933,400
     Exercisable, December 31 (1995 - $6.55
       weighted average exercise price per share)       860,175        508,925         33,500
     Available for grant, December 31                    33,360          8,550         14,100
     </TABLE>

     Transactions involving  the 1994 plan,  which authorized options  for the
     purchase of up  to 2,000,000 shares  of common stock,  are summarized  as
     follows:

     <TABLE>
     <CAPTION>
                                                        1995            1994
                                                     -------------------------
     <C>                                             <S>            <S>
     Outstanding, January 1                           1,984,140            ---
     Granted                                            100,350      2,014,320
     Exercised                                              ---            ---
     Forfeited                                         (145,400)       (30,180)
     Outstanding, December 31                         1,939,090      1,984,140
     Exercisable, December 31 (1995 - $26.87
       weighted average exercise price per share)       625,330            ---
     Available for grant, December 31                    60,910         15,860
     </TABLE>

     Transactions involving  the 1995 plan,  which authorized options  for the<PAGE>


     purchase of  up to 3,000,000  shares of  common stock, are  summarized as
     follows:

     <TABLE>
     <CAPTION>
                                                        1995
                                                     ----------
     <C>                                             <S>
     Outstanding, January 1                                 ---
     Granted                                          2,078,850
     Exercised                                              ---
     Forfeited                                          (64,500)
     Outstanding, December 31                         2,014,350
     Exercisable, December 31                               ---
     Available for grant, December 31                   985,650
     /TABLE
<PAGE>


     <PAGE> 41

     The Company has an  incentive compensation plan whereby officers  and key
     employees  receive bonuses based upon the annual operating results of the
     Company.    Incentive compensation  expense was  approximately $3,162,000
     and  $1,902,000 in 1994 and 1993,  respectively.  No management bonus was
     earned in  1995.  In  addition, certain  individuals will receive  a cash
     bonus based  upon the achievement  of certain  measurable criteria  other
     than the  annual operating results of  the Company.  These  bonus amounts
     are not significant.


     NOTE 12 - COMMON STOCK

     On April  17, 1995, the stockholders of MAMSI approved an increase in the
     number  of  authorized  shares   of  common  stock  from   60,000,000  to
     100,000,000.

     On June 15, 1994, the Board of Directors declared a  100% stock dividend.
     The stock dividend  was paid on August 5, 1994  to shareholders of record
     on July 5, 1994.

     On  October  21, 1993,  the  Board  of  Directors  declared a  50%  stock
     dividend.    The  stock  dividend  was  paid  on  November  19,  1993  to
     shareholders of record on November 1, 1993.  

     All  references in  the  consolidated financial  statements to  per share
     amounts,  number  of  shares, and  weighted  average  common  and  common
     equivalent shares have been adjusted  to reflect the stock dividends on a
     retroactive basis.


     NOTE 13 - COMMITMENTS AND CONTINGENCIES

     The Company leases certain equipment and  office space under the terms of
     noncancellable  operating leases  that  expire at  various dates  through
     2000.    Rent expense  relating  to these  operating  leases approximated
     $2,593,000, $984,000 and $720,000 in 1995, 1994 and 1993, respectively.

     Future minimum  lease commitments under  non-cancelable operating  leases
     are as follows for the years ended December 31 (in thousands):

     1996                  $    2,998
     1997                       2,467
     1998                       1,444
     1999                         833
     2000                         307
                            ---------
                           $    8,049
                            =========

     During the third  quarter of  1995, certain shareholders  of MAMSI  filed
     four lawsuits in  the United States  District Court for  the District  of
     Maryland against  MAMSI  and certain  current  and former  directors  and
     officers.    These actions  have been  consolidated  and, on  November 1,
     1995, a consolidated Amended  Class Action Complaint was filed  on behalf
     of all plaintiffs.   The amended complaint  alleges that MAMSI  is liable
     under Section 10(b) of the Securities Exchange Act of 1934  and Rule 10b-
     5 thereunder for its failure to  disclose in a timely fashion that it had
     been  denied   accreditation  by  the  National   Committee  for  Quality<PAGE>


     Assurance  ("NCQA")  and   that  the  officers  and  directors  named  as
     defendants  are liable under Section  10(b) and Rule  10b-5, directly and
     as   controlling  persons  of   MAMSI,  for  the   failure  to  disclose.
     Plaintiffs  seek to represent  a class of  all persons who  purchased the
     common  stock of MAMSI  from March  1, 1995 through  June 15,  1995.  The
     Court has set a discovery schedule, and has set a trial date of  December
     2, 1996.  Currently, the  parties have undertaken limited discovery.  The
     Company  is  not  able  to predict  the  probability  of  a  favorable or
     unfavorable outcome or the amount  of potential loss, in the event  of an
     unfavorable outcome.  MAMSI  believes it has meritorious defenses  to the
     claims raised in the amended  complaint and intends to defend the  action
     vigorously.

