HBO & CO, 424B1, 1995-09-28

HBO & CO
424B1, 1995-09-28
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE>
Filed Pursuant to Rule 424(b)(1)
Registration No. 33-61919
P R O S P E C T U S

3,600,000 SHARES

[LOGO]
COMMON STOCK
--------

This Prospectus relates to the sale of 3,600,000 shares (the "Shares") of
Common Stock, par value $.05 per share (the "Common Stock"), of HBO & Company, a
Delaware corporation ("HBOC" or the "Company"), by First Data Corporation, a
Delaware corporation ("FDC" or the "Selling Stockholder"). The Company will not
receive any of the proceeds from the sale of the Common Stock offered hereby.
The Company's Common Stock is traded on The Nasdaq Stock Market National Market
(the "Nasdaq NM") under the symbol "HBOC." The last reported sale price of the
Company's Common Stock on the Nasdaq NM on September 27, 1995 was $61.25 per
share.
--------------

SEE "RISK FACTORS" AT PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDER(2)
<S> <C> <C> <C>
Per Share $60.00 $2.25 $57.75
Total(3) $216,000,000 $8,100,000 $207,900,000
<FN>
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company, estimated
at $450,000.
(3) The Selling Stockholder has granted the Underwriters a 30-day option to
purchase up to 400,000 additional shares of Common Stock on the same terms
as set forth above solely to cover over-allotments, if any. If such option
is exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Selling Stockholder will be $240,000,000,
$9,000,000 and $231,000,000, respectively. See "Underwriting."
</TABLE>

--------------

The Shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the Shares
of Common Stock offered hereby will be available for delivery on or about
October 3, 1995 at the offices of Smith Barney Inc., 388 Greenwich Street, New
York, New York 10013.

--------------
SMITH BARNEY INC.
ALEX. BROWN & SONS
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SCHRODER WERTHEIM & CO.

SEPTEMBER 27, 1995
<PAGE>
AVAILABLE INFORMATION

HBOC is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information may be inspected and copied at the Public Reference Room of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; and at the
Commission's regional offices at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661; and 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such material may be obtained from the Public
Reference Section of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.

The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") of which this Prospectus forms a part, with
respect to the Shares being offered hereby pursuant to the Securities Act of
1933, as amended (the "Securities Act"). As permitted by the rules and
regulations of the Commission, this Prospectus omits certain information,
exhibits and undertakings contained in the Registration Statement. Such
additional information can be inspected at the principal office of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of the
Registration Statement can be obtained from the Commission at prescribed rates
by writing to the Commission at such address.

Certain financial information relating to CliniCom Incorporated, a Delaware
corporation ("CliniCom"), which has been obtained from certain periodic reports
filed by CliniCom with the Commission pursuant to the applicable requirements of
the Exchange Act, is included herein to comply with certain accounting rules and
financial information requirements promulgated by the Commission. Although HBOC
has entered into a definitive agreement with CliniCom pursuant to which CliniCom
will be merged with a subsidiary of HBOC and HBOC, upon such merger, will be
deemed to be the successor to CliniCom. HBOC does not presently control such
company. Accordingly, HBOC does not have the ability to verify the accuracy,
completeness or correctness of such financial information relating to CliniCom
and HBOC can offer no assurances concerning such information other than that it
has been accurately reproduced from the relevant reports filed with the
Commission under the Exchange Act by CliniCom.

DOCUMENTS INCORPORATED BY REFERENCE

The information in the following documents filed by the Company with the
Commission (File No. 0-9900) pursuant to the Exchange Act is incorporated by
reference in this Prospectus:

1. Annual Report on Form 10-K for the fiscal year ended December 31, 1994 filed
with the Commission on March 17, 1995, as amended by Form 10-K(A) filed with
the Commission on March 31, 1995;

2. Quarterly Reports on Form 10-Q for the quarter ended March 31, 1995 filed
with the Commission on May 9, 1995, and for the quarter ended June 30, 1995
filed with the Commission on July 31, 1995, as amended by Form 10-Q(A) dated
August 11, 1995 and filed with the Commission on August 14, 1995;

3. Current Reports on Form 8-K, dated February 24, 1995 and filed with the
Commission on February 24, 1995, dated May 17, 1995 and filed with the
Commission on May 17, 1995, dated June 23, 1995 and filed with the
Commission on June 26, 1995, as amended by Form 8-K(A), dated July 31, 1995
and filed with the Commission on July 31, 1995 and as further amended by
Form 8-K(A)2, dated August 8, 1995 and filed with the Commission on August
8, 1995, dated July 10, 1995, filed with the Commission on July 11, 1995,
dated July 18, 1995 and filed with the Commission on July 18, 1995 and dated
August 16, 1995 and filed with the Commission on August 16, 1995;

2
<PAGE>
4. Proxy Statement, dated as of April 3, 1995, filed in final form on April 5,
1995, with the Commission with respect to the information required to be
included herein by Items 402 (executive compensation), 403 (security
ownership of certain beneficial owners) and 404 (certain relationships and
related transactions) of Regulation S-K promulgated under the Securities Act
and the Exchange Act; and

5. The description of Common Stock and Preferred Share Purchase Rights
contained in HBOC's Registration Statements on Form 8-A, filed with the
Commission on August 19, 1981, as amended and February 19, 1991, as amended,
respectively.

All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of the Shares hereunder shall be deemed to be incorporated herein by reference
and shall be a part hereof from the date of the filing of such documents. Any
statements contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document, which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

The Company will provide without charge to each person, including any
beneficial owner, to whom a Prospectus is delivered, upon written or oral
request of such person, a copy of the documents incorporated by reference
herein, other than exhibits to such documents not specifically incorporated by
reference. Such requests should be directed to: HBO & Company, 301 Perimeter
Center North, Atlanta, Georgia 30346, Attention: Monika Brown (telephone number
(770) 668-5926).

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NM OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NM IN ACCORDANCE
WITH RULE 10B-6A UNDER THE EXCHANGE ACT. SEE "UNDERWRITING."

3
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND THE NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE. EXCEPT AS OTHERWISE
NOTED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE OVER-
ALLOTMENT OPTION GRANTED TO THE UNDERWRITERS.

THE COMPANY

HBOC is a leading healthcare information systems company that develops
integrated patient care, clinical, financial and strategic management software
solutions for healthcare providers, payers and integrated healthcare delivery
systems. HBOC designs open systems solutions which facilitate the integration of
clinical, financial and administrative data from a wide range of customer
systems and software. The Company's broad product portfolio can be implemented
on a stand-alone, combined or enterprisewide basis. HBOC's newer products offer
open systems solutions that enable customers to add incremental capabilities to
existing information systems, without making prior capital investments obsolete.
HBOC also provides networking technologies and outsourcing services under
contract management agreements whereby its staff manages and operates data
centers, information systems, organizations and business offices of healthcare
institutions of various sizes and structures.

The Company markets its products and services to hospitals, integrated
healthcare delivery systems, physicians' offices, managed care providers, home
health providers, pharmacies and reference laboratories, and currently has one
or more applications installed in approximately 2,600 of the 5,900 hospitals in
the United States. The Company also sells its products and services
internationally through its subsidiaries in the United Kingdom and Canada and
distribution agreements in Saudi Arabia, Australia, Puerto Rico and New Zealand.

The Company's strategy is to provide a comprehensive range of computer-based
information systems and services designed to meet the evolving needs of
healthcare enterprises. The key elements of this strategy are to: (i) leverage
its existing customer base to sell additional applications and new products;
(ii) provide enterprisewide solutions to the evolving integrated healthcare
delivery systems market; (iii) provide open systems solutions designed to
integrate with other data and software; (iv) establish premier product
brand-name recognition in new markets; and (v) continue its significant research
and development efforts to ensure its product offerings will continue to meet
the evolving needs of its existing and potential customer base.

HBO & Company was incorporated in Delaware in 1974. The Company's executive
offices are located at 301 Perimeter Center North, Atlanta, Georgia 30346. The
Company's telephone number is (770) 393-6000.

RECENT ACQUISITIONS

The Company has grown its business through the development of new products,
the expansion of its service capabilities and the addition of new customers. In
addition, a substantial portion of its recent growth has come from acquisitions
which expanded the HBOC product lines and enhanced its installed customer base.

In February 1995 the Company acquired Advanced Laboratory Systems, Inc.
("ALS"), a Eugene, Oregon based developer of laboratory software for the
healthcare and commercial marketplace, for $7 million, net of cash acquired. In
June 1995 HBOC acquired the Health Systems Group ("HSG") from First Data
Corporation, the Selling Stockholder in this Offering, for approximately $201
million, consisting of 4 million shares of HBOC Common Stock and $600,000 in
cash. Now known as HBOC's Charlotte Product Group, this business unit has an
installed base of more than 500 customers and provides information systems and
services to hospitals, medical group practices and medical facilities throughout
the United States, and in the United Kingdom, Australia and Puerto Rico. In July
1995 the Company acquired Pegasus Medical LTD, the developer of a computer-based
patient record

4
<PAGE>
designed to support clinical processes in physicians' offices and across the
continuum of care, for $8 million in cash and an additional cash payment of up
to $7 million, contingent upon product development.

Also in July 1995 HBOC entered into a definitive agreement to acquire
CliniCom Incorporated ("CliniCom") pursuant to which each of the approximately
8,660,000 outstanding shares of CliniCom common stock would be exchanged for .4
of a share of HBOC Common Stock (the "CliniCom Acquisition"). CliniCom is a
developer of point-of-care clinical information systems. For the six months
ended June 30, 1995, CliniCom reported that 54% of CliniCom's $21.8 million in
net sales were attributable to a cooperative marketing arrangement with HBOC.
The acquisition is subject to certain conditions, including CliniCom stockholder
approval.

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by Selling Stockholder........... 3,600,000 Shares(1)
Total Outstanding Common Stock........................ 36,197,554 shares(2)
Use of Proceeds....................................... The Company will not receive any
proceeds from the sale of the Shares
offered hereby.
Nasdaq National Market Symbol......................... HBOC
<FN>
- ------------------------
(1) Excludes up to 400,000 shares of Common Stock that may be sold by the
Selling Stockholder upon exercise of the over-allotment option granted to
the Underwriters. See "Underwriting."

