FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended August 31, 1995
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[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from to
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Commission file number 0-13879

Salick Health Care, Inc.
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(Exact name of registrant as specified in its charter)

Delaware 95-4333272
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

8201 Beverly Boulevard, Los Angeles, California 90048-4520
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (213) 966-3400
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Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on
which registered

Not Applicable
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Securities registered pursuant to Section 12(g) of the Act:
Callable Puttable Common Stock
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(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].

The aggregate market value of callable puttable common stock held by
nonaffiliates of the registrant was $155,532,756 based on the closing price of
the callable puttable common stock on the NASDAQ reporting system on November
15, 1995.

The number of shares outstanding of the issuer's common stock as of
November 15, 1995: 5,657,115. The number of shares outstanding of the issuers'
callable puttable common stock at November 15, 1995: 5,638,082.

DOCUMENTS INCORPORATED BY REFERENCE

Information called for by Part III of Form 10-K is incorporated by reference to
the Proxy Statement of the Registrant to be filed by December 29, 1995 pursuant
to Regulation 14A in connection with the Annual Meeting of Stockholders. Except
for the information incorporated herein by reference, said Proxy Statement shall
not be deemed "filed" as part of this Report on Form 10-K.

PART I

ITEM 1. BUSINESS

THE COMPANY

Salick Health Care, Inc. ("Salick" or the "Company") provides disease-
specific health care services and risk-based and other products and programs to
health care payors, principally in the areas of the diagnosis and treatment of
cancer and the treatment of kidney failure, primarily through its operating
subsidiaries, Comprehensive Cancer Centers, Inc., USHAWL, Inc., Century Dialysis
Corporation, INFUSX, Inc. and SalickNet, Inc. The Company's strategy is to
expand its services throughout the United States and to utilize the Company's
expertise and experience in providing disease specific outpatient services to
its historic operations and to expand into additional and new settings
(inpatient, alternate site and home), into areas of diagnosis and treatment of
other complex illnesses and diseases requiring sophisticated, long-term care and
in providing unique disease state programs to payors and managed care entities.

The diagnosis and treatment of cancer and the treatment of kidney failure
represent significant and growing markets. The American Cancer Society
estimates that 33% of Americans now living will eventually be diagnosed with
cancer. The National Cancer Institute estimates that overall direct and
indirect costs of cancer are in excess of $100 billion. Published reports
indicate that the market for dialysis services is currently in excess of $4
billion. The Company's facilities, and its ability to provide a full range of
services to cancer and kidney disease patients in any setting, e.g., outpatient,
alternate site, home, etc., are designed to meet the growing demand for cancer,
kidney, organ transplant, immuno-deficient and other complex disease medical
treatment in a quality, cost effective manner, consistent with the increasing
focus on cost containment in the health care sector.

The Company is a leader in the design, development and operation of
primarily outpatient facilities for the diagnosis and treatment of cancer. The
Company believes that its experience and expertise in delivering such outpatient
medical services, and its ability to provide cost effective, quality and
convenient care, provides significant advantages to cancer patients over
outpatient services offered at physicians' offices, acute care hospitals or
other clinical settings. Traditionally, many of the cancer diagnostic and
treatment services provided by Salick on an outpatient basis have been
principally available through more costly hospital admissions. The Company's
Cancer Centers provide sophisticated, cost effective health care services,
emphasizing quality of care and patient convenience.

At August 31, 1995, the Company operated ten outpatient comprehensive
diagnostic and treatment cancer centers in affiliation with medical schools,
teaching hospitals and private and community hospitals. The centers are located
at Cedars-Sinai Medical Center in Los Angeles, California, Mount Sinai Medical
Center in Miami Beach, Florida, Parkway Regional Medical Center and Kendall
Medical Center in the Miami, Florida area, Temple University Medical Center in
Philadelphia, Pennsylvania, JFK Medical Center in Palm Beach County, Florida,
Desert Hospital in Palm Springs, California, Alta Bates Medical Center in
Berkeley, California, the University of Kansas Medical Center in Kansas City,
Kansas and Westlake Medical Center in Westlake, California. These ten centers
are collectively referred to herein as the "Cancer Centers".

Salick is also one of Southern California's leading providers of
specialized facilities and services for the treatment of patients suffering from
kidney failure. Dialysis treatments provided by the Company generally

utilize artificial kidney machines that remove certain toxic substances from the
blood and return the cleansed blood to the patient. Salick currently operates or
manages nine outpatient (chronic) facilities, provides inpatient (acute)
dialysis services at more than twenty Southern California hospitals and provides
dialysis services to patients in their homes.

Having the ability to provide services in all settings is, in the areas of
cancer and dialysis, a unique feature attractive to payors and provides a
continuum of care for patients and their physicians. This is an integral part
of the Company's strategy for dealing with cost controls and the changing health
care environment with its emphasis on managed care.

At each of its Cancer Centers and dialysis facilities, the Company provides
the supervision, medical personnel, technicians and equipment for patient
treatments. However, with the exception of certain South Florida locations, the
Company does not provide any part of the physician component of the services
rendered.

The Company's INFUSX subsidiary provides alternate site and home care
services (including chemotherapy, infusions, antibiotics, nursing visits, etc.)
for cancer, kidney disease, organ transplant and immuno-deficient patients in
the Southern California, South Florida, Kansas/Missouri and greater Philadelphia
areas.