     The  staff of the Securities  and Exchange Commission has  asked MAMSI to
     provide certain  information relating to  the denial of  accreditation by
     the NCQA  and to sales of  stock by certain officers  and directors prior
     to the announcement  of NCQA's  action.  MAMSI  has complied  voluntarily
     with the Commission's requests.<PAGE>


     <PAGE> 42

     The Company  is involved in  other various legal  actions arising  in the
     normal  course  of business,  some  of  which seek  substantial  monetary
     damages.    After  review,  including consultation  with  legal  counsel,
     management believes  any ultimate liability  that could arise  from these
     other  actions would  not  materially affect  the Company's  consolidated
     financial position or results of operations.


     NOTE 14 - STATUTORY REQUIREMENTS

     M.D.  IPA, OCI and OCCI  are subject to  insurance department regulations
     in the states  in which they are  licensed.  The  state with the  highest
     requirement obligated  M.D. IPA and OCI to each  maintain a statutory net
     worth  of $3.0  million at December  31, 1995  and 1994;  at December 31,
     1995,  OCCI  was  required to  maintain  a  statutory net  worth  of $1.0
     million.   The statutory net  worth of  M.D. IPA was  approximately $57.8
     million and $48.0 million for the respective  periods.  The statutory net
     worth of  OCI was approximately $19.8  million and $11.6 million  for the
     respective  periods.  The statutory  net worth of  OCCI was approximately
     $2.5 million at December 31, 1995.  

     MAMSI Life  is subject to  insurance department regulations  in Maryland,
     its state of  domicile.  At  December 31, 1995 and  1994, MAMSI Life  was
     obligated  to maintain  statutory  capital and  surplus  funds   of  $3.8
     million.   The statutory capital and surplus funds of MAMSI Life totalled
     approximately  $20.9  million  and   $12.1  million  for  the  respective
     periods.  
     M.D.  IPA,  OCI,  OCCI  and MAMSI  Life  were  in  compliance  with state
     depository rules at December 31, 1995 and 1994.  In  addition, MAMSI Life
     was  in compliance  with the  applicable risk-based  capital requirements
     for life and  health insurance companies  at December 31, 1995  and 1994.
     These MAMSI subsidiaries must notify state  regulators before the payment
     of any dividends  to MAMSI  and, in certain  circumstances, must  receive
     positive affirmation prior to such payment.


     NOTE 15 - RISK CONCENTRATIONS

     Financial  instruments that  potentially  subject the  Company to  credit
     risk  consist   primarily   of  investments   in  marketable   securities
     (including  money market  funds, floating  rate municipal  putable bonds,
     intermediate  term  municipal  bonds,  and common  stocks)  and  premiums
     receivable.    The  Company receives  advice  through  or assigns  direct
     management  of   short-term  investments  in  marketable   securities  to
     professional investment managers selected  for their expertise in various
     markets,  within guidelines established by the Board of Directors.  These
     guidelines  include broad diversification of investments.  Concentrations
     of  credit risk and business  volume with respect  to commercial premiums
     receivable  are generally  limited due  to the  large number  of employer
     groups comprising the Company's customer base.   As of December 31, 1995,
     approximately 18% of premium  and home service receivables were  due from
     federal  government  agencies.    The  Company  performs  ongoing  credit
     evaluations of customers and generally does not require collateral.<PAGE>


     <PAGE> 43

                  Report of Ernst & Young LLP Independent Auditors

     Board of Directors and Stockholders
     Mid Atlantic Medical Services, Inc.

     We  have audited  the  accompanying consolidated  balance  sheets of  Mid
     Atlantic  Medical Services, Inc. and subsidiaries as of December 31, 1995
     and 1994, and the  related consolidated statements of income,  changes in
     stockholders' equity  and cash flows for  each of the three  years in the
     period ended December  31, 1995.  Our audits  also included the financial
     statement schedule listed  in the Index  to Financial Statement  Schedule
     at  Item  14(a).    These  financial  statements  and  schedule  are  the
     responsibility of  the Company's  management.   Our responsibility  is to
     express an opinion on these financial statements based on our audits.