(2) Excludes approximately 3,500,000 shares of Common Stock issuable upon
consummation of the CliniCom Acquisition. See "Pro Forma Financial
Information." Also excludes up to 2,381,413 shares of Common Stock reserved
for issuance upon exercise of director and employee stock options of HBOC
at a weighted average exercise price of $16.856 per share and up to 516,563
shares of Common Stock issuable upon exercise of director and employee
stock options of CliniCom.
</TABLE>

5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE AND CUSTOMER DATA)

<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA FOR FOR SIX
YEAR ENDED SIX MONTHS ENDED MONTHS ENDED
YEARS ENDED DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
---------------------------- ---------------- -------------------------- ------------
1992 1993 1994 1994 (1) 1994 1995 1995 (1)
-------- -------- -------- ---------------- -------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................................. $214,954 $250,791 $327,201 $510,522 $145,850 $ 190,245 $277,397
Operating Expense:
Cost of Operations.................... 118,106 132,801 172,894 285,277 78,870 91,279 145,510
Marketing............................. 26,144 34,631 42,769 57,091 19,649 26,411 32,178
Research and Development.............. 20,096 23,428 28,928 39,228 13,085 16,453 18,471
General and Administrative............ 29,035 27,765 34,590 52,675 14,712 20,490 30,930
Nonrecurring Charge................... -- -- -- -- -- 125,520(2) --
-------- -------- -------- ---------------- -------- ---------------- ------------
Operating Expense Before Nonrecurring
Charge................................. 193,381 218,625 279,181 434,271 126,316 154,633 227,089
-------- -------- -------- ---------------- -------- ---------------- ------------
Operating Expense After Nonrecurring
Charge................................. 193,381 218,625 279,181 434,271 126,316 280,153 227,089
-------- -------- -------- ---------------- -------- ---------------- ------------
Operating Income Before Nonrecurring
Charge................................. 21,573 32,166 48,020 76,251 19,534 35,612 50,308
-------- -------- -------- ---------------- -------- ---------------- ------------
Operating Income (Loss) After
Nonrecurring Charge.................... 21,573 32,166 48,020 76,251 19,534 (89,908) 50,308
-------- -------- -------- ---------------- -------- ---------------- ------------
Net Income (Loss)....................... $ 13,758 $ 18,819 $ 28,159 $ 41,573 $ 11,763 $ (54,561) $ 27,784
-------- -------- -------- ---------------- -------- ---------------- ------------
-------- -------- -------- ---------------- -------- ---------------- ------------
Fully Diluted Earnings (Loss) Per
Share.................................. $ .43 $ .58 $ .85 $ 1.02 $ .36 $ (1.69)/.61(3) $ .67
Fully Diluted Weighted Average Shares
Outstanding............................ 32,296 32,718 33,106 40,667 32,834 32,333 41,259

OPERATING DATA:
Recurring Revenue....................... $ 83,809 $ 88,035 $119,678 $ 50,818 $ 77,687
One-Time Sales Revenue.................. $131,145 $162,756 $207,523 $ 95,032 $ 112,558
Approximate Number of Customers......... 1,300 1,400 2,100 1,600 2,600
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1995
------------------------
ACTUAL PRO FORMA (1)
--------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital (Deficiency)............................................................ $ (12,370) $ 11,364
Total Assets............................................................................ $ 441,455 $ 467,668
Long-Term Debt.......................................................................... $ 879 $ 879
Stockholders' Equity.................................................................... $ 241,769 $ 271,375
<FN>
- ------------------------------
(1) Gives effect to the acquisition of HSG and the proposed acquisition of
CliniCom as if each had occurred on January 1 of each period presented. For
a detailed description, see "Pro Forma Financial Information."

(2) Primarily relates to research and development purchased from FDC which had
not reached the stage of technological feasibility. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

(3) $.61 excludes the nonrecurring charge and includes the effect of dilutive
stock options.
</TABLE>

6
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE
FOLLOWING FACTORS IN EVALUATING AN INVESTMENT IN THE COMMON STOCK OFFERED
HEREBY.

ACQUISITIONS AND INTEGRATION

An important element of the Company's business strategy has been to expand
through acquisitions. The Company's future success is partially dependent upon
its ability to effectively integrate acquired businesses with the Company's
operations. Although the Company believes that its recent acquisitions will be
successful and that it will be able to effect such integration, there can be no
assurance that past or future acquisitions will be successfully integrated or
that any such acquisition will otherwise be successful. In addition, the
financial performance of the Company is now and will continue to be subject to
various risks associated with the acquisition of businesses, including the
financial effects associated with the integration of such businesses. During the
fiscal quarter ended June 30, 1995, the Company recorded a $126 million pre-tax
charge in connection with its acquisition of HSG from the Selling Stockholder.
The Company has entered into a definitive agreement to acquire CliniCom which
the Company presently expects to close early in the fourth quarter of 1995,
although there can be no assurance that such transaction will be consummated.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General" and "Business -- Strategy."

HEALTHCARE INDUSTRY AND MARKET CHANGES

The healthcare industry is subject to changing political, economic and
regulatory influences that may affect the procurement practices and other
operational aspects of the healthcare industry. During the past several years,
the healthcare industry has been subject to an increase in governmental
regulation of, among other things, reimbursement rates and certain capital
expenditures. A number of lawmakers have announced that they intend to propose
programs to reform the U.S. healthcare system. These programs may contain
proposals to increase governmental involvement in healthcare, lower
reimbursement rates and otherwise change the operating environment for the
Company's customers. Cost containment measures instituted by healthcare
providers could result in greater selectivity in the allocation of capital
funds, which could have an adverse effect on the Company's ability to sell its
products and services. The Company cannot predict with any certainty what
effect, if any, such proposals or healthcare reforms might have on its business,
financial condition or results of operations.

In addition, the healthcare industry is currently undergoing significant
consolidation of healthcare providers resulting in a smaller number of larger
healthcare delivery enterprises. The changing industry profile produced by this
consolidation could have an adverse impact on the Company's margins and
profitability due to increased competition.

Certain clinical applications of the Company's computer-assisted services
may be subject to regulation by the federal Food and Drug Administration (the
"FDA") as medical devices. Such regulation would require the registration of the
applicable manufacturing facility and software/ hardware products, application
of detailed recordkeeping and manufacturing standards, and pre-market
notification to the FDA of the Company's intent to market the applications in
question. The pre-market notification procedure could create delays in
marketing, and the FDA could require supplemental filings or object to certain
of these applications.

COMPETITION

The industry in which the Company operates is highly competitive and subject
to continual change in the manner in which products and services are marketed
and vendors are selected by customers. The primary competitive factors are scope
and quality of products and service and support capabilities. Certain current
and potential competitors have greater resources than the Company.

7
<PAGE>
TECHNOLOGICAL CHANGE; PROPRIETARY TECHNOLOGY

Future advances in the healthcare information systems industry could lead to
new technologies, products or services that are competitive with the products
and services offered by the Company. The Company's continued success will
depend, in part, on its ability to be responsive to technological developments
and challenges. Such technological advances could also lower the cost of such
products and services or otherwise result in competitive pricing pressures,
which could have an adverse effect on the Company. To remain competitive in the
evolving healthcare information systems marketplace, the Company must develop
new products on a timely basis. The failure to develop competitive products or
to introduce new products on a timely basis could have an adverse effect on the
Company's future financial performance.

The Company relies on a combination of trade secret, copyright and trademark
laws, nondisclosure and other contractual provisions and technical measures to
protect its proprietary rights in its products. There can be no assurance that
these protections will be adequate or that the Company's competitors will not
independently develop technologies that are substantially equivalent or superior
to the Company's technology. Although the Company believes that its products and
other proprietary rights do not infringe upon the proprietary rights of third
parties, there can be no assurance that third parties will not assert
infringement claims against the Company in the future.

PRODUCT LIABILITY

Certain of the Company's products provide applications that relate to
patient medical histories and treatment plans. Although the Company has not
experienced any material claims to date, any failure of the Company's products
to provide accurate and timely information could result in claims against the
Company. The Company maintains insurance to protect against claims associated
with the use of its products, but there can be no assurance that its insurance
coverage would adequately cover any claim asserted against the Company.

POSSIBLE VOLATILITY OF STOCK PRICE

The stock market has from time to time experienced extreme price and volume
fluctuations, particularly in the high technology sector, which have often been
unrelated to the operating performance of particular companies. Such
fluctuations and factors such as announcements of technological innovations or
new products by the Company or its competitors or third parties, as well as
market conditions in the computer software or hardware industries and healthcare
reform measures, may have a significant effect on the market price of the
Company's Common Stock. Also, since the Company recognizes revenues for certain
products upon the completion of certain milestone conditions, delays in meeting
such conditions could result in the shift of revenue recognition from one
quarter to another. Any such shift could adversely impact the results of
operations for a particular quarter, which in turn could cause fluctuations in
the Company's stock price.

SHARES ELIGIBLE FOR FUTURE SALE

See "Shares Eligible for Future Sale" for a discussion of the potential
effect on the market price of the Company's Common Stock of sales of the
Company's outstanding shares and, particularly, the shares issuable upon the
closing of the recently announced CliniCom Acquisition. Sales, or the
availability for sale, of a substantial number of shares of Common Stock could
have a significant adverse effect on the market price for the Common Stock.

8
<PAGE>
PRO FORMA FINANCIAL INFORMATION

The following unaudited Pro Forma Combined Income Statements for the six
months ended June 30, 1995, and the year ended December 31, 1994, have been
prepared to reflect adjustments to the Company's historical results of
operations to give effect to the acquisition of HSG and the proposed acquisition
of CliniCom as if each had been acquired on January 1 of each period presented.
The attached Pro Forma Combined Balance Sheets as of June 30, 1995, give effect
to the proposed acquisition of CliniCom as if it had occurred on that date.

These pro forma statements have been prepared by the Company based on the
audited financial statements of HSG and CliniCom for the year ended December 31,
1994, and the unaudited financial statements of HSG for the period from January
1 through June 17, 1995, and of CliniCom for the six months ended June 30, 1995,
which statements are incorporated by reference herein.

These pro forma statements are not necessarily indicative of the results of
operations which would have been attained had each of the acquisitions been
consummated on the dates indicated or which may be attained in the future. These
pro forma statements should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
historical financial statements and notes thereto of HBOC, HSG and CliniCom,
incorporated herein by reference.

9
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED INCOME STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
HBOC HSG ADJUSTMENTS COMBINED CLINICOM ADJUSTMENTS COMBINED
--------- -------- ------------ ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue....................... $ 190,245 $ 53,429 $ 17,048(2) $ 258,440 $ 21,770 $ (2,813)(8) $ 277,397
(2,282)(3)
Operating Expense:
Cost of Operations.......... 91,279 -- 44,263(2) 137,194 11,429 (4,231)(8) 145,510
(296)(3) 1,418(8)
130(3) (300)(9)
3,334(3)
(456)(3)
(1,060)(3)
Marketing................... 26,411 -- 6,048(2) 29,810 2,758 (390)(9) 32,178
(2,649)(3)
Research and Development.... 16,453 -- 4,509(2) 16,724 2,347 (600)(9) 18,471
(4,238)(3)
General and
Administrative............. 20,490 -- 12,597(2) 29,309 2,381 (760)(9) 30,930
(1,896)(3)
767(3)
(2,649)(3)
Nonrecurring Charge......... 125,520 -- (125,520)(5) 0 -- -- 0
HSG Operating Expense....... -- 50,369 (50,369)(2) 0 -- -- 0
--------- -------- ------------ ---------- --------- ------------ ----------
Total Operating Expense... 280,153 50,369 (117,485) 213,037 18,915 (4,863) 227,089
--------- -------- ------------ ---------- --------- ------------ ----------
Operating Income (Loss)....... (89,908) 3,060 132,251 45,403 2,855 2,050 50,308
Other Income (Expense), Net... (1,026) (3,233) -- (4,259) 258 -- (4,001)
--------- -------- ------------ ---------- --------- ------------ ----------
Income (Credit) Before
Provision for Income Taxes... (90,934) (173) 132,251 41,144 3,113 2,050 46,307
Provision (Credit) for Income
Taxes........................ (36,373) 1,433 51,398(6) 16,458 158 1,907(10) 18,523
--------- -------- ------------ ---------- --------- ------------ ----------
Net Income (Loss)............. $ (54,561) $ (1,606) $ 80,853 $ 24,686 $ 2,955 $ 143 $ 27,784
--------- -------- ------------ ---------- --------- ------------ ----------
--------- -------- ------------ ---------- --------- ------------ ----------
Earnings (Loss) Per Share:
Primary..................... $ (1.69) -- -- $ .66 $ .33 -- $ .68
Fully Diluted............... $ (1.69) -- -- $ .66 $ .33 -- $ .67
Weighted Average Shares
Outstanding:
Primary..................... 32,333 -- 5,149(7) 37,482 9,007 (5,404)(11) 41,085
Fully Diluted............... 32,333 -- 5,323(7) 37,656 9,007 (5,404)(11) 41,259
</TABLE>

See "Notes to Pro Forma Combined Financial Statements."