The Company's subsidiary, SalickNet, provides a range of cancer and
dialysis treatment programs to managed care entities including Health
Maintenance Organizations ("HMO"), Preferred Provider Organizations ("PPO")
Independent Practice Associations ("IPA"), self insured and other payors of
health care services. The SalickNet programs offered include capitated
contracts (a set price calculation on the basis of a per member, per month
charge), discounted fee for service, case rate and visit group methodologies.
These programs employ proprietary practice guidelines and outcomes measurement
to gauge the success and effectiveness of the programs offered through
contracted physicians and facilities on the basis of quality, convenience,
patient satisfaction and cost effectiveness. The Company's programs, the first
of their kind, have been well received since being introduced in 1994 and
include the first capitated covered treatment agreement with Physician
Corporation of America covering 120,000 persons in South Florida, and a non-
capitated global fixed fee agreement with CAPP CARE, a national managed PPO for
the Company's services.

Salick is a Delaware corporation formed in July 1991 for the purpose of
changing the state of incorporation of Salick Health Care, Inc., a California
corporation ("Salick California"), from California to Delaware by way of a
merger of Salick California with and into the Company which was consummated on
August 27, 1991. All references herein to Salick or the Company shall, unless
the context otherwise clearly indicates, refer to both the Company and Salick
California.

In April 1995, an indirect wholly owned subsidiary of Zeneca Limited, an
English company, was merged into the Company, with the Company being the
surviving corporation. Pursuant to the merger, the then stockholders of the
Company received an aggregate of 5,634,115 shares of a new Callable Puttable
Common Stock of the Company and cash in exchange for their shares of the
Company's Common Stock and a wholly owned subsidiary of Zeneca Limited received
an aggregate of 5,657,082 shares of the Company's Common Stock. As a result,
Zeneca Limited beneficially owns at least 50% of the equity securities of the
Company. Zeneca Limited is a wholly owned subsidiary of Zeneca Group PLC, an
English company, which is a major international bioscience business engaged in
the research, development, manufacture and marketing of ethical (prescription)

pharmaceuticals, agricultural chemicals, specialty chemicals, seeds and
biological products.

Salick's executive offices are located at 8201 Beverly Boulevard, Los
Angeles, California 90048-4520, telephone number (213)966-3400.

CANCER SERVICES

GENERAL

The American Cancer Society estimates that one of three Americans now
living will eventually be diagnosed with cancer. In 1995 alone, estimates are
that approximately 1,300,000 people will be diagnosed as having cancer,
excluding nonmelanoma skin cancer and carcinoma in situ. The National Cancer
Institute estimates that the overall direct and indirect costs of cancer exceed
$100 billion. Based on the trend shown in American Cancer Society reports, the
incidence of cancer as well as cancer related costs has continued to grow.
However, the incidence of certain forms of cancer can be reduced and early
detection and treatment of cancer can improve cure rates and increase life
expectancy. New developments in the treatment of certain types of cancer have
not only increased the ability to detect cancer in early stages but have
significantly increased the five year survival rate for cancer patients.

The Company's strategy has been to provide, in affiliation with major
university, teaching and other hospitals, substantially all of the outpatient
health care services necessary to meet the needs of cancer patients and their
physicians. More recently, the Company has been adding alternate sites and
began providing inpatient services at selected Centers. Each of the Cancer
Centers addresses the critical needs of the cancer patient, their families and
partners in care by offering a wide range of services, delivered in a cost
effective setting. Each of the Cancer Centers is open for extended hours with
most services available seven days a week.

Among the many diagnostic and therapeutic services available at or through
a Cancer Center are diagnostic radiology (including CT scanning, magnetic
resonance imaging and ultrasound), radiation therapy, infusion and bolus
chemotherapy, laboratory, pharmacy, blood banking, nutritional counseling, pain
management, educational and psychosocial services. Most of the Cancer Centers
presently in operation provide the majority of these services on site. As a
Cancer Center moves from interim to permanent facilities, substantially all
services are provided on site.

Each Cancer Center is led by a Medical Director who is an acknowledged
expert in the diagnosis and treatment of cancer. The Medical Directors and
other physicians who treat patients at the Cancer Centers are supported by
Company personnel (including nurses, pharmacists, technicians, psychiatrists,
psychologists, social workers and nutritionists), who have substantial
experience in providing services to cancer patients. Each Cancer Center is the
exclusive provider to the affiliated hospital of substantially all of its
outpatient diagnostic and treatment programs related to cancer.

Salick emphasizes interaction between its Cancer Centers' Medical Directors
and area affiliated physicians in order to enable all patients to have access to
and to share the latest clinical research and treatment protocols. This enables
physicians in one area of the country to have access to expertise, as needed,
without having to refer their patient to other facilities and lose contact with
their patient. See also "Artificial Kidney ("Dialysis") Services and Medical
Supplies."

ADDITIONAL SERVICES

The American Cancer Society estimates that one out of every nine women will
develop breast cancer. Breast cancer is the second leading cause of cancer
death in women. The Company believes that there is a clear need for increased
efforts and specialized attention to the prevention, detection and treatment of
breast cancer. In order to address this current need and to provide individuals
with prompt responses to their concerns, the Company operates breast centers
affiliated with its Cancer Centers at the Mount Sinai Medical Center, in Miami
Beach, Florida, at Desert Hospital in Palm Springs, California, at Westlake
Medical Center in Westlake, California and in Palm Beach, Florida. Certain
breast cancer specific services are also provided at the Company's Cedars-Sinai,
Alta Bates, Temple University and University of Kansas Cancer Centers. The
Company is developing additional comprehensive breast care centers
(collectively, "Breast Centers") proximate to or as an integral part of the
Cancer Centers in order to take advantage of the full range of services which
the Company's programs offer. The Breast Centers provide state of the art
detection, diagnostic and treatment services to individuals, with and without
the disease. Education and counseling with respect to all aspects of breast
health and disease are an integral part of the Breast Center program. The
Company provides cancer risk assessment at its Alta Bates, Westlake and JFK
Centers. This program takes into account genetic and epidemiologic factors as
they relate to the potential of a person's risk of contracting breast cancer.
The Company believes that few health care facilities provide such assessment and
counseling services and that its Breast Center program will aid in the early
detection and prompt treatment of breast cancer, thus increasing the potential
for cure.