     We  have  conducted  our audits  in  accordance  with generally  accepted
     auditing standards.   Those standards  require that we  plan and  perform
     the  audit to  obtain reasonable  assurance about  whether  the financial
     statements  are  free  of  material  misstatement.    An  audit  includes
     examining,  on  a  test  basis,  evidence  supporting  the  amounts   and
     disclosures  in  the  financial  statements.    An  audit  also  includes
     assessing the  accounting principles used and  significant estimates made
     by management,  as well  as evaluating  the overall  financial  statement
     presentation.  We believe that our audits provide a reasonable  basis for
     our opinion.

     In  our  opinion, the  financial  statements  referred  to above  present
     fairly, in all material respects, the consolidated  financial position of
     Mid Atlantic  Medical  Services, Inc.  and subsidiaries  at December  31,
     1995  and  1994, and  the consolidated  results  of their  operations and
     their  cash  flows for  each  of  the three  years  in  the period  ended
     December  31,  1995, in  conformity  with  generally accepted  accounting
     principles.   Also,  in  our  opinion, the  related  financial  statement
     schedule, when considered  in relation to the financial  statements taken
     as a whole, presents fairly in all material respects the  information set
     forth therein.

     As discussed in  Notes 2 and 8 to  the consolidated financial statements,
     the Company changed its  method of accounting for certain  investments in
     debt and equity securities in 1994 and for income taxes in 1993.


                                                   /s/ Ernst & Young LLP
                                                      ----------------------
                                                       Ernst & Young LLP
     Washington, D.C.
     February 23, 1996<PAGE>


     <PAGE> 44

     SELECTED QUARTERLY FINANCIAL DATA FOR FISCAL YEARS 1995 AND 1994 (1)

     <TABLE>
     <CAPTION>
                                              1995      1995      1995      1995      1994      1994      1994      1994
                                              First    Second     Third    Fourth     First    Second     Third    Fourth
                                             Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter
                                             -------   -------   -------   -------   -------   -------   -------   -------
                                                                  (in thousands except share amounts)
                                                                                (unaudited)
     <S>                                     <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>

     Revenue                                 $220,988  $235,516  $243,280  $255,611  $179,770  $181,803  $188,934  $199,391
     Expense                                  193,724   213,476   220,088   231,767   158,065   162,636   168,066   174,576
     Income before income tax                  27,264    22,040    23,192    23,844    21,705    19,167    20,868    24,815
     Net income                                16,918    13,825    14,399    15,982    13,457    11,884    13,555    15,634

     Earnings per common and common
       equivalent share (2):
       Net income                                0.36      0.29      0.30      0.33      0.29      0.25      0.28      0.33
     </TABLE>

     Notes

     1.  Certain 1994 quarterly revenue and expense amounts are different from
     the  amounts originally  reported due  to reclassifications  necessary to
     conform to the current presentation.

     2.  Earnings per  common  share  are  computed  after  giving  effect  to
     dilutive  stock  options.   All per  share  amounts and  weighted average
     common and common  equivalent shares  have been adjusted  to reflect  all
     stock dividends on a retroactive basis.  See Note 12  to the consolidated
     financial statements.<PAGE>


     <PAGE> 45

     ITEM 9. CHANGES IN  AND DISAGREEMENTS WITH ACCOUNTANTS ON  ACCOUNTING AND
     FINANCIAL DISCLOSURE

     None.<PAGE>


     <PAGE> 46

                                    Part III

     ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required  by this  item is incorporated  by reference  to
     "Directors and  Executive Officers" in  the Proxy  Statement for  MAMSI's
     annual meeting of shareholders to be held on April 15, 1996.


     ITEM 11. EXECUTIVE COMPENSATION

     The information required  by this  item is incorporated  by reference  to
     "Directors  and  Executive  Officers  --   Directors'  Compensation"  and
     "Executive Management  Compensation" in  the Proxy Statement  for MAMSI's
     annual meeting of shareholders to be held on April 15, 1996.


     ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required  by this  item is incorporated  by reference  to
     "Stock  Owned by  Management" and  "Principal Stockholders" in  the Proxy
     Statement for MAMSI's annual meeting of  shareholders to be held on April
     15, 1996.