10
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED INCOME STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA
HBOC HSG ADJUSTMENTS COMBINED CLINICOM ADJUSTMENTS
-------- -------- ---------------- --------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Revenue................................. $327,201 $121,241 $ 36,732(2) $480,546 $35,416 $ (5,440)(8)
(4,628)(3)
Operating Expense:
Cost of Operations.................... 172,894 -- 93,480(2) 273,131 18,186 (5,005)(8)
(746)(3) (435)(8)
260(3) (600)(9)
6,668(3)
(925)(3)
1,500(4)
Marketing............................. 42,769 -- 14,625(2) 52,825 5,046 (780)(9)
(4,569)(3)
Research and Development.............. 28,928 -- 9,153(2) 37,125 3,303 (1,200)(9)
(956)(3)
General and Administrative............ 34,590 -- 20,393(2) 50,476 3,719 (1,520)(9)
(3,879)(3)
1,534(3)
(2,162)(3)
HSG Operating Expense................. -- 100,919 (100,919)(2) 0 -- --
-------- -------- ---------------- --------- -------- -------
Total Operating Expense............. 279,181 100,919 33,457 413,557 30,254 (9,540)
-------- -------- ---------------- --------- -------- -------
Operating Income (Loss)................. 48,020 20,322 (1,353) 66,989 5,162 4,100
Other Income (Expense), Net............. (1,031) (6,703) -- (7,734) 771 --
-------- -------- ---------------- --------- -------- -------
Income (Credit) Before Provision for
Income Taxes........................... 46,989 13,619 (1,353) 59,255 5,933 4,100
Provision (Credit) for Income Taxes..... 18,830 7,877 (3,005)(6) 23,702 445 3,568(10)
-------- -------- ---------------- --------- -------- -------
Net Income.............................. $ 28,159 $ 5,742 $ 1,652 $ 35,553 $ 5,488 $ 532
-------- -------- ---------------- --------- -------- -------
-------- -------- ---------------- --------- -------- -------
Earnings Per Share:
Primary............................... $ .85 -- -- $ .96 $ .62 --
Fully Diluted......................... $ .85 -- -- $ .96 $ .62 --
Weighted Average Shares Outstanding:
Primary............................... 32,973 -- 4,000(7) 36,973 8,901 (5,341)(11)
Fully Diluted......................... 33,106 -- 4,000(7) 37,106 8,902 (5,341)(11)

<CAPTION>
PRO FORMA
COMBINED
---------
<S> <C>
Revenue................................. $510,522

Operating Expense:
Cost of Operations.................... 285,277

Marketing............................. 57,091

Research and Development.............. 39,228

General and Administrative............ 52,675

HSG Operating Expense................. 0
---------
Total Operating Expense............. 434,271
---------
Operating Income (Loss)................. 76,251
Other Income (Expense), Net............. (6,963)
---------
Income (Credit) Before Provision for
Income Taxes........................... 69,288
Provision (Credit) for Income Taxes..... 27,715
---------
Net Income.............................. $ 41,573
---------
---------
Earnings Per Share:
Primary............................... $ 1.03
Fully Diluted......................... $ 1.02
Weighted Average Shares Outstanding:
Primary............................... 40,533
Fully Diluted......................... 40,667
</TABLE>

See "Notes to Pro Forma Combined Financial Statements."

11
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEETS
JUNE 30, 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HBOC CLINICOM ADJUSTMENTS COMBINED
-------- -------- ------------ ---------

<S> <C> <C> <C> <C>
ASSETS

Current Assets:
Cash and Cash Equivalents..................................................... $ 8,232 $ 7,526 $ -- $ 15,758
Receivables, Net.............................................................. 131,709 23,884 (13,486)(8) 142,107
Current Deferred Income Taxes................................................. 9,130 -- -- 9,130
Inventories................................................................... 1,868 3,401 -- 5,269
Prepaids and Other Current Assets............................................. 12,061 895 (1,879)(8) 11,077
-------- -------- ------------ ---------
Total Current Assets........................................................ 163,000 35,706 (15,365) 183,341
-------- -------- ------------ ---------
Intangibles, Net................................................................ 181,293 -- -- 181,293
Deferred Income Taxes........................................................... 33,096 -- -- 33,096
Property and Equipment, Net..................................................... 31,983 2,646 -- 34,629
Capitalized Software, Net....................................................... 25,626 3,491 (400)(8) 28,717
Other Noncurrent Assets, Net.................................................... 6,457 135 -- 6,592
-------- -------- ------------ ---------
Total Assets.............................................................. $441,455 $41,978 $ (15,765) $467,668
-------- -------- ------------ ---------
-------- -------- ------------ ---------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities............................................................. $175,370 $ 8,816 $ (12,209)(8) $171,977
Long-Term Debt.................................................................. 879 -- -- 879
Other Long-Term Liabilities..................................................... 23,437 -- -- 23,437
Stockholders' Equity............................................................ 241,769 33,162 (3,556)(8) 271,375
-------- -------- ------------ ---------
Total Liabilities and Stockholders' Equity................................ $441,455 $41,978 $ (15,765) $467,668
-------- -------- ------------ ---------
-------- -------- ------------ ---------
</TABLE>

See "Notes to Pro Forma Combined Financial Statements."

12
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)

GENERAL

1. The attached Pro Forma Combined Income Statements for the six months
ended June 30, 1995, and the year ended December 31, 1994, give effect to the
acquisition of HSG which was completed on June 17, 1995, and the proposed
CliniCom Acquisition. The foregoing Pro Forma Combined Balance Sheets as of June
30, 1995, give effect to the proposed CliniCom Acquisition as if it had occurred
on that date. No pro forma adjustments are necessary for the HSG acquisition on
the June 30, 1995, Pro Forma Combined Balance Sheets since that transaction was
completed on June 17, 1995.

HBOC accounted for the acquisition of HSG as a purchase. The proposed
CliniCom Acquisition, which is subject to certain conditions including CliniCom
stockholder approval, is expected to close early in the fourth quarter of 1995.
The transaction will be accounted for as a pooling of interests.

Adjustments to the Pro Forma Combined Income Statements include such
adjustments as are necessary to allocate the HSG purchase price based on the
estimated fair market value of the assets acquired and the liabilities assumed
and to give effect to events that are directly attributable to the HSG and
CliniCom transactions, which are expected to have a continuing impact on HBOC
and are factually supportable. The adjustments related to the Pro Forma Combined
Income Statements assume the transactions were consummated on January 1 of each
period presented.

Adjustments to the Pro Forma Combined Balance Sheets include such
adjustments as are necessary to give effect to events that are directly
attributable to the CliniCom Acquisition and are factually supportable. The
adjustments related to the Pro Forma Combined Balance Sheets assume the
transaction was consummated on June 30, 1995.

HSG ACQUISITION

2. HSG revenue and expense classifications were historically broken out
using different policies than those applied by HBOC. The adjustments necessary
to reclassify HSG revenue and expenses in accordance with HBOC policies are:

<TABLE>
<CAPTION>
6/30/95 12/31/94
-------- ---------
<S> <C> <C>
Revenue........................................... $ 17,048 $ 36,732
Cost of Operations................................ $ 44,263 $ 93,480
Marketing......................................... $ 6,048 $ 14,625
Research and Development.......................... $ 4,509 $ 9,153
General and Administrative........................ $ 12,597 $ 20,393
HSG Operating Expense............................. $(50,369) $(100,919)
</TABLE>

Historically, HSG netted certain costs against revenue for presentation,
while HBOC has historically reported revenue as a gross number.

13
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)

3. The following adjustments are necessary to adjust the June 30, 1995, and
December 31, 1994, income statement impact of the asset and liability fair
market value adjustments, assuming the purchase of HSG had been consummated on
January 1 of each period presented:

<TABLE>
<CAPTION>
6/30/95 12/31/94
------- --------
<S> <C> <C>
HSG Capitalized Software.......................... $ (296) $ (746)
HSG Goodwill...................................... $(1,896) $ (3,879)
HBOC Capitalized Software......................... $ 130 $ 260
HBOC Customer Lists --
to amortize over 15 years....................... $ 3,334 $ 6,668
HBOC Goodwill --
to amortize over seven years.................... $ 767 $ 1,534
Deferred Revenue:
Revenue......................................... $(2,282) $ (4,628)
Cost of Operations.............................. $ (456) $ (925)
Terminated Employees:
Cost of Operations.............................. $(1,060) $ --
Marketing....................................... $(2,649) $ (4,569)
Research and Development........................ $(4,238) $ (956)
General and Administrative...................... $(2,649) $ (2,162)
</TABLE>

HBOC recorded the HSG deferred revenue acquired at its cost (the cost to
service remaining commitment). The net profit which had been deferred has been
eliminated.

The reduction of expense related to terminated employees results from the
termination of certain HSG employees in order to eliminate certain redundant
positions and increase the efficiency of the combined operations.

4. HSG was charged an allocated amount for the use of FDC's Data Center. In
1994, the amount charged was less than that deemed reasonable by management by
$1,500. The adjusted charge reflects that which will be charged to HBOC in the
future. The 1995 charge has been deemed reasonable by management.

5. In the second quarter of 1995, HBOC recorded a $125,520 charge primarily
related to purchased research and development of HSG. This nonrecurring charge
has been eliminated from the June 30, 1995, Pro Forma Combined Income
Statements.

6. The provision for income tax was derived by using the HBOC effective tax
rate of 40%.

7. The weighted average shares outstanding have been adjusted for the HSG
acquisition to give effect to the additional 4 million shares of Common Stock of
HBOC outstanding, assuming the transaction had been consummated on January 1 of
each period presented and to give effect to the dilutive effect of stock options
outstanding at June 30, 1995, assuming that HBOC had net income.

