DAOU Signs Preferred Supplier Agreement with PhyCor

Business Wire, April 7, 1998

SAN DIEGO--(BW HealthWire)--April 7, 1998--DAOU Systems Inc. (NASDAQ:DAOU) has entered into a preferred supplier agreement with PhyCor (NASDAQ:PHYC) to provide the organization with network evaluation and design services.

These services would be available to PhyCor's 55 affiliated clinics, 510 service sites, and 28 independent physician association (IPA) markets. DAOU is already conducting network evaluation and design for five PhyCor clinics and affiliates.

"This is an important and attractive market for DAOU," said Robert McNeill, DAOU Systems chief operating officer. "Obviously, the physicians are the cornerstone of healthcare. Under the umbrella of organizations like PhyCor, they are consolidating their resources within the framework of a restructured healthcare industry. As a result, managed service organizations, IPAs and clinics are rapidly growing markets. Of course, as they grow, they will require network services and information technology in order to maintain their competitiveness. It is DAOU's strategic objective to expand its services within this market."

Of the agreement, Eric Thrailkill, vice president of information services, said, "Information access and distribution is critical to physician's effective delivery of medical services and monitoring of patient outcomes. DAOU's technical expertise in network systems will assist PhyCor's affiliated clinics in meeting this most important goal."

PhyCor is one of the nation's largest physician corporations. The company operates in 68 markets, with more than 22,000 physicians, and more than 2.7 million managed care lives.

DAOU Systems Inc., designs, implements, and manages computer networks for the healthcare industry. The company offers solutions for voice, video and data networking, combining its technological expertise with its knowledge of the healthcare industry's specialized needs. In addition, DAOU offers an array of operational and Internet solutions.

DAOU's clients comprise more than half of the nation's top 50 integrated healthcare delivery networks and include such organizations as Centura Health, North Shore Health System, Mercy Health Services, Harris Methodist Health System, and Catholic Medical Center of Brooklyn and Queens.

DAOU operates five regional offices and five operations centers across the country. The firm employs a staff of over 475 and has provided services to more than 1,000 organizations throughout the U.S.

CONTACT: DAOU Systems Inc.

Craig K. Collins, 619/646-2857

craig.collins@daou.com

www.daou.com