     ITEM 13. CERTAIN RELATIONS AND RELATED TRANSACTIONS

     The information required  by this  item is incorporated  by reference  to
     "Executive Management  Compensation" in  the Proxy Statement  for MAMSI's
     annual meeting of shareholders to be held on April 15, 1996.<PAGE>


     <PAGE> 47

                                         PART IV

     ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a)(1)
     INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                        PAGE
                                                                       ----
     Consolidated Balance Sheets as of December 31, 1995 and 1994 ...    25
     Consolidated Statements of Income for the years ended 
       December 31, 1995, 1994 and 1993 .............................    26
     Consolidated Statements of Changes in Stockholders' Equity
       for the years ended December 31, 1995, 1994 and 1993 .........    27
     Consolidated Statements of Cash Flows for the years ended
       December 31, 1995, 1994 and 1993 .............................    28
     Notes to Consolidated Financial Statements .....................    29
     Report of Ernst & Young LLP Independent Auditors ...............    43

     (a)(2) and (d)
     INDEX TO FINANCIAL STATEMENT SCHEDULE                             PAGE
                                                                       ----
     II - Valuation and Qualifying Accounts as of December 31,
            1995, 1994 and 1993 .....................................    48

     All  other  schedules  for which  provision  is  made  in the  applicable
     accounting  regulations of  the  Securities and  Exchange Commission  are
     omitted because they are  not required under the related  instructions or
     are inapplicable.<PAGE>


     <PAGE> 48

                               Mid Atlantic Medical Services, Inc.
                       Schedule II - Valuation and Qualifying Accounts
                                   (in thousands)
     <TABLE>
     <CAPTION>
                                               Additions
                     Balance at     ------------------------------
                     Beginning        Charged to      Charged to                      Balance
                         of              Costs          Other        Deductions-       at End
     Description       Period        and Expenses      Accounts      Write-Offs      of Period
     -----------     ----------     -------------     ----------     -----------     ---------
     <C>             <S>            <S>               <S>            <S>             <S>

     DEDUCTED FROM ASSET ACCOUNTS:

     YEAR ENDED DECEMBER 31, 1993
     Allowance for doubtful accounts - accounts receivable
                     $   2,048                        $   1,018(1)                   $   3,066
                      ========       ========          ========       ========        ========

     Valuation allowance - deferred tax assets
                     $     234(2)   $     149(3)                                     $     383
                      ========       ========          ========       ========        ========

     YEAR ENDED DECEMBER 31, 1994
     Allowance for doubtful accounts - accounts receivable
                     $   3,066      $      39         $     486(4)                   $   3,591
                      ========       ========          ========       ========        ========

     Valuation allowance - deferred tax assets
                     $     383                                       $     244       $     139
                      ========       ========          ========       ========        ========

     YEAR ENDED DECEMBER 31, 1995
     Allowance for doubtful accounts - accounts receivable
                     $   3,591      $      25         $      22(1)                   $   3,638
                      ========       ========          ========       ========        ========

     Valuation allowance - deferred tax assets
                     $     139                                       $      11       $     128
                      ========       ========          ========       ========        ========
     </TABLE>

     (1) The additions to the allowance were charged to premium revenue.

     (2) The valuation allowance  was created with the implementation  of FASB
     Statement No. 109, "Accounting for Income Taxes" on January 1, 1993.

     (3) The additions to the allowance were charged to the tax provision.

     (4)  Total additions  includes $155,000,  which represents  the allowance
     established  by an acquired company immediately prior to the acquisition.
     The remaining additions were charged to premium revenue.<PAGE>


     <PAGE> 49

     (a)(3)
     EXHIBITS

     See the Exhibit Index on pages 52-53 of this Form 10-K.

     (b)
     REPORTS ON FORM 8-K

     None.<PAGE>


     <PAGE> 50

                                     SIGNATURES

     Pursuant to the requirements of Section  13 or 15(d) of the Exchange Act,
     the  registrant has  caused this  report to  be signed  on its  behalf by
     undersigned thereunto duly authorized.


           MID ATLANTIC MEDICAL SERVICES, INC. ("MAMSI")
           (Registrant)

           By: /s/ George T. Jochum                      3/28/96
              --------------------------------------------------
              George T. Jochum                              Date
              Chairman, Chief Executive Officer, President, and Director 

     Pursuant to  the requirements of the  Exchange Act, this  report has been
     signed below by the following persons on behalf of the  registrant and in
     the capacities and on the dates indicated.