CLINICOM ACQUISITION

8. Beginning in 1988, HBOC and CliniCom were parties to various informal
cooperative marketing arrangements. Accordingly, certain intercompany
transactions and balances are included in the historical financial statements of
HBOC and CliniCom. The adjustments necessary to eliminate intercompany
transactions assuming the pooling of interests had been consummated on January 1
of each period presented are:

<TABLE>
<CAPTION>
6/30/95 12/31/94
------- --------
<S> <C> <C>
Revenue........................................... $(2,813) $ (5,440)
Cost of Operations................................ $(4,231) $ (5,005)
</TABLE>

14
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)

The following adjustments are necessary to correctly match revenue and
expenses according to HBOC policies, assuming the pooling of interests had been
consummated on January 1 of each period presented:

<TABLE>
<CAPTION>
6/30/95 12/31/94
------- --------
<S> <C> <C>
Cost of Operations................................ $ 1,418 $(435)
</TABLE>

The adjustments necessary to eliminate intercompany balances, assuming the
pooling of interests had been consummated on June 30, 1995, are:

<TABLE>
<CAPTION>
6/30/95
---------
<S> <C>
Receivables....................................... $ (13,486)
Prepaids and Other Current Assets................. $ (1,879)
Capitalized Software.............................. $ (400)
Current Liabilities............................... $ (12,209)
Retained Earnings................................. $ (3,556)
</TABLE>

9. The following adjustments are necessary to adjust the June 30, 1995, and
December 31, 1994, income statements to give effect to employee terminations.
The reduction of expense related to terminated employees results from the
termination of certain CliniCom employees in order to eliminate certain
redundant positions and increase the efficiency of the combined operations. The
adjustments, assuming the pooling of interests had been consummated on January 1
of each period presented, are:

<TABLE>
<CAPTION>
6/30/95 12/31/94
------- --------
<S> <C> <C>
Cost of Operations................................ $ (300) $ (600)
Marketing......................................... $ (390) $ (780)
Research and Development.......................... $ (600) $ (1,200)
General and Administrative........................ $ (760) $ (1,520)
</TABLE>

10. The provision for income tax was derived by using the HBOC effective
tax rate of 40%.

11. The definitive agreement to acquire CliniCom provides for the exchange
of .4 of a share of Common Stock of HBOC for each share of currently outstanding
CliniCom common stock.

15
<PAGE>
HBO & COMPANY
SELECTED HISTORICAL FINANCIAL INFORMATION
(FROM CONTINUING OPERATIONS)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

The following selected historical financial information for each of the five
years in the period ended December 31, 1994, set forth below have been derived
from the consolidated financial statements of the Company. The report of Arthur
Andersen LLP, independent public accountants, with respect to such consolidated
financial statements as of December 31, 1993, and 1994 and for the three years
in the period ended December 31, 1994, has been incorporated herein by
reference. The historical financial information for the six months ended June
30, 1994, and 1995 is derived from the unaudited financial statements of the
Company, which in the opinion of management include all adjustments necessary
for a fair presentation of the financial condition and results of operations of
the Company for such periods.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------ ------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue.................................................. $179,704 $177,775 $214,954 $250,791 $327,201 $145,850 $190,245
Operating Expense:
Cost of Operations..................................... 99,036 99,314 118,106 132,801 172,894 78,870 91,279
Marketing.............................................. 20,530 22,741 26,144 34,631 42,769 19,649 26,411
Research and Development............................... 19,166 19,571 20,096 23,428 28,928 13,085 16,453
General and Administrative............................. 28,103 27,762 29,035 27,765 34,590 14,712 20,490
Nonrecurring Charge.................................... 731 10,883 -- -- -- -- 125,520(1)
-------- -------- -------- -------- -------- -------- --------
Total Operating Expense.............................. 167,566 180,271 193,381 218,625 279,181 126,316 280,153
-------- -------- -------- -------- -------- -------- --------
Operating Income (Loss).................................. 12,138 (2,496) 21,573 32,166 48,020 19,534 (89,908)
Other Income (Expense), Net.............................. (133) (1,263) (553) (669) (1,031) 73 (1,026)
-------- -------- -------- -------- -------- -------- --------
Net Income (Loss) Before Provision (Credit) for Income
Taxes................................................... 12,005 (3,759) 21,020 31,497 46,989 19,607 (90,934)
Provision (Credit) for Income Taxes...................... 3,811 (1,312) 7,262 12,678 18,830 7,844 (36,373)
-------- -------- -------- -------- -------- -------- --------
Net Income (Loss)........................................ $ 8,194 $ (2,447) $ 13,758 $ 18,819 $ 28,159 $ 11,763 $(54,561)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Fully Diluted Earnings (Loss) Per Share.................. $ .27 $ (.08) $ .43 $ .58 $ .85 $ .36 $ (1.69)
Fully Diluted Weighted Average Shares Outstanding........ 29,720 28,654 32,296 32,718 33,106 32,834 32,333
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------ AT JUNE 30,
1990 1991 1992 1993 1994 1995
-------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital (Deficiency)................................ $ 19,254 $ 18,038 $ 18,304 $ 18,037 $ (8,719) $(12,370)
Total Assets................................................ $127,758 $108,285 $113,842 $131,157 $233,877 $441,455
Long-Term Debt.............................................. $ 37,450 $ 20,003 $ -- $ -- $ 252 $ 879
Stockholders' Equity........................................ $ 28,339 $ 24,692 $ 47,727 $ 57,575 $ 91,475 $241,769
<FN>
- ------------------------------
(1) Primarily relates to research and development purchased from FDC which had
not reached the stage of technological feasibility.
</TABLE>

16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company's revenues represent both one-time sales revenue and recurring
revenues. Software implementation fees, hardware sales and software license fees
represent nonrecurring components of revenue. Software maintenance fees, monthly
service fees and outsourcing services fees represent recurring revenues.

Information systems are marketed under equipment purchase and software
license agreements, as well as service agreements. Hardware revenue is
recognized at the time of delivery, and software license fees are recognized
either when the software is installed or, for packaged software, upon shipment.
Implementation fees are recognized as the work is performed or on a
percentage-of-completion basis. Software maintenance and support agreements are
marketed under annual and multi-year renewable agreements. Maintenance and
support revenue is generally billed annually and recognized ratably over the
period. Fees for outsourcing services are either recognized monthly as the work
is performed or on a percentage-of-completion basis.

The Company capitalizes research and development costs incurred from the
point of technological feasibility to the point of general availability and
amortizes those costs using the straight-line method based on estimated useful
lives of three years.

The Company grows its business through the development of new products, the
expansion of its service capabilities and the addition of new customers. A
substantial portion of its recent growth has resulted from acquisitions of
companies which expanded the HBOC product lines and enhanced its installed
customer base.

The following table outlines these acquisitions:

<TABLE>
<CAPTION>
AGGREGATE PURCHASE
DATE ACQUIRED COMPANY PRICE PRIMARY SIGNIFICANCE
- -------------------- --------------------------- -------------------- ----------------------------------------
<S> <C> <C> <C>
June 1993 Biven Software, Inc. $2 million Managed care applications
December 1993 Data-Med Computer Services $5.2 million(1)
Limited Installed base of 100 hospitals in U.K.
May 1994 IBAX Healthcare Systems $44 million Series 4000 product line with presence
in the IBM AS/400 market; installed
base of 475 hospitals
September 1994 Serving Software, Inc. $48 million(2) Healthcare enterprise patient and
resource scheduling software
December 1994 Care 2000, Inc. $1.5 million Specialty in case management
methodologies
February 1995 Advanced Laboratory $7 million, net of Laboratory software for the healthcare
Systems, Inc. cash acquired and commercial marketplace
June 1995 Health Systems Group of $200.6 million(3)
First Data Corporation Installed base of 500 hospitals
July 1995 Pegasus Medical, LTD $8 million and up to Electronic patient record for the
$7 million physician's office designed to support
contingent payment the clinical process across the
continuum of care
Fourth Quarter 1995 CliniCom Incorporated To be determined(4) Bedside acute care clinical information
(Estimated) systems
<FN>
- ------------------------
(1) Represents $5 million cash and shares of Common Stock valued at closing at
$200,000.
(2) Accounted for as a pooling of interests. Represents value at closing of
1,479,029 shares of Common Stock.
</TABLE>

17
<PAGE>
<TABLE>
<S> <C>
(3) Represents $600,000 cash and 4 million shares of Common Stock valued at
$200 million based on the ten day average of the closing prices of the
Common Stock immediately prior to closing.
(4) To be accounted for as a pooling of interests. To be determined based on
value of .4 of a share of Common Stock to be issued for each of the
approximately 8,660,000 shares of outstanding common stock of CliniCom.
</TABLE>

RESULTS OF OPERATIONS

The following table presents, as a percent of revenue, certain categories
included in the Company's consolidated statements of income for the periods
indicated:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
------------------------ ---------------
1992 1993 1994 1994 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenue........................................... 100% 100% 100% 100% 100%
Operating Expense:
Cost of Operations.............................. 55% 53% 53% 55% 48%
Marketing....................................... 12% 14% 13% 13% 14%
Research and Development........................ 9% 9% 9% 9% 9%
General and Administrative...................... 14% 11% 10% 10% 11%
Nonrecurring Charge............................. -- -- -- -- 65%
------ ------ ------ ------ ------
Operating Income (Loss)........................... 10% 13% 15% 13% (47%)
------ ------ ------ ------ ------
Net Income (Loss)................................. 6% 8% 9% 8% (29%)
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>

COMPARISON OF SIX MONTHS ENDED JUNE 30, 1995 AND 1994

The Company's revenue grew to $190.2 million for the first six months of
1995 from $145.9 million for the comparable prior year period as a result of
increased sales of the Pathways 2000 product group and HBOC's core transaction
systems and the Company's merger and acquisition activity. The Company's
acquisitions have increased revenue by enhancing the Company's product offerings
as well as expanding the customer base in which to sell its products.

Support and maintenance revenue increased 91% for the six-month period
compared to the same period of 1994 and was the source of approximately 29% of
the Company's revenue compared to approximately 20% a year ago. The increase in
support and maintenance revenue is a result of having more installed customers.

Software license fee revenue grew 29% for the 1995 six-month period, largely
due to Pathways 2000. Also contributing to the growth in license fee revenue was
the Serving Software Group, which has introduced its Pathways Healthcare
Scheduling product to the market; however, HBOC continues to derive a large
portion of its software license fee revenue from the STAR and TRENDSTAR
products.

Implementation services revenue grew 29% for the six-month period compared
to the same period last year. The increase was a result of the addition of the
Series product line and continued increases in implementation services for all
current business units.

Cost of operations were $91.3 million in the first six months of 1995 as
compared to $78.9 million in the comparable prior year period, but dropped to
48% of revenue for the six-month period compared to 54% for the same period in
1994. Cost of operations expense increased at a rate significantly slower than
the rate of revenue growth primarily due to a shift in the Company's software,
services and hardware revenue mix, a low salary growth rate resulting from
streamlining within the implementation organization, and a decrease in the use
of consultants and third-party contractors.

Marketing expense increased to $26.4 million or 14% of revenue for the first
six months of 1995 as compared to $19.6 million or 13% of revenue for the first
six months of 1994. Salary, travel and commission expense have increased due to
a larger sales force and higher sales volume.