Certain transplantation and surgical procedures relating to cancer are or
will soon be able to be done on an outpatient basis. Where appropriate and
authorized, certain of the Company's existing and future Cancer Centers will
have these facilities. Additionally, as some of these surgical and
transplantation procedures may continue to have to be done on an inpatient
basis, at certain Cancer Centers the Company expects to add inpatient services
for such procedures to be done in Company facilities.

The Company's alternate site and home infusion subsidiary, INFUSX, Inc.
("INFUSX") provides a range of infusions, nutrition, antibiotics, pain
management, blood products, nursing and other treatment services to patients
with chronic and complex illnesses requiring sophisticated, long term care,
matching disease treatment intensity with the resource intensity and Company
facility (Cancer Center, alternate site facility, home, etc.) necessary to
service the patient's needs. In addition to its appeal to managed care
entities, employer groups, other health care payors and patients amenable to
such treatment, INFUSX provides the Company with the ability to service patients
who have historically been provided such care by others. It also allows the
Company to broaden the scope of its programs and services and, at greatly
reduced capital costs, to reach out to other payors, areas and patients that
have not previously been serviced by the Company.

Increasing health care costs and decreasing reimbursements have hastened
the trend toward managed care and alternate site care. Managed care, in its
myriad forms, covers approximately 55% of U.S. workers and focuses on limiting
or sharing risk among payors and providers. SalickNet, the Company's managed
care subsidiary, which entered into its first two major agreements in 1994,
develops and oversees such arrangements with payors including self insured
employers and managed care companies for the provision of complex care
principally relating to cancer. SalickNet differs from most managed care
companies in that it offers an integrated system of care, which includes
physician services, inpatient, outpatient, and home care services at

predetermined prices, using certain proprietary practice guidelines developed by
a group of experts, and evaluated on the basis of an array of outcome measures,
e.g., mortality, patient satisfaction and quality of life.

Salick believes that there are numerous locations at which its and the
SalickNet products can be sold and Cancer Centers and INFUSX operations
established or acquired. The Company regularly engages in discussions to
establish additional cancer centers with medical schools, private and public
hospitals, physician groups, prepaid health plans and third party payors. Some
of the entities with whom the Company may negotiate may already offer some of
the services provided by the Company.

The market for disease state or disease specific managed care arrangements
on both a pricing and service to patients basis is rapidly developing. The
Company is a leader in this nascent line of business with long experience and
expertise in providing assorted services in a cost-effective, quality manner.
These programs include capitation, discounted fee for service, visit groups and
case rates. By offering a full array of services, patient referrals and billing
procedures are simplified. Discussions with managed care organizations using
various programs are ongoing. The Company has obtained reinsurance to manage
its risk exposure on its capitated contracts.

BENEFITS OF A COMPREHENSIVE CANCER PROGRAM

The Company believes that its multi-disciplinary Cancer Center program
represents an innovative approach offering an essential improvement in the
provision of services for the diagnosis and treatment of cancer. Significant
aspects of the programs and services include:

Convenience of Care. Convenience to the patient is an essential part of
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the Company's strategy and a primary consideration in scheduling treatments and
procedures. Traditionally, a cancer patient has been treated in a variety of
settings, including the hospital, outpatient diagnostic radiology and radiation
therapy facilities, the physician's office and the emergency room, often
competing for access to services with patients having a variety of other
illnesses. A Salick Cancer Center provides substantially all diagnostic and
treatment services, on an outpatient basis, at a single site. The Cancer
Center's services are available seven days a week, providing patients with
continuous access to professional staff and services and not requiring patients,
during non-business hours, to utilize facilities such as emergency rooms.
Because of the breadth of services available, the Cancer Centers allow a
physician to more rapidly establish a diagnosis and initiate appropriate
treatment. Substantially all of the Company's programs enable the patient to
receive care promptly and in a convenient setting and to return to his or her
family each day, thereby improving the quality of life for the patient and the
patient's family.

Quality of Care. Each Cancer Center has sophisticated diagnostic equipment
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and trained staff available to physicians and patients utilizing the Cancer
Center, is staffed by physicians, nurses and technicians with expertise in
cancer care and has a Medical Director who provides overall supervision of
quality, implements clinical and research developments, and accesses current
treatment protocols for use by patients and their physicians. A patient care
plan to facilitate interaction between all persons involved in the patient's
care is developed for each patient. The plan provides for individualized
objectives of care and protocol compliance, including formal treatment schedules
and diagnostic procedures monitoring the course of therapy in the Cancer Center,
the hospital and the home. Records documenting the patient's history, treatment
and clinical course are immediately available to the hospital staff if admission
of the patient is required.

Studies published in The Journal of Clinical Oncology and Cancer have
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indicated that reduced side effects from intensive chemotherapy can often be
achieved for patients treated during lengthier sessions. The Cancer Centers
provide this intensive chemotherapy to the numerous patients who may benefit
from this method of treatment. Physicians' offices, physician based practice
locations including those managed by others and home care entities often lack
the capacity to safely and efficiently provide this type of treatment or to
handle any severe complications which may arise as a result of the treatment.