           By: /s/ John L. Child                         3/28/96 
              --------------------------------------------------
              John L. Child                                 Date
              Director


           By: /s/ John H. Cook, III, M.D.               3/28/96
              --------------------------------------------------
              John H. Cook, III, M.D.                       Date
              Director


           By: /s/ Peter L. Flaherty, Jr., M.D.          3/28/96
              --------------------------------------------------
              Peter L. Flaherty, Jr., M.D.                  Date
              Vice Chairman and Director


           By: /s/ Robert E. Foss                        3/28/96 
              --------------------------------------------------
              Robert E. Foss                                Date
              Executive Vice President and Chief Financial Officer
              (Principal Financial Officer)


           By: /s/ Walter Girardin                       3/28/96
              --------------------------------------------------
              Walter Girardin                               Date
              Director


           By: /s/ Mark D. Groban, M.D.                  3/28/96
              --------------------------------------------------
              Mark D. Groban, M.D.                          Date
              Assistant Medical Director for Mental Health Services
              and Director<PAGE>


           By: /s/ Donald R. Hammett                     3/28/96
              --------------------------------------------------
              Donald R. Hammett                             Date
              Director

              
           By: /s/ George T. Jochum                      3/28/96
              --------------------------------------------------
              George T. Jochum                              Date
              Chairman, Chief Executive Officer, President and Director
              (Principal Executive Officer)


           By: /s/ William M. Mayer, M.D.                3/28/96
              --------------------------------------------------
              William M. Mayer, M.D.                        Date
              Director<PAGE>


     <PAGE> 51


           By: /s/ Creighton R. Schneck                  3/28/96 
              --------------------------------------------------
              Creighton R. Schneck                          Date
              Director


           By: /s/ Mary E. Shocklee                      3/28/96
              --------------------------------------------------
              Mary E. Shocklee                              Date
              Controller and Chief Accounting Officer
              (Principal Accounting Officer)


           By: /s/ Stanley F. Smith, R.Ph.               3/28/96 
              --------------------------------------------------
              Stanley F. Smith, R.Ph.                       Date
              Director


           By: /s/ Alfred Talamantes                     3/28/96 
              --------------------------------------------------
              Alfred Talamantes                             Date
              Chief Operating Officer and Director


           By: /s/ James A. Wild                         3/28/96 
              --------------------------------------------------
              James A. Wild                                 Date
              Director<PAGE>


     <PAGE> 52

     (a)(3), (b) and (c) List of Exhibits.

     <TABLE>
     <CAPTION>
                                       EXHIBIT INDEX
                                                                                  Location of Exhibit
     Exhibit                                                                        in Sequential
     Number     Description of Document                                             Numbering System 
     -------    -----------------------                                           -------------------
     <C>        <S>                                                               
      3.1       Copy of Certificate of Incorporation of MAMSI dated
                October 7, 1986..........................................................(1)
      3.2       Copy of Certificate of Amendment of MAMSI Certificate of
                Incorporation dated April 23, 1990.......................................(5)
      3.3       Amended and Restated By-laws of MAMSI as of February 28, 1996............
      3.4       Copy of Certificate of Amendment of MAMSI Certificate of
                Incorporation dated June 2, 1994.........................................(5)
     10.5       Copy of Agreement between M.D. IPA and the United States
                Secretary of Health and Human Services dated December 20, 1985...........(1)
     10.6       M.D. IPA's 1985 Stock Option Plan........................................(1)
     10.7       Promissory Note signed by Thomas P. Barbera dated November 9, 1993.......(5)
     10.16      1989 Non-Qualified Stock Option Plan.....................................(4)
     10.17      Copy of 1989 Non-Qualified Stock Option Letter sent to Key Employees.....(5)
     10.20      Copy of Amendments to Agreement between M.D. IPA and the United
                States Secretary of Health and Human Services dated December 24, 1987....(4)
     10.26      1990 Non-Qualified Stock Option Plan.....................................(5)
     10.27      Copy of 1990 Non-Qualified Stock Option Letter sent to Key Employees.....(5)
     10.32      Copy of Contract between George T. Jochum and M.D. IPA for the period
                January 1, 1991 through January 1, 1994..................................(5)
     10.35      1991 Non-Qualified Stock Option Plan.....................................(5)
     10.36      Copy of 1991 Non-Qualified Stock Option Letter sent to Key Employees.....(5)
     10.41      Copy of Agreement between M.D. IPA and Surgical Care Affiliates, Inc.,
                dated April 22, 1985.....................................................(5)
     10.44      1992 Non-Qualified Stock Option Plan.....................................(5)
     10.45      Copy of 1992 Non-Qualified Stock Option Letter sent to Key Employees.....(5)
     10.46      Agreement to Purchase 10 Taft Court dated February 10, 1992..............(5)
     10.47      Agreement to Purchase 11 Taft Court dated February 14, 1992..............(5)
     10.48      Equipment Term Loan Agreement with Signet Bank dated March 25, 1991......(5)
     10.50      Amendment to Revolving Loan Agreement with Signet Bank dated
                June 19, 1991............................................................(5)
     10.53      Amendments to the Stock Option Plans effective May 15, 1991..............(5)
     10.54      Summary Plan Description of the Employees Cash or Deferred Profit
                Sharing (401k) Plan dated October, 1991..................................(5)
     10.55      Defined Benefit Plan Agreement with the Principal Financial Group which
                was approved September 12, 1991..........................................(5)
     10.57      Mortgage and Loan Agreement with Aid Association for Lutherans dated
                October 4, 1990..........................................................(5)
     10.58      1993 Management Bonus Program............................................(2)
     10.59      1993 CEO Bonus Program...................................................(2)
     10.60      1993 Non-Qualified Stock Option Plan.....................................(2)
     10.61      1993 Non-Qualified Stock Option Letter Sent to Key Employees.............(2)
     10.62      1992 Amendment to Employment Agreement Between George T. Jochum and
                the Company..............................................................(2)
     10.63      Agreement to Purchase MAMSI Life and Health Insurance Company, as
                amended..................................................................(2)
     10.65      Agreement to Purchase 2301 Research Boulevard dated September 30, 1993...(3)
     10.66      1994 Management Bonus Program............................................(4)
     10.67      1994 Non-Qualified Stock Option Plan.....................................(4)<PAGE>