18
<PAGE>
Research and development ("R&D") expense increased to $16.5 million from
$13.1 million but remained constant at 9% of revenue for the six-month periods
of both 1995 and 1994. Salary expense increased, while consulting expense
decreased as HBOC brought almost all of its development expertise in-house. The
R&D capitalization rate was 25% for the 1995 six-month period compared to 26%
for the comparable 1994 period. HBOC continues to work to enhance existing
products and bring additional Pathways 2000 products to the point of general
availability.

General and administrative expense increased to $20.5 million or 11% of
revenue for the first six months of 1995 from $14.7 million or 10% of revenue
for the first six months of 1994. The increases were primarily due to increased
depreciation and amortization expense resulting from a larger fixed asset base
and increased intangible asset amortization related to the acquisitions and
higher expense for incentive programs such as the Company-wide gainsharing
program.

The $126 million nonrecurring charge primarily related to the acquisition of
HSG, now the Charlotte Product Group, and resulted in an operating loss of $90
million for the six-month period ended June 30, 1995. Before adjusting for the
impact of this nonrecurring charge, operating income increased 82% for the
six-month period compared to the same period in 1994. Operating income as a
percent of revenue before the purchased research and development charge
increased to 19% from 13% for the six-month period.

The effective tax rate remained constant at 40% for the periods presented.

Earnings per share for the six months ended June 30, 1995, excluding the
nonrecurring charge, was $.64 ($.61 fully diluted), a 78% increase over the same
period in the prior year. These increases are attributable to increases in
revenue of 30% for the six-month period compared to the same period in 1994 with
a related increase of only 22% in operating expense, excluding the nonrecurring
charge. Revenue growth was fueled primarily by increased revenue from support
and maintenance, software license fees, and implementation services related to
both internal growth and acquisitions.

With the nonrecurring charge, loss per share for the six months ended June
30, 1995 was $(1.69). The nonrecurring charge of $126 million is primarily
related to research and development of HSG, which at the date of acquisition had
not reached technological feasibility. Also, the reported loss per share is not
adjusted for the effect of stock options outstanding since the effect was
anti-dilutive. Fully diluted earnings per share information, excluding the
nonrecurring charge, is presented above to aid in the analysis of results.

COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND 1993

Revenue for 1994 of $327.2 million increased 30% over 1993 revenue of $250.8
million due to both internal growth and acquisitions. Strong software license
fee revenue, growth in recurring maintenance and support contracts, heavy
implementation activity and growth from new outsourcing business all contributed
to overall growth. Revenue from software license fees increased 58% due
primarily to increased sales of the Company's new Pathways 2000 and STAR
products. The Series product line as well as the TRENDSTAR line of decision
support products also contributed strongly to software revenue growth. Revenue
from software maintenance and support contracts increased 69% in 1994 over 1993
due to growth in HBOC's customer base by more than 1,000 customers and as a
result of the installation of additional products in the Company's existing
customer base. Revenue from implementation services grew 18% as the Company's
implementation teams, particularly in the Series and STAR groups, worked on the
backlog of sold business. Revenue from outsourcing services grew 30%, primarily
due to growth in the Company's outsourcing businesses in the United Kingdom.

HBOC entered 1995 with a backlog consisting of future contracted outsourcing
service fees which totalled $75.2 million, contracted software and hardware fees
not yet delivered and installed which totalled $28.4 million, and future
payments from systems sold under monthly service fee agreements totalling $11.6
million for future years. HBOC also derives a large portion of its revenue from
renewable software maintenance and support contracts and from implementation
services.

19
<PAGE>
Cost of operations increased to $172.9 million in 1994 from $132.8 million
in 1993, but as a percent of revenue remained stable at 53% for both years.
Personnel-related expense has grown as HBOC has added implementation and support
staff to service its growing customer base, although cost of operations salaries
as a percent of revenue have actually decreased. Software royalty expense
increased as a result of Pathways Care Manager, the Company's nursing solution;
Pathways Health Network Server, the Company's enterprisewide database
repository; and the addition of the Series product line. Amortization expense
increased as a result of higher amortization of capitalized software as new
products were released and amortization of the customer lists acquired from IBAX
Healthcare Systems ("IBAX"). Hardware and software maintenance expense increased
primarily for support of customers' third-party business partner products.

Marketing expense increased to $42.8 million in 1994 from $34.6 million in
1993, but as a percent of revenue decreased to 13% in 1994 from 14% in 1993.
Marketing expense increased in total primarily in the area of personnel-related
expense that included salaries, commissions and travel. The addition of the
Series sales force drove these expenses higher.

R&D expense as a percent of revenue remained constant at 9% in 1994 and
1993. R&D expense increased in total in 1994 primarily as a result of higher
personnel-related expenses that were partially offset by a higher R&D
capitalization rate. HBOC capitalized 25% of its R&D costs in 1994, up slightly
from 24% in 1993. The increase in the capitalization rate reflects the effort
spent bringing the Company's new suite of Pathways 2000 products to market.

RESEARCH AND DEVELOPMENT SUMMARY

<TABLE>
<CAPTION>
1993 1994
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Total R&D Expenditures................................................. $ 30,890 $ 38,608
Less Capitalized R&D................................................. (7,462) (9,680)
--------- ---------
Reported R&D Expense................................................... $ 23,428 $ 28,928
Capitalization Rate.................................................... 24% 25%
--------- ---------
--------- ---------
</TABLE>

General and administrative expenses increased to $34.6 million in 1994 from
$27.8 million in 1993 but as a percent of revenue decreased slightly in 1994.
Total general and administrative expense increased, although at less than the
rate of revenue growth. Assets added through the Company's acquisitions resulted
in higher depreciation and amortization expense. Facilities-related expenses
have increased in total due to the IBAX acquisition, but the Company is
continuing to take steps to maximize productive use of space and equipment.
Employee benefit expense has increased due to the growth in the number of
employees.

Total operating expense as a percent of revenue showed a downward trend,
which improved operating income as a percent of revenue to 15% in 1994 from 13%
in 1993.

The effective tax rate remained stable at 40% in both 1994 and 1993.

Weighted average shares outstanding increased between 1993 and 1994 due to
shares issued under employee stock option and purchase programs and the dilutive
effect of stock options outstanding.

COMPARISON OF YEARS ENDED DECEMBER 31, 1993 AND 1992

For 1993, revenue was $250.8 million, an increase of 17% over 1992 revenue
of $215.0 million as a result primarily of increased STAR system sales and
installations, the addition of outsourcing customers, continued growth in
networking technology sales and increased demand for decision support software
products. HealthQuest revenue decreased slightly as customers waited for new
releases of several products.

20
<PAGE>
At December 31, 1993, future contracted outsourcing service fees totalled
$78.6 million and contracted software license fees and hardware to be installed,
as well as related subcontracted labor, totalled $30.9 million. Future payments
from systems installed or to be installed under monthly service agreements
provided the Company with a $23.4 million revenue base for future years as of
December 31, 1993. HBOC also generated recurring revenue from software
maintenance and enhancement fees.

Cost of operations expense increased to $132.8 million in 1993 from $118.1
million in 1992 but decreased as a percent of revenue to 53% from 55% in 1992
due to the move of approximately 50 employees into marketing roles and improved
productivity of implementation personnel. Hardware, personnel and consulting
costs were higher in 1993 compared to 1992 due to a higher volume of
installations and new outsourcing contracts.

Marketing expense increased to $34.6 million in 1993 from $26.1 million in
1992 and increased as a percent of revenue to 14% in 1993 from 12% in 1992 as a
result of the move of approximately 50 employees into marketing roles and
increased commissions due to higher sales volume.

R&D expense as a percent of revenue remained constant in 1993 and 1992. R&D
expense increased in 1993 due to an increase in personnel and other expenses
related to development activities. HBOC capitalized 24% of its R&D costs in
1993, which was an increase from the 1992 rate of 23%, due to new product
offerings reaching the technological feasibility threshold required for
capitalization.

RESEARCH AND DEVELOPMENT SUMMARY

<TABLE>
<CAPTION>
1992 1993
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Total R&D Expenditures................................................. $ 26,230 $ 30,890
Less Capitalized R&D................................................. (6,134) (7,462)
--------- ---------
Reported R&D Expense................................................... $ 20,096 $ 23,428
Capitalization Rate.................................................... 23% 24%
--------- ---------
--------- ---------
</TABLE>

General and administrative expense decreased to $27.8 million for 1993 from
$29.0 million in 1992 and also decreased as a percent of revenue compared to
1992, primarily as a result of lower salary expense, rent and bonuses due to
compensation plan restructuring and expense controls.

Total operating expense as a percent of revenue showed a downward trend,
which improved operating income as a percent of revenue from 13% in 1993 to 10%
in 1992.

The effective tax rate increased to 40% in 1993 from 35% in 1992 due to
deferred tax adjustments in 1992 and tax law changes in 1993.

Weighted average shares outstanding increased between 1992 and 1993 due to
shares issued under employee stock option and purchase programs and the dilutive
effect of stock options outstanding.

INFLATION

HBOC is affected by inflation through increased salaries, benefits and other
operating and administrative expenses. To the extent permitted by the
marketplace, the Company attempts to pass on increased costs by periodically
increasing prices of products and services. Both service and software
maintenance and support agreements contain clauses allowing the Company to
increase fees annually to reflect changes in costs. Other products and services
are generally contracted for short periods and are therefore not exposed to
inflationary pressure.

21
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

During the six-month period ended June 30, 1995, HBOC generated $17 million
of cash flow from operations. The Company used a net $11 million for investing
activities, including the purchase of ALS, and capital expenditures. In
addition, the Company used $3.6 million to reduce indebtedness and pay
dividends. As a result, the Company increased its cash balance by $2.4 million
to $8.2 million at June 30, 1995.

For the year ended December 31, 1994, HBOC generated $39.4 million of cash
from operating activities and $1.1 million from financing activities, and used
$60.4 million in investing activities (including $42.5 million for acquisitions,
net of cash acquired, $9.7 million for capitalized software development and $5.7
million for capital expenditures), resulting in a cash decrease of $20 million.

The Company's current ratio remained constant at .9:1 at both June 30, 1995,
and December 31, 1994. Current assets increased $40.3 million or 33% during the
first six months of 1995, primarily due to acquisitions. The bulk of this growth
came from increased receivables acquired in the acquisition of HSG. Receivables
management is a key performance factor for HBOC, and management continues to
focus on this area. Current liabilities increased $44 million or 33% primarily
due to liabilities assumed related to the acquisition of HSG and increased
accounts payable.

The Company has access to several financing sources, including $25 million
available under a revolving credit agreement and $5 million available on two
lines of credit totalling $10 million, as of June 30, 1995.

Management believes positive future cash flows from operations and access to
financing sources will enable HBOC to continue to make strategic investments to
enhance quality, increase efficiency and promote growth.

QUARTERLY RESULTS

The following table sets forth certain unaudited quarterly financial data of
the Company for its six most recent fiscal quarters. In the opinion of the
Company's management, this unaudited information has been prepared on the same
basis as the audited information and includes all adjustments necessary to
present fairly the information set forth therein. The operating results for any
quarter are not necessarily indicative of results for any future period.