Cost Effectiveness. The Cancer Center program provides diagnosis and
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treatment in cost effective settings, not dependent upon hospitalization or
multiple site testing, record keeping and evaluations to effect diagnosis or to
institute treatment. The Company believes that the overall cost of patient care
is reduced because of the rapidity of diagnosis and implementation of treatment
as well as the avoidance of duplicative tests and services, inconsistent
procedures, unnecessary hospitalization and the ability to match resources to
the intensity of the care required.

Benefits to Hospitals. The Cancer Centers provide a hospital with practice
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management services, a truly coordinated disease specific program providing
quality medical care and support which serve to enhance the hospital's
reputation. The addition of these sophisticated facilities and programs may
also attract new patients to the hospital for other health care services.
Because of its resources, reputation in the field of cancer and expertise,
Salick is able to provide a hospital with the services and facilities of a
Cancer Center in a shorter period of time than if the hospital were to seek to
develop such a center on its own. Additionally, as a Cancer Center provides its
services principally on an outpatient basis, the affiliated hospital is often
able to discharge its cancer inpatients sooner. This facilitates the hospital's
ability to manage under present reimbursement programs such as capitation. See
"Governmental Regulation."

Benefits to Physicians. The Cancer Centers provide physicians with
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practice management services, a trained oncology staff, state of the art
facilities, access to many of the latest treatment protocols and clinical
research, a support staff, and continuing education. By affiliating with and
utilizing a Cancer Center, physicians can increase their income by freeing their
time to see an increasing number of patients and reducing their overhead
expenses.

Benefits to Employers and Payors. In addition to providing a high quality
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program and establishing control over payor cost, the Company has established
"managed care" and "physician-facility network" teams to develop, implement and
operate programs aimed at the managed care market. These teams are developing
what the Company believes to be innovative programs dealing with cancer in the
areas of outcome studies (as to utilization measures, patient satisfaction and
survival rates), guidelines for the diagnosis and treatment of cancer, case rate
charges, preferred fee-for-service charges, capitation programs and the
establishment of physician stand alone and combined physician-facility networks,
all to be marketed and employed, as they are developed, to employer groups,
purchasing alliances, managed care and other payors.

OPERATING CANCER CENTERS

CEDARS-SINAI CANCER CENTER

Salick's 53,000 square foot Cancer Center at Cedars-Sinai Medical Center
("Cedars-Sinai") in Los Angeles, California provides, 24-hours a day, seven days
a week, substantially all of the programs and services required by a

cancer patient, including infusion and bolus chemotherapy, radiation therapy,
pharmacy, laboratory, blood transfusions, psychosocial services and oncology
nursing. This Cancer Center has its own identity within and is located on the
campus of the hospital. The Company is the exclusive provider of substantially
all the hospital's outpatient cancer diagnostic and treatment programs and
facilities in conjunction with the hospital's teaching and research programs.
All physicians treating patients at the Cancer Center must be members of the
Cedars-Sinai staff. It is the Company's understanding that Cedars-Sinai has an
open medical staff in medical oncology and many other specialties.

The Company has obtained nearby space which it may use for expansion of the
Cancer Center at Cedars-Sinai to meet increasing demands for patient care and to
accommodate additional physicians.

The Company owns the physical improvements and equipment located at the
Cancer Center, subject to the rights of Cedars-Sinai upon termination of the
agreement and the lessors or sellers under any equipment lease or purchase
contract. The Company has no ownership interest in the land upon which the
Cancer Center is located. If the Company elects to terminate the Cedars-Sinai
agreement without cause and liability, the Company must transfer all physical
improvements and all of the Company's interest in the Cancer Center's equipment
to Cedars-Sinai without payment. In the event the agreement is not extended or
is terminated by the Company for cause, Cedars-Sinai is required to purchase the
Company's interest in the Cancer Center's improvements at their book value
amortized over a twenty year life and may purchase or lease the Cancer Center's
equipment at its then fair market value reduced by existing obligations assumed
by Cedars-Sinai. The loss of the agreement with Cedars-Sinai would have a
material adverse effect on the Company.

MOUNT SINAI CANCER CENTER

Under its agreement with Mount Sinai Medical Center in Miami Beach,
Florida, the Company became the exclusive provider of outpatient cancer services
at Mount Sinai Medical Center's existing Radiation Therapy and Breast Center
Departments in November 1988 and has provided most of the hospital's other
outpatient cancer services, such as medical oncology, laboratory and pharmacy,
in interim space since April 1989. The Company began construction of the
permanent center in 1994 and completed and occupied it in November 1995. The
Mount Sinai Comprehensive Cancer Center's programs and services are similar to
those of the Cedars-Sinai Comprehensive Cancer Center.

TEMPLE UNIVERSITY CANCER CENTER

Salick operates this Cancer Center in interim space on the Temple
University Health Sciences and Hospital campus in Philadelphia, Pennsylvania.
Services provided include radiation and medical oncology, laboratory, pharmacy
and psychosocial services. Stem-cell pheresis and stereotactic radiosurgery
services are also included in services provided at this facility. The
development of the permanent Cancer Center is being planned and will be subject
to pending regulatory and other approvals. At such time as the permanent center
is established, the Temple University Cancer Center's programs and services will
be similar to those of the Cedars-Sinai Cancer Center.

JFK CANCER CENTER

On October 1, 1987, Salick became the provider of services at the 20,000
square foot JFK Medical Center Outpatient Comprehensive Cancer Center located in
Palm Beach County, Florida. This Cancer Center provides medical and radiation
oncology programs and services including chemotherapy, pharmacy and laboratory
services as well as a full range of support services.