     10.68      1994 Non-Qualified Stock Option Letter sent to Key Employees.............(4)
     10.69      Revolving Loan Agreement with Signet Bank dated September 30, 1993.......(4)
     10.70      Articles of Merger between M.D. IPA and MAMSOVA as of December 2, 1993...(4)
     10.71      Agreement between OCI and the State of Maryland governing the Medical
                Assistance Program ("Medicaid") dated August 5, 1993.....................(4)
     10.72      List of States in which MAMSI Life is Licensed to Operate................(4)
     10.73      1995 Management Bonus Program............................................(5)
     10.74      1995 Non-Qualified Stock Option Plan.....................................(5)
     10.75      1995 Non-Qualified Stock Option Plan letter sent to Key Employees........(5)
     10.76      Agreement between OCI and the Commonwealth of Virginia governing the
                Medical Assistance Program ("Medicaid") dated May 27, 1994...............(5)
     10.77      1995 Amendment to Employment Agreement Between George T. Jochum and
                the Company..............................................................
     10.78      1996 Management Bonus Program............................................
     10.79      1996 Non-Qualified Stock Option Plan.....................................
     10.80      Form of Agreement between MAMSI and Employees Granting Options
                under the 1996 Non-Qualified Stock Option Plan...........................<PAGE>


     <PAGE> 53

     10.81      Form of Agreement between MAMSI and George T. Jochum Granting Options
                under the 1996 Non-Qualified Stock Option Plan...........................
     10.82      Form of Agreement between MAMSI and Non-Employee Directors Granting
                Options under the 1996 Non-Qualified Stock Option Plan...................
     21         Subsidiaries of the Company..............................................
     23         Consent of Independent Auditors..........................................
     27         Financial Data Schedule..................................................
     </TABLE>

     (1)    Incorporated by  reference to  exhibits  filed with  the Company's
     Registration Statement filed under the Securities  Act of 1933 on Form S-
     4 (Registration No. 33-9803).

     (2)    Incorporated by  reference to  exhibits  filed with  the Company's
     Annual Report filed  under the  Securities Exchange Act  of 1934 on  Form
     10-K for the fiscal year ended December 31, 1992.

     (3)    Incorporated by  reference to  exhibits  filed with  the Company's
     Quarterly Report filed under the Securities Exchange Act of 1934 on  Form
     10-Q for the Quarterly Period Ended September 30, 1993.

     (4)    Incorporated by  reference to  exhibits  filed with  the Company's
     Annual Report  filed under the  Securities Exchange Act  of 1934  on Form
     10-K for the fiscal year ended December 31, 1993.

     (5)    Incorporated by  reference to  exhibits  filed with  the Company's
     Annual Report  filed under the  Securities Exchange  Act of 1934  on Form
     10-K for the fiscal year ended December 31, 1994.<PAGE>