QUARTERLY RESULTS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

<TABLE>
<CAPTION>
QUARTER ENDED,
------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1994 1994 1994 1994 1995 1995
----------- ----------- ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue............................... $ 67,507 $ 78,343 $ 85,938 $ 95,413 $ 90,709 $ 99,536
Operating Income (Loss)............... $ 8,861 $ 10,673 $ 13,324 $ 15,162 $ 15,365 $(105,273)(1)
Net Income (Loss)..................... $ 5,428 $ 6,335 $ 7,726 $ 8,670 $ 9,002 $ (63,563)
Fully Diluted Earnings (Loss) Per
Share................................ $ .17 $ .19 $ .23 $ .26 $ .27 $ (1.94)
Fully Diluted Weighted Average Shares
Outstanding.......................... 32,818 33,040 33,263 33,351 33,481 32,739
<FN>
- ------------------------------
(1) Includes nonrecurring charge, which primarily relates to research and
development purchased from FDC which had not reached the stage of
technological feasibility.
</TABLE>

22
<PAGE>
BUSINESS

GENERAL

OVERVIEW

INDUSTRY

The healthcare industry is undergoing significant and rapid change.
Healthcare delivery costs have increased dramatically in recent years as
compared to the overall rate of inflation. The growing influence of managed care
has resulted in increasing pressure on participants in the healthcare system to
contain costs. Accordingly, the healthcare system has migrated towards more
managed care reimbursement, including discounted fee for service and capitation.
Under capitation, providers are paid a pre-determined fee per individual to
provide all healthcare services, thereby assuming the potential financial risks
of escalating healthcare costs. In order to deliver care in a cost effective
manner, providers are forming integrated healthcare delivery systems ("IHDS") to
provide care across the continuum.

IHDS are vertical networks of care providers that may include acute care
hospitals, physicians, out-patient care facilities and home healthcare. The goal
of IHDS is to deliver comprehensive healthcare in a cost effective manner and,
accordingly, their success is dependent on effectively managing and delivering
information to the caregivers. As IHDS are evolving, the demand for information
services is increasing as both financial and clinical information is required
across the multiple points-of-care.

Traditionally, the hospital information systems market has been the largest
segment of healthcare information services. According to Sheldon Dorenfest, a
healthcare consulting company, in 1994 the healthcare industry spent
approximately $8.5 billion for products and services to support automated
information systems, and the growth rate is expected to continue to increase
over the next several years as healthcare information expenditures are expected
to rise to $13 billion by 1997. In addition to this expanding market
opportunity, the demand for healthcare information systems is also increasing
because hospitals and other providers are under pressure to quantify and control
their costs. As a result, they are spending more of their operating budgets on
systems which enable them to access such information. According to the 1995
Annual HIMSS/HP Leadership Survey, an industry survey conducted by Hewlett
Packard at the Healthcare Information and Management Systems Society conference,
75% of the respondents stated that their information system investments will
increase at a rate of 20% or more over the next two years.

Healthcare information systems are evolving to meet the needs of a changing
marketplace. Initially, healthcare information systems were financially
oriented, focusing on the ability to capture

23
<PAGE>
charges and generate patient bills. As cost containment efforts have forced
providers and payors to focus on their costs, manage risk and provide outcomes
and quality analysis, system needs have evolved from the traditional billing
information to a wider range of needs including enterprisewide systems capable
of capturing and analyzing data at all points-of-care as well as data
repositories to store the data. Historically, cost containment efforts have been
hampered by a lack of integrated clinical and financial information. As
reimbursement is shifting more toward risk sharing and capitation, providers and
payers need to better manage risk by controlling costs, demonstrating quality,
measuring outcomes and influencing utilization. Each of these goals requires the
collection, analysis and interpretation of clinical and financial information
related to the delivery of healthcare.

The availability of a complete, timely and cost-effective patient-focused
information system is essential to controlling healthcare costs while providing
high quality patient care. In many cases, information necessary to provide
effective patient care is located at several different sites and is not
immediately available to the care giver. To implement a computerized
patient-focused information system that accesses patient information in a
cost-effective manner, current and historical paper records must be made
available by computer to all points-of-care. In order to effectively manage
information in the current healthcare environment, providers, payers and IHDS
need information systems that can interface fully with existing and future
systems, capture data at the point-of-care, communicate data across the
continuum of care and process and store large volumes of data necessary for the
development of the computer-based patient record.

STRATEGY

HBOC's strategy is to provide a comprehensive range of computer-based
information systems and services designed to meet the evolving needs of
healthcare enterprises. The key elements of this strategy are to:

LEVERAGE EXISTING CUSTOMER BASE. HBOC is a leader in the hospital
information systems marketplace with one or more applications installed in
approximately 2,600 of the 5,900 hospitals in the U.S. The Company expands its
core customer base through its sales and marketing efforts and strategic
acquisitions such as IBAX and HSG, which added 475 and 500 hospital customers,
respectively. This expanded customer base offers HBOC significant opportunities
to sell both additional applications of its established core product line and
its new Pathways patient-centered enterprisewide solutions. In addition, the
Company believes its customer relationships and familiarity with customers'
existing systems should give the Company an advantage over many of its
competitors in marketing applications to meet the evolving needs of these
customers. The Company also seeks to further leverage its relationships with
existing customers to access additional healthcare organizations throughout
newly-formed IHDS.

PROVIDE ENTERPRISEWIDE SOLUTIONS TO THE EVOLVING HEALTHCARE INDUSTRY. HBOC
offers one of the broadest product lines in the healthcare information systems
industry serving patient care, clinical, financial and strategic applications.
Through its Pathways 2000 family of patient-focused enterprisewide information
systems, the Company facilitates the more efficient integration of IHDS. HBOC's
Pathways 2000 client server applications are designed to provide a common
information infrastructure, enabling IHDS to collect, manage and disseminate
clinically oriented information organized on the basis of a patient's entire
history of care. The Pathways product line provides the capability to create
longitudinal computerized patient records as well as connectivity along the
entire continuum of care, enabling users to access patient data from any point
within an integrated delivery system.

PROVIDE SUPERIOR INTEGRATION OF PRODUCTS AND DATA. The Company's products
offer customers open systems solutions with flexibility in adding incremental
capabilities, which protects the customers' capital investments. In addition,
HBOC's client-server architecture facilitates integration of clinical with
financial and administrative data from both HBOC and non-HBOC applications for

24
<PAGE>
efficient resource allocation thereby allowing its customers to benefit from
price/performance advances. The Company believes that these features will be of
key significance to healthcare organizations as they face industry consolidation
and evolve as part of integrated delivery systems.

EXPAND INTO NEW MARKETS. The Company strives to establish premier product
brand-name recognition in new markets that provide business critical
applications in every essential care setting and the payer marketplace. The
Company believes that as the healthcare industry decentralizes, management
information requirements at the point-of-care will increase. HBOC is developing
or has acquired client server applications to meet these needs in the
physician's office, home health market, reference lab and the payer market, all
of which are scheduled to be available in 1995 or early 1996.

CONTINUE PRODUCT DEVELOPMENT. HBOC believes that a key to implementing each
of its growth strategies is an ongoing focus on research and development to
ensure its product offerings will continue to meet the evolving needs of its
existing and potential customer base. The Company's research efforts focus on
enhancements of existing product offerings as well as new product development.
In developing its products, HBOC's strategy is to ensure its information systems
are highly flexible, quickly adaptable and can serve the information access
needs of the increasingly broad range of users. HBOC's product developers use
state-of-the-art application development tools such as program generators,
artificial intelligence and expert systems which decrease development time and
lower the cost of new products. While the Company's efforts focus primarily on
internal research and development of new products, the Company has made and
continues to explore strategic acquisitions of developers of niche product
software to complement and diversify its product portfolio.

PRODUCT SUMMARY

The Company's offering of products and services is based on a strategic mix
of applications and technologies that support the restructuring of the
healthcare delivery system, backed by implementation, support and outsourcing
services. This portfolio of products is organized into four areas: core
applications, infrastructure applications, enterprisewide clinical practice
management applications and enterprise management applications.

CORE APPLICATIONS automate the operation of individual departments and their
respective functions within the healthcare enterprise.

INFRASTRUCTURE APPLICATIONS are not limited to a single department or
function; rather, they form the foundation of the emerging information
structures of healthcare enterprises. Specific components include:

- Interface managers that coordinate the flow of information throughout the
greater system and allow disparate incompatible source systems to
communicate with one another as well as enterprise applications;

- Indexing applications that organize the vast information collected about a
person throughout the enterprise into a patient-centered index; allowing
the patient to be tracked throughout the IHDS; and

- Data repository applications that collect all of the information generated
by source systems and organized by interface managers and patient indexes
into central relational databases, thus forming the basis for the
electronic medical record.

ENTERPRISEWIDE CLINICAL PRACTICE MANAGEMENT APPLICATIONS facilitate and
improve the actual practice of medicine throughout the enterprise. Examples
include:

- Point-of-care workstations that give professionals immediate access to the
critical information necessary to provide better quality care;

- Applications that make use of patient information to create protocols and
care pathways; and

- Applications that instantly register and schedule patients anywhere in the
enterprise from any other point within an enterprise.

25
<PAGE>
ENTERPRISE MANAGEMENT APPLICATIONS facilitate and improve the management and
operation of healthcare enterprises. These applications focus on providing
caregivers with the clinical, financial, and other information necessary to
improve the operation of the enterprise. Examples include utilization review and
accounts receivable management, as well as managed care contracting and member
management applications.