ALTA BATES CANCER CENTER

In December 1990, the Company became the exclusive provider of a broad
range of medical oncology and radiation therapy services at Alta Bates Medical
Center in Berkeley, California in a 10,000 square foot interim facility. The
permanent Cancer Center of some 35,000 square feet was occupied in May 1995.
Most radiology services are presently provided at the Center with some at off
site locations in which the Company is a limited partner.

DESERT HOSPITAL CANCER CENTER

In September 1990, Salick became the exclusive provider of all outpatient
cancer services and programs at and in affiliation with Desert Hospital in Palm
Springs, California. The Company is presently providing its services in a
15,000 square feet interim facility. A permanent center of approximately 35,000
square feet is expected to become operational in 1996, pending regulatory
approvals. The Center in its interim phase contracts with the hospital for
certain radiologic services and provides all of its other services on site. The
full range of the Company's programs and services will be provided in the
permanent center.

PARKWAY AND KENDALL CANCER CENTERS

In June 1987, the Company became the exclusive provider of certain of its
Cancer Center services and programs at Parkway and Kendall Regional Medical
Centers in the greater Miami, Florida area. Radiologic and certain other
services not presently provided at these Cancer Centers are available through
agreements with the hospitals. Neither of these Cancer Centers provides
radiation therapy services, although arrangements exist for patients to obtain
such services at a Company facility adjacent to Parkway and or through third
parties in the Kendall area. In October 1991, in order to service patients of
the Parkway Cancer Center, the Company acquired an 80% interest in a radiation
therapy center adjacent to the Parkway Cancer Center and has acquired all but 2%
of the remaining interest.

UNIVERSITY OF KANSAS CANCER CENTER

In April 1992, Salick became the exclusive provider, under a thirty five
year agreement, of all outpatient cancer services and programs at and in
affiliation with the University of Kansas and its medical center based in Kansas
City. At the present time, the Company occupies approximately 25,000 square
feet of interim space and provides medical and radiation oncology services while
contracting with the medical center for radiologic and certain other ancillary
services. A permanent center is in the planning stage. When all approvals are
obtained and the Center is completed, the full range of the Company's services
and programs, including a breast center and surgical and radiological
facilities, will be on-site. Financing of the construction of the Center may be
through a bond issued by the Kansas Board of Regents for the University of
Kansas.

WESTLAKE MEDICAL CENTER CANCER CENTER

In 1993, the Company established a Cancer Center, in a joint venture with
Universal Health Services ("UHS") the then owner of the Westlake Medical Center,
in Westlake, California. The Center, which began operations in October 1993, is
the first Salick Center to provide both inpatient and outpatient services,
including a dedicated inpatient unit, comprehensive outpatient diagnosis and
treatment and surgical capabilities. In July 1995, UHS sold Westlake Medical
Center to Columbia/HCA and the Company acquired UHS' interest in the Cancer
Center. Under the agreement with Columbia/HCA the Company is the

exclusive provider of inpatient and outpatient cancer services and programs at
Westlake Medical Center. Initially, services are being provided in 18,000 square
feet of existing space including dedicated inpatient facilities. The Center
contractually utilizes the Hospital's radiology and surgical facilities and
arranges for radiation oncology services with plans to incorporate into an
expanded facility. A separate Breast Center was opened in September 1994 with
nationally recognized medical and radiation oncology specialists. Among these
are specialists in reconstructive surgery, bone marrow and stem cell
transplantation and breast cancer. The Company is the exclusive provider of a
full range of home care services to cancer patients of Westlake Medical Center.
The features of this Center enable the Company to deliver a comprehensive,
quality, cost effective package of services for the diagnosis and treatment of
cancer to managed care entities and other health care payors in any setting, and
complements the Company's other California operations.

PAYMENT AND BILLING

The Cancer Centers bill their charges to the hospitals with which each is
affiliated. Each Cancer Center is paid by the hospital after the payment is
received by the hospital. Payors include the Medicare and Medicaid programs,
Blue Cross and other insurance plans, HMO's and other prepaid health plans and
the patient. Medicare makes interim payments for services provided. Currently,
Medicare reimbursement for certain surgery, radiology and diagnostic services is
based on 80% of the lower of the hospital's reasonable cost (reduced by 5.8% -
see "Governmental Regulation-Medicare Reimbursement") or a blend of the
hospital's reasonable costs and a fee schedule amount; for other hospital
outpatient services, Medicare reimbursement is based on 80% of the hospital's
reasonable costs, reduced by 5.8%. These payments are subject to an annual
audit which can result in an adjustment to payments previously made. These
audits may not be finalized for a number of years and final adjustments, if any,
made as the result thereof can have a positive or negative effect, retroactively
and/or prospectively, on the estimate of contractual allowances used in the
Company's financial statements for the periods involved, and a corresponding
impact, which could be material, on the Company's revenues and income. See
"Governmental Regulation - Reimbursement." Adjustments in these payment
methodologies may have an adverse impact on the Company's revenues and
profitability. Blue Cross and other private insurance plans and certain health
plans with whom the Company contracts generally pay a percentage of reasonable
and customary charges. Some of the payors with which the Company does business
pay on a capitated basis, while others pay on a case rate or visit basis.
Reimbursement under the Medi-Cal program and Pennsylvania and other state
Medicaid programs is based on their schedules of allowable charges. SalickNet is
paid on a monthly basis on its capitated program and it bills for services
provided on its non-capitated programs.

ARTIFICIAL KIDNEY ("DIALYSIS") SERVICES AND MEDICAL SUPPLIES

Published reports indicate that dialysis services generate in excess of $4
billion per year in revenues. The Company believes it is one of the larger
dialysis services providers in the United States and one of the largest in
California, the only state in which it currently provides these services.

The Company's nine outpatient (chronic) artificial kidney treatment
facilities are located in Southern California. Dialysis treatments are
generally provided through use of an artificial kidney machine which removes
certain toxic substances from the blood and returns the cleansed blood to the
patient. As required by Medicare, Salick employs and compensates physicians to
provide coverage, education, peer review medical direction, quality assurance
and other services at these facilities during operating hours. Each

facility is staffed by a director of nursing and other nurses, administrative
and support personnel.

Chronic dialysis is generally performed three times a week, for four to
five hours per treatment. Improvements in technology now available have
shortened the treatment time for certain patients to approximately three to four
hours. This allows the Company to achieve efficiencies while continuing to
provide the highest quality of care. A substantial majority of the Company's
chronic dialysis patients presently receive this treatment.

During the course of a dialysis treatment, the Company provides the
disposable and reusable supplies, including the dialyzer, blood tubing,
injectable medications, solutions, drugs and blood products. The Company's
capacity for treating patients is subject to a number of variables, including
length of time per treatment, type of treatment, individual patient requirements
and local operating practices and ordinances regulating a facility's hours of
operations. To date, none of these constraints have affected the Company's
ability to increase the number of patients treated or hours of operation.
Patients are generally referred to artificial kidney facilities by their managed
care entity, or if they are not part of a managed care entity by physicians or
other medical personnel. Dr. Salick and physicians affiliated with him contract
to provide medical and administrative services in connection with the Company's
dialysis operations. All physicians retain professional fees which they receive
for providing services to dialysis patients treated at Company and other
facilities.

Most dialysis treatments are performed in hospitals or outpatient
facilities, although dialysis can be performed at home or on an ambulatory basis
for certain patients. Less than 15% of the dialysis patients treated by the
Company presently receive either ambulatory or home dialysis. Support services,
such as supplies, patient education, counseling and self-care training, are also
provided to these patients by the Company.

The Company's outpatient facilities are subject to extensive federal, state
and local government regulation, inspection and licensing. The addition of
treatment stations at existing facilities is dependent upon approval of the
state licensing agency. In addition, federal and state rules and standards must
be met to qualify for payments under Medicare, Medicaid and other reimbursement
programs. See "Governmental Regulation."

Approximately 90% of the outpatient dialysis revenues received by the
Company are paid by the Medicare and Medicaid programs. Under the current
Medicare reimbursement regulations (the "Medicare Regulations"), for Medicare
eligible beneficiaries, Medicare pays 80% of prospectively determined
reimbursement rate for treatment at an outpatient dialysis facility and for
patients treated at home. Currently this prospective price varies from about
$117 to $139 per treatment at an outpatient facility, depending on regional wage
index differentials. The average reimbursement rate presently applicable to the
Company's facilities is approximately $136 per outpatient dialysis treatment,
including routine laboratory services, but excluding physician fees and certain
ancillary and non-routine laboratory and pharmacy charges. See "Governmental
Regulation - Reimbursement." Under the Medicare Regulations, home dialysis
patients may elect to have all of their dialysis supplies and back-up services
provided by an End Stage Renal Disease Program ("ESRD") facility, such as those
operated by the Company. If the patient so elects, the facility will receive the
same reimbursement as it receives for treatment of patients at an outpatient
facility.

A technological development affecting the dialysis industry has been the
grant of approval from the Food and Drug Administration for the production and

sale of Erythropoietin ("EPO"), a drug produced by recombinant DNA technology.
EPO may be useful in treating the anemia associated with end stage renal disease
by reducing the need for transfusions in dialysis patients. The Company
provides EPO and the administration thereof to its patients according to
physicians' orders. Effective January 1, 1991, the manner of reimbursement for
EPO dialysis patients was changed from its former structure (80% of $40 per
treatment for up to 10,000 units and 80% of $70 for a treatment dosage of 10,000
or more units) to provide for payment of 80% of $11.00 per 1,000 units. If a
beneficiary requires 10,000 units or more, sufficient medical documentation must
accompany the claim. The effect of this change had an adverse impact on the
Company and the industry. Pursuant to the Omnibus Budget Reconciliation Act of
1993 ("OBRA 1993"), payment for EPO was further reduced to 80% of $10.00 per
1,000 units, effective January 1, 1994.

The Company also provides inpatient ("acute") dialysis services to
hospitalized patients under separate contracts with 21 hospitals in Southern
California. The Company's inpatient facilities are located on hospital premises
and operated under hospital licenses, rules, by-laws and medical staff
requirements. Under each of the agreements, payments to the Company for its
services are made directly by the hospital and are at negotiated rates.

The Company is in the process of developing its 10th outpatient dialysis
center at Hi-Desert Hospital in Yucca Valley (Riverside County), California.
This center will have 15 treatment stations in its 5450 square feet and the
agreement is for a five-year term with three five-year renewal options. The
Company expects to begin operations at this center by the spring of 1996.

MEDICAL PRODUCTS AND SUPPLIES

Aurora Medical Supplies, Inc. ("Aurora"), a wholly-owned subsidiary of the
Company, arranges the acquisition of medical and pharmaceutical products and
supplies for the Company's Cancer Centers, dialysis facilities, as well as
physicians' offices, hospitals and medical clinics. These products and supplies
are manufactured by others.