The following table outlines the principal products in each area:

PRODUCT SUMMARY

<TABLE>
<CAPTION>
GENERAL PRICE RANGE INSTALLED
PRODUCT FAMILY RELEASE DATE (IN THOUSANDS) BASE DESCRIPTION
- ---------------------- ------------- ------------ -------------- ------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
CORE APPLICATIONS
STAR STAR Available $150-250(1) 300 Hospital and clinical information
system -- UNIX/RISC-based (includes
patient care, laboratory,
radiology, pharmacy and financial)
HealthQuest HealthQuest Available $200-300 230 Hospital and clinical information
system -- IBM mainframe-based
Series Series Available $150-250 500 Hospital and clinical information
system (includes patient care,
radiology, pharmacy and financial)
TRENDSTAR TRENDSTAR Available $50(2) 650(3) Decision support system targeted at
acute care hospitals
Saint, The Precision CPG Available $150-1,000 400 Hospital and clinical information
Alternative, Host system -- UNIX/RISC-based and Host
Based Based

INFRASTRUCTURE
APPLICATIONS
Health Network Server Pathways Available $350-500 17 Relational database; data repository
for patient transactions
Interface Manager Pathways Available $60-150 58 Interface engine; manages network
traffic; performs protocol
conversion and translation
Health Network Pathways Available $300-500 11 Enterprisewide management system;
Management patient-centered data collection,
organization, and dissemination

ENTERPRISEWIDE
CLINICAL PRACTICE
MANAGEMENT
APPLICATIONS
Care Manager Pathways Available $150-1,000 34 Acute care point-of-care clinical
information system
Clinical Workstation Pathways Available $500-2,000 11 Assimilates and presents on-line,
-- Phases I and II real-time clinical information to
physicians and other care givers
Clinical Workstation Pathways Q4 95/Q1 96 $500-2,000 0 Will incorporate advanced nursing
-- Phases III and IV functions, clinical imaging, and
multimedia capabilities
Enterprise Scheduling Pathways Available $200-500 14 On-line enterprisewide scheduling
system
Enterprise Pathways Q4 95 $200-500 0 On-line enterprisewide registration
Registration system
Physician Chart Pegasus Q1 96 $150-300 2 Physician's office computer-based
Systems patient record
Home Health Home Health Q2 96 $150-500 0 Clinical point-of-care applications
for the home health market
</TABLE>

26
<PAGE>
<TABLE>
<CAPTION>
GENERAL PRICE RANGE INSTALLED
PRODUCT FAMILY RELEASE DATE (IN THOUSANDS) BASE DESCRIPTION
- ---------------------- ------------- ------------ -------------- ------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
ENTERPRISE MANAGEMENT
APPLICATIONS
Enterprise Strategic- TRENDSTAR Available $200-750 650(3) Collects and presents data from
Management transaction and decision support
systems in a high-level, summary
form
Contract Management Pathways Available $200-1,000 47 Monitors and manages multiple varied
contracts for providers with
managed care focus
Managed Care Pathways Q4 95 $200-1,000 1 Helps entities manage contractual
arrangements with providers,
payers, and patients
TRENDSTAR Enterprise TRENDSTAR Q1 96/Q3 96 $100-750 0 Enterprisewide decision support
Information System system; new version will be client/
server based and will run on Sybase
Receivables Pathways TBD $100-250 0 Facilitates A/R, billing, and other
Workstation money management functions
<FN>
- ------------------------------
(1) $150-250 per module. On average, customers purchase 4-5 modules. Excludes
hardware (which is typically 50% of the software license fee),
implementation fees (which are typically $300-400), and software
maintenance fees (which approximate 15% of software license fees).
(2) $50 per module. On average, customers purchase 3 modules.
(3) 650 represents total TRENDSTAR installed base (including Enterprise
Strategic Management and TRENDSTAR).
</TABLE>

SERVICES

Installation and implementation services are provided for purchasers of all
HBOC software products to assist with the smooth introduction of or transition
to those products. HBOC also provides software maintenance and enhancement
services, as well as custom programming and system modifications to meet special
client requirements. Equipment maintenance services are provided through HBOC's
various hardware partners.

CONNECT TECHNOLOGY

To support the connectivity needs of hospitals and their affiliates, the
Connect Technology Group ("CTG") provides total network installation and
support. In addition, CTG offers comprehensive value-added network information
services that extend local and metropolitan area networks outside of the
hospital to include payers, vendors, financial institutions and the Internet.
All together, HBOC's networking solutions provide customers with a complete
network solution for electronic access throughout a provider enterprise.

OUTSOURCING SERVICES GROUP

HBOC has been in the outsourcing business in the United States for more than
20 years and now offers outsourcing services in the United Kingdom as well. With
the change and uncertainty engendered by healthcare reform and the resulting
economic pressures, information systems outsourcing is becoming increasingly
popular in the United States. Outsourcing services go beyond managing hospital
data processing operations (traditionally known as facilities management) to
encompass strategic management services in information systems planning,
receivables management, business office administration and major system
conversions.

RESEARCH AND DEVELOPMENT AND TECHNOLOGY

The Company's product development effort applies advanced computer
technology and installation methodologies to the specific information processing
needs of its customers. The Company believes a substantial and sustained
commitment to such research and development is important to the long-term
success of the business.

27
<PAGE>
Many of the Company's products are portable to a variety of hardware
platforms to protect a healthcare organization's hardware investments and enable
it to benefit from price/performance advances. For example, HBOC offers a full
range of its products on RISC (Reduced Instruction Set Computing) hardware using
the UNIX operating system, which has very attractive price/performance
characteristics. Additionally, workstation technology, via PCs, provides
enhanced productivity and appeal for system users by giving them access to
graphics, image processing, voice processing, multiple technologies and
sophisticated user interfaces.

The Company also offers specialized processors, utilizing client/server
technology, which provide organizations with improved processing and storage for
large volumes of data and specific applications, including imaging and document
processing. The Company utilizes local, metropolitan and wide area networks to
provide faster and more effective pathways to distribute the wider variety of
data, images and recorded voice needed by image processing and client/server
applications.

Investment in software development, including both research and development
expense as well as capitalized software, has increased as the Company has
addressed new software applications and enhanced existing products for installed
systems. In each of the last three fiscal years, the Company expensed 9% of
revenue for research and development, which was approximately $29 million in
1994. The Company capitalized 25%, 24% and 23% of its research and development
expenditures in 1994, 1993 and 1992, respectively. Such amounts exclude the
costs associated with the Company's acquisitions. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

The technical concepts and codes embodied in the Company's computer programs
and program documentation are not protected by patents or copyrights but
constitute trade secrets that are proprietary to the Company. The Company and
its subsidiaries are the owners of various registered trademarks and service
marks, but such registration provides limited protection.

SALES AND MARKETING

The Company's primary market for its products and services consists of
approximately 3,000 acute care hospitals (and affiliated organizations) in the
above-100 bed range of the total of approximately 5,900 hospitals in the United
States. Through hospital affiliates, HBOC is increasingly marketing new products
to the total healthcare enterprise including ambulatory care, physician offices,
pharmacies, reference laboratories and managed care providers. Through its
subsidiary HBO & Company Canada Ltd., HBOC provides products and services in
Canada, where there are approximately 500 hospitals having 100 or more beds.
Through its subsidiary HBO & Company (UK) Limited, the Company services the
United Kingdom, where there are approximately 300 hospitals having 100 or more
beds. HBOC products are also sold in other parts of the world through agreements
with third parties. One or more of the Company's applications are currently
installed in approximately 2,600 hospitals.

HBOC's products and services are offered through a companywide sales
organization and business units that have responsibility for research and
development and customer services. HBOC's direct sales force includes over 150
salespersons. Approximately two-thirds of the sales force is dedicated to the
Pathways, STAR and HealthQuest product lines. The balance includes dedicated
sales forces for each of the remaining products lines.

28
<PAGE>
MANAGEMENT

The following table sets forth certain information about the executive
officers and directors of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------- --- ---------------------------------------------------------------------
<S> <C> <C>
Charles W. McCall 51 Director, President and Chief Executive Officer
James A. Gilbert 47 Vice President -- General Counsel and Secretary
Jay P. Gilbertson 35 Vice President -- Finance, Chief Financial Officer, Treasurer and
Assistant Secretary
Russell G. Overton 48 Senior Vice President -- Business Development
Albert J. Bergonzi 45 Executive Vice President -- Sales
John P. Crecine 55 Director
Alfred C. Eckert III 47 Director
Holcombe T. Green, Jr. 55 Chairman of the Board
Alton F. Irby III 55 Director
Gerald E. Mayo 63 Director
James V. Napier 58 Director
Charles E. Thoele 59 Director
Donald C. Wegmiller 56 Director
</TABLE>

Charles W. McCall has served as a Director, President and Chief Executive
Officer of the Company since 1991. Prior to joining the Company, he served as
President and Chief Executive Officer of CompuServe, Inc., a wholly owned
subsidiary of H&R Block, from 1985 to 1991. Mr. McCall is also a Director of
SYMIX Systems, Inc., EIS International, Inc., WestPoint Stevens Inc. and
XcelleNet, Inc.

James A. Gilbert has served as Vice President and General Counsel since
joining the Company in 1988. He has served as Secretary since 1992.

Jay P. Gilbertson has served as Vice President -- Finance, Chief Financial
Officer, Treasurer and Assistant Secretary since 1993. In 1992, Mr. Gilbertson
served as Vice President -- Controller and Chief Accounting Officer. From 1988
through 1991, he served in a financial management capacity at Medical Systems
Support, Inc., HBOC's hardware maintenance subsidiary sold in 1991.

Russell G. Overton has served as Senior Vice President -- Business
Development since 1992. From 1989 through 1991, he served as Vice President --
Business Development for HealthQuest Ltd. (a wholly owned subsidiary of the
Company).

Albert J. Bergonzi has served as Executive Vice President -- Sales of the
Company since June 1995. Prior to that time, Mr. Bergonzi served as the Vice
President and General Manager of the Company's Amherst Product Group.

John P. Crecine has served as Chief Executive Officer of Integrated Digital
Systems, Inc., a technological services company, since July 1994. He was the
President of Georgia Institute of Technology from 1987 to July 1994. Dr. Crecine
is a Director of Intermet Corporation. He has been a Director of the Company
since 1990.

Alfred C. Eckert III has been President of Greenwich Street Capital
Partners, Inc., a private investment firm, since January 1994 and has been a
Partner of Greycliff Partners, a private investment firm, since December 1991.
He was a Partner of Goldman, Sachs & Co., investment bankers, from December 1984
to November 1991. Mr. Eckert is a Director of Georgia Gulf Corporation. He has
been a Director of the Company since 1990.

29
<PAGE>
Holcombe T. Green, Jr. is the Chairman of the Board of Directors of the
Company and has been a Director of the Company since 1987. He served in the
capacity of President and Chief Executive Officer of the Company from January
1990 to January 1991. Mr. Green has served as the Chairman and Chief Executive
Officer of WestPoint Stevens Inc., a textile manufacturing company, since
October 1992. Mr. Green has been the Principal of Green Capital Investors, L.P.,
a private investment fund, since October 1987. He is also a Director of Georgia
Gulf Corporation, Rhodes, Inc. and American Buildings Company.

Alton F. Irby III has been a principal of J O Hambro Magan & Company,
investment bankers, since March 1988 and has also served as Deputy Chairman
since March 1994. Mr. Irby has been a Director of the Company since 1990.

Gerald E. Mayo has served as Chairman and President of Midland Financial
Services, Inc., the holding company for The Midland Life Insurance Company which
is the successor to The Midland Mutual Life Insurance Company, a life insurance
and annuities company, since December 1994. Mr. Mayo served the predecessor
company in similar capacities for over five years. Mr. Mayo is a Director of
Huntington BancShares Inc., The Columbia Gas System, Inc. and Borror
Corporation. He has been a Director of the Company since 1991.

James V. Napier has served as the Chairman of the Board of Directors of
Scientific-Atlanta, Inc., a communications equipment manufacturer, since
November 1992 and served as Acting Chief Executive Officer from December 1992 to
July 1993. From June 1988 to October 1992, he was Chairman and President of
Commercial Telephone Group, a telecommunication products company. Mr. Napier has
been a private investor since August 1987. Mr. Napier is a Director of Engelhard
Corporation, Intelligent Systems Corporation, Vulcan Materials Corporation,
Summit Communications Group, Inc. and Rhodes, Inc. He has been a Director of the
Company since 1981.

Charles E. Thoele has been a Consultant to and a Director of Sisters of
Mercy Health Systems, a not for profit healthcare system, since February 1991.
From July 1986 to January 1991, he served as the Chief Operating Officer of
Sisters of Mercy Health Systems. Mr. Thoele is also a Director of Transcend
Services, Inc. He has been a Director of the Company since 1989.

Donald C. Wegmiller has been President and Chief Executive Officer of
Management Compensation Group/HealthCare, an executive and physician
compensation consulting firm, since April 1993. He was Vice Chairman and
President of HealthSpan Health Systems Corporation ("HealthSpan") from November
1992 to April 1993. From May 1987 to November 1992, he was President and Chief
Executive Officer of Health One Corporation, a healthcare services company that
merged with HealthSpan. Mr. Wegmiller is a Director of Medical Graphics
Corporation, Possis Corporation and Minnesota Power & Light Company. He has been
a Director of the Company since 1988.

30
<PAGE>
THE SELLING STOCKHOLDER

All of the 3,600,000 shares of Common Stock offered hereby (excluding up to
400,000 shares that may be sold by FDC, the Selling Stockholder, pursuant to the
Underwriters' over-allotment option) are being sold by FDC. Such shares were
issued to FDC in June 1995 in connection with the sale of HSG to the Company.
See "Prospectus Summary -- Recent Acquisitions." As of the date of this
Prospectus, the 4,000,000 shares of Common Stock owned by FDC represent
approximately 11.1% of the outstanding Common Stock. Upon completion of this
Offering, FDC will own 400,000 shares of Common Stock (representing
approximately 1.1% of the outstanding Common Stock (without giving effect to the
CliniCom Acquisition)) or no shares of Common Stock if the Underwriters'
over-allotment option is exercised in full.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the CliniCom Acquisition, HBOC will have approximately
39.7 million shares outstanding all of which will be freely tradeable except (i)
shares which are held by certain persons who may be deemed "affiliates" of HBOC
for purposes of Rule 144; (ii) approximately 1.3 million of the approximately
3.5 million shares issuable in the CliniCom Acquisition (which CliniCom has
advised HBOC will be issued to persons who may be deemed "affiliates" of
CliniCom for purposes of Rule 145); and (iii) all or any portion of the 400,000
shares held by the Selling Stockholder which are not sold to the underwriters
pursuant to their over-allotment option, which will continue to be "restricted
securities" for purposes of Rule 144.

The Company, the Selling Stockholder and certain of the Company's officers
and directors who beneficially own in the aggregate 1,003,937 shares of Common
Stock (approximately 2.5% of the outstanding Common Stock after giving pro forma
effect to the consummation of the CliniCom Acquisition), have agreed that, for a
period of 60 days after the date of this Prospectus, they will not, without the
prior written consent of Smith Barney Inc., offer for sale, sell, contract to
sell or otherwise dispose of any Common Stock (or any securities convertible
into or exercisable or exchangeable for Common Stock) or grant any options or
warrants to purchase Common Stock, except, in the case of the Company, pursuant
to a registration statement on Form S-4 or S-8 or in transactions exempt from
the registration requirements of the Securities Act so long as the transferee
thereof agrees to the foregoing restrictions on transfer for the remainder of
such 60 day period.

In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned restricted securities for at least a two-year period (as
computed under Rule 144), and any person who is an affiliate of the Company
whose shares are not restricted securities, is entitled to sell within any
three-month period a number of shares that does not exceed the greater of (i) 1%
of the then outstanding shares of Common Stock (approximately 400,000 shares
after giving effect to the CliniCom Acquisition), and (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks immediately
preceding the date on which the notice of sale is filed with the Commission.
Sales under Rule 144 are also subject to certain provisions relating to the
manner and notice of sale and the availability of current information about the
Company. A person (or persons whose shares are aggregated) who is not deemed an
affiliate of the Company at any time during the 90 days immediately preceding a
sale, and who has beneficially owned shares for at least a three-year period (as
computed under Rule 144), would be entitled to sell such shares under Rule
144(k) without regard to the volume limitations and other conditions described
above. Under Rule 145 as currently in effect, former affiliates of CliniCom are
free to publicly resell their shares in accordance with the provisions of Rule
144, other than the two-year holding period requirement.

The persons who may be deemed "affiliates" of CliniCom have been granted
certain registration rights with respect to their shares as has the Selling
Stockholder with respect to the balance, if any, of its shares which remain
unsold after completion of the Offering.

31
<PAGE>
Sales, or the availability for sale, of a substantial number of the shares
of Common Stock could have a significant adverse effect on the market price of
the Common Stock.

UNDERWRITING

Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof, each of the underwriters named below (the "Underwriters")
for whom Smith Barney Inc., Alex. Brown & Sons Incorporated, Donaldson, Lufkin &
Jenrette Securities Corporation and Schroder Wertheim & Co. Incorporated are
acting as the Representatives (the "Representatives") has severally agreed to
purchase, and the Selling Stockholder has agreed to sell to each Underwriter,
Shares of Common Stock which equal the number of Shares set forth opposite the
name of such underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------- -----------
<S> <C>
Smith Barney Inc........................ 551,000
Alex. Brown & Sons Incorporated......... 551,000
Donaldson, Lufkin & Jenrette
Securities Corporation................. 551,000
Schroder Wertheim & Co. Incorporated.... 551,000
George K. Baum & Company................ 28,000
Bear, Stearns & Co. Inc................. 68,000
Brean Murray, Foster Securities Inc. ... 28,000
CS First Boston Corporation............. 68,000
The Chicago Corporation................. 28,000
Dain Bosworth Incorporated.............. 48,000
Dean Witter Reynolds Inc................ 68,000
Dillon, Read & Co. Inc. ................ 68,000
A. G. Edwards & Sons, Inc............... 68,000
Everen Securities, Inc.................. 48,000
Goldman, Sachs & Co. ................... 68,000
Interstate/Johnson Lane Corporation..... 28,000

<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------- -----------
<S> <C>

Jefferies & Company, Inc. .............. 48,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................... 68,000
Montgomery Securities................... 68,000
Morgan Stanley & Co. Incorporated....... 68,000
Needham & Company, Inc.................. 48,000
Oppenheimer & Co., Inc.................. 68,000
Pacific Growth Equities, Inc............ 28,000
PaineWebber Incorporated................ 68,000
Piper Jaffray Inc....................... 48,000
Prudential Securities Incorporated...... 68,000
Punk, Ziegel & Knoell................... 48,000
Ragen MacKenzie Incorporated............ 28,000
The Robinson-Humphrey Company, Inc...... 48,000
Sterne, Agee & Leach, Inc............... 28,000
Wessels, Arnold & Henderson, L.L.C...... 48,000
-----------
Total............................... 3,600,000
-----------
-----------
</TABLE>

The Underwriters initially propose to offer part of the Shares of Common
Stock directly to the public at the public offering price set forth on the cover
page of this Prospectus and part to certain dealers at a price which represents
a concession not in excess of $1.35 per Share below the public offering price.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $.10 per Share to the other Underwriters or to certain other dealers.
After the initial public offering, the public offering price and such
concessions may be changed by the Underwriters.

The Selling Stockholder has granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an
aggregate of 400,000 additional shares of Common Stock at the public offering
price set forth on the cover page of this Prospectus less underwriting discounts
and commissions. The Underwriters may exercise such option to purchase
additional shares solely for the purpose of covering over-allotments, if any,
incurred in connection with the sale of the Shares offered hereby. To the extent
such option is exercised, each Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares as the number of Shares set forth opposite such Underwriter's
name in the preceding table bears to the total number of Shares in such table.

The Company, the Selling Stockholder and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

The rules of the Commission generally prohibit the Underwriters from making
a market in the Common Stock during the two business days prior to commencement
of sales in this Offering (the "Cooling Off Period"). The Commission has,
however, adopted Rule 10b-6A ("Rule 10b-6A"), which provides an exemption from
such prohibition for certain passive market making transactions. Such passive
market making transactions must comply with applicable price and volume limits
and must be identified as passive market making transactions. In general,
pursuant to Rule 10b-6A, a passive market maker must display its bid for a
security at a price not in excess of the highest independent bid for the
security. If all independent bids are lowered below the passive market maker's
bid, however,

32
<PAGE>
such bid must then be lowered when certain purchase limits are exceeded.
Further, net purchases by a passive market maker on each day are generally
limited to a specified percentage of the passive market maker's average daily
trading volume in a security during a specified prior period and must be
discontinued when such limit is reached. Pursuant to the exemption provided by
Rule 10b-6A, certain of the Underwriters and selling group members may engage in
passive market making in the Common Stock during the Cooling Off Period. Passive
market making may stabilize the market price of the Common Stock at a level
above that which might otherwise prevail, and if commenced, may be discontinued
at any time.

LEGAL MATTERS

The validity of the Shares offered hereby will be passed upon for the
Company by Jones, Day, Reavis & Pogue, Atlanta, Georgia. Certain legal matters
will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher &
Flom, New York, New York.

EXPERTS

The audited financial statements of HBOC incorporated by reference in this
Registration Statement of which this Prospectus is a part, to the extent and for
the periods indicated in their report, have been audited by Arthur Andersen LLP,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.

With respect to the unaudited interim financial information of HBOC for the
quarter ended March 31, 1994 and 1995 and the quarter and six months ended June
30, 1994 and 1995, which are also incorporated by reference herein, Arthur
Andersen LLP has applied limited procedures in accordance with professional
standards for a review of that information. However, their separate reports
thereon state that they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of reliance on their
reports on that information should be restricted in light of the limited nature
of the review procedures applied. In addition, the accountants are not subject
to the liability provisions of Section 11 of the Securities Act for their report
on the unaudited interim financial information because that report is not a
"report" or a "part" of the Registration Statement prepared or certified by the
accountants within the meaning of Sections 7 and 11 of the Securities Act.

The financial statements of the Health Systems Group of FDC at December 31,
1993 and 1994, and for each of the three years in the period ended December 31,
1994 incorporated herein and in the Registration Statement of which this
Prospectus is a part have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon, and are incorporated herein in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.

The audited financial statements of CliniCom incorporated by reference in
this Prospectus and elsewhere in the Registration Statement of which this
Prospectus is a part, to the extent and for the periods indicated in their
report, have been audited by Arthur Andersen LLP, independent public
accountants, and are included in reliance upon the authority of said firm as
experts in giving said report.

33
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES TO WHICH
IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Documents Incorporated by Reference............ 2
Prospectus Summary............................. 4
Risk Factors................................... 7
Pro Forma Financial Information................ 9
Selected Historical Financial Information...... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 17
Business....................................... 23
Management..................................... 29
The Selling Stockholder........................ 31
Shares Eligible for Future Sale................ 31
Underwriting................................... 32
Legal Matters.................................. 33
Experts........................................ 33
</TABLE>

3,600,000 SHARES

[LOGO]
COMMON STOCK

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P R O S P E C T U S

SEPTEMBER 27, 1995

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SMITH BARNEY INC.

ALEX. BROWN & SONS
INCORPORATED

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

SCHRODER WERTHEIM & CO.

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