ALTERNATE SITE AND HOME INFUSION SERVICES

The Company's subsidiary, INFUSX, emphasizes the treatment of chronic,
complex and catastrophic illnesses requiring sophisticated, long term care in
non-Cancer Center and related satellite facility settings. INFUSX's initial
focus has been in providing services to cancer, dialysis, bone marrow, organ
transplant and immune suppressed patients. A number of these patients are or
have been treated in facilities operated by the Company. Among the services
provided by INFUSX are chemotherapy, antibiotics, parenteral and enteral
nutrition, blood products, pain management, nursing visits, related services,
certain equipment and supplies. INFUSX bills the payor or patient directly for
the services it provides. Presently INFUSX, a duly licensed home health agency,
operates in Southern California, South Florida and in the greater Philadelphia
and Kansas/Missouri areas. Operations will also be established or acquired in
other areas where appropriate to support the Company's operations.

COMPETITION

Although the Company believes its Cancer Center operations and programs are
innovative and unique, they operate in a competitive environment. Some services
which may be considered to be competitive to those which are and will be offered
by the Cancer Centers, SalickNet and INFUSX are being provided by comprehensive
cancer centers established under federal law (whose primary purpose is research
and education), certain major acute care hospitals, other

primary health care facilities, radiation therapy and diagnostic imaging
centers, private and group physicians, home and alternate site care entities,
infusion centers and prepaid and other forms of health plans. Certain of these
providers have been established in the general health care field for a number of
years and have greater financial and marketing resources than the Company.

In its dialysis operations the Company competes with both hospital-based
and freestanding dialysis facilities. The Company competes on the basis of its
reputation for quality care and convenience. Certain of the Company's
competitors with respect to its dialysis services may also compete for the
development or acquisition of dialysis centers in markets which may be targeted
by the Company. Certain of the Company's competitors may have substantially
greater financial and marketing resources than the Company.

GOVERNMENTAL REGULATION

Health care facilities are subject to extensive federal, state and local
legislation and regulations, including those relating to the reimbursement and
control of health care costs.

REIMBURSEMENT

The largest single component of the Company's revenue continues to be
reimbursement at rates which are set or regulated by federal or individual state
authorities. These reimbursement rates are also subject to periodic adjustment
for certain factors, including changes in legislation and regulations, those
imposed pursuant to the federal and individual state budgets, inflation, area
wage indices and costs incurred in rendering the services. The reimbursement
rates may in the future, as they have in the past, also be affected by cost
containment and other legislation, competition, third party payor changes or
other governmental administrative controls or limitations. Changes in the
Medicare and Medicaid system and reimbursement have been proposed by both
Republican and Democrat members of Congress. While the Company expects changes
in reimbursement to occur, this may be limited to extensions of previously
implemented reductions scheduled to expire or may include additional changes.
The ultimate impact of any such changes on the Company's business cannot be
predicted, in part due to budgetary constraints and the rapidly evolving changes
in the health care system generally. The Company has developed and/or
implemented plans to deal with this situation and notes that in the past as
reimbursement reductions or changes have occurred, the Company has previously
been able to improve operations by an increased market share and greater
efficiency.

Under federal Medicare law, most hospital inpatients covered by Medicare
are classified into diagnostic related groups ("DRGs") based on such factors as
primary admitting diagnosis and surgical procedure. Payment to hospitals for
the care of a patient covered under the DRG system is generally set at a
predetermined amount based on the DRG assigned the patient. The federal
government, as well as many states and third party payors, are investigating or
have adopted these or other modifications to their reimbursement formula in an
effort to contain costs. This type of program provides an incentive for
hospitals to plan and deliver their services more efficiently.

(including clinical diagnostic laboratory tests) or are other services related
to the admission, as defined by the Secretary of Health and Human Services ("the
Secretary"). Such services are not reimbursable separately as hospital
outpatient services under Medicare Part B. These provisions have been in effect
since 1991. On January 12, 1994, the Secretary issued interim final regulations
implementing this provision and on September 1, 1995, the Secretary announced
she will revise the regulations to recognize that only the one day immediately
preceding the date of the patient's admission would be considered to be not
reimbursable separately as hospital outpatient services for hospitals and
hospital units excluded from the DRG system.

In recent years there have been a number of statutory and regulatory
changes that affect Medicare reimbursement for services furnished to hospital
outpatients. Prior to October 1, 1987, Medicare generally had reimbursed
hospital outpatient services on the basis of the reasonable costs (as determined
pursuant to regulations) incurred by the hospital. On October 1, 1987, Medicare
began reimbursing hospitals for certain surgery services furnished to hospital
outpatients on the basis of the lower of reasonable costs or an amount based on
a blend of the hospital's reasonable costs and a prospectively set fee schedule
amount. On October 1, 1988, this blended payment system was extended to
radiology services furnished to hospital outpatient patients; the blended
payment system was extended further to certain other diagnostic services on
October 1, 1989. In addition, the amount of the blend that is based on the
hospital's reasonable costs has decreased; currently, the blend is based 42% on
hospital costs for surgery and radiology services, and 50% on hospital costs for
other diagnostic services. For surgery services reimbursed under the blend, the
fee schedule portion of the blend is based on the amount of payment that
ambulatory surgery centers would receive for the procedure. For radiology and
diagnostic services reimbursed under the blend, the fee schedule portion of the
blend is based on the amount that physicians would receive if the procedure were
furnished in a physician's office under the Medicare physician fee schedule.

Under the Omnibus Budget Reconciliation Act of 1989, effective January 1,
1992, Medicare reimbursement for physician services began a five year transition
to the use of a physician fee schedule based on a "resource-based relative value
scale." That physician fee schedule, through the blended payment system
described above, has affected the amount of Medicare reimbursement for hospital
outpatient departments providing outpatient radiology, radiation therapy,
surgery and certain diagnostic services.

There is also the possibility of the establishment of a prospective payment
for certain Medicare-reimbursed hospital outpatient services. Congress had
requested that the Health Care Financing Administration ("HCFA"), which
administers Medicare, prepare recommendations concerning the establishment of
such a prospective payment system. HCFA submitted its recommendations to
Congress in March 1995 and included a proposal to phase in such a prospective
payment system, beginning first with outpatient surgery, radiology, and other
diagnostic services. The details of the proposed payment system, including the
amounts of payment that would be made for each procedure, have not been
finalized by HCFA. Adoption of HCFA's recommendation would require a change in
the Medicare law by Congress,and senior HCFA staff have stated that even if
Congress enacted such a change in 1995, the new system would not likely be
implemented until January 1997, at the earliest. Under HCFA's proposal,
services other than surgery, radiology, and other diagnostic services would not
be reimbursed under a new prospective payment system until further research is
completed. The Company cannot predict what will be the effect, if any, on
revenues or income which may result from the adoption by Congress of HCFA's
recommendations for a Medicare prospective payment for hospital outpatient
services.

HCFA in its March 1995 report to Congress made two other recommendations
concerning proposed changes in the Medicare law. First, HCFA proposed that the
Medicare law be changed to modify the way that the amount of beneficiary
coinsurance for outpatient services is computed. Second, HCFA proposed that
Medicare law be changed to correct what has been described as the "formula
driven overpayment" which HCFA states results in Medicare payments for hospital
outpatient surgery, radiology and other diagnostic services that are greater
than what was intended by Congress. In its report, HCFA suggested several ways
in which the Medicare law could be changed to address these issues, either with
or without the enactment of a prospective payment system for hospital outpatient
services. The alternatives suggested by HCFA generally would result in an
overall reduction in payments for hospital outpatient services furnished to
Medicare beneficiaries and, if enacted, could adversely affect the Company's
revenues and income. However, it is uncertain which alternative, if any,
Congress will enact, and it is impossible to determine what impact, if any, such
changes might have on the Company's revenues and income.

Effective October 1, 1991, Medicare payments for hospital outpatient
services made on a reasonable cost basis and the cost portion of outpatient
services paid on the basis of a blended amount, were reduced by 5.8%. Under the
Omnibus Reconciliation Act of 1993 ("OBRA 1993"), Congress extended this
reduction through federal fiscal year 1998. Effective October 1, 1991, Medicare
has reimbursed the capital costs allocated to outpatient departments on the
basis of 90% of reasonable costs. Under OBRA 1993, Congress extended this 10%
reduction in hospital outpatient capital cost reimbursement through federal
fiscal year 1998. Also under OBRA 1993, the amount which Medicare reimburses
for clinical laboratory services was reduced.

Effective November 1, 1990, the Medicare fiscal intermediary for the
Company's dialysis facilities changed the method of reimbursing medications
provided to Medicare dialysis patients from charge-based reimbursement to
reimbursement based on reasonable costs. This change has reduced the amount of
reimbursement to the Company for such medications and other regulatory changes
potentially could further reduce such reimbursement. In addition, effective
January 1, 1991, the method of reimbursement for EPO furnished to dialysis
patients was changed from its former structure (80% of $40 per treatment dosage
for up to 10,000 units and 80% of $70 per treatment dosage of 10,000 or more
units) to provide for payment of 80% of $11.00 per 1,000 units. This change in
EPO reimbursement has been partially offset by a $1.00 per treatment increase in
the composite rate reimbursement for outpatient dialysis services. In addition,
pursuant to OBRA 1993, reimbursement for EPO was further reduced beginning
January 1, 1994 to 80% of $10.00 per 1,000 units. The Secretary announced on
September 1, 1995 that she will not at this time adjust the current composite
rate. The overall impact of the EPO reimbursement change has adversely affected
the Company's revenues and earnings.

The effect of these changes may be mitigated by the Company's ability to
increase its patient volume both at the same sites and at additional centers, to
increase its non-Medicare patient volume and to continue implementation of cost
controls and cost reduction strategies. To address these changes, the Company
has expanded its program to increase patient volume, and instituted other
programs to achieve efficiencies in staffing, purchasing and scheduling.

services are hospital-based, the effect of the legislation has not had a
material effect on the Company's operations. Florida also has legislation
precluding or limiting referrals by physicians to facilities in which they have
an ownership, control or investment relationship (the Florida Patient/Self-
Referral Act). One of the Company's radiation facilities in South Florida
currently has three physician investors who own less than two percent (2%) in
total and who make no referrals to the facility. The Company believes it is in
full compliance with the law.

Florida adopted legislation effective in 1994 which is aimed at health care
coverage for presently uninsured residents and encouraging the formation of
purchasing alliances for health care services. This legislation is principally
aimed at small employer groups. As it is now configured, the Company cannot
predict its future effect upon the Company and its operations. However, the
Company, as part of its overall strategy is in the process of developing various
plans to be offered to employer groups, purchasing alliances, health maintenance
organizations, managed care and other payors. The first of these plans has been
successfully marketed in Florida with a major capitated (per member, per month)
agreement entered into with Physician's Corporation of America currently
covering 120,000 members in South Florida (See "Additional Services" discussion
of SalickNet).

To the extent that legislation or regulations may be enacted in the future
which may include outpatient services furnished to Medicare beneficiaries in a
prospective payment system, the Company cannot predict whether or to what extent
such a change would adversely affect its revenues or earnings. In addition, in
1995 Congress began considering extensive changes to the Medicare and Medicaid
programs. Medicare changes under consideration include, among others, (1) a
change in the formula used to calculate hospital outpatient reimbursement under
the blended payment system which generally would result in reducing
reimbursement amounts; (2) an extension of the current 5.8% reduction in
hospital outpatient reasonable cost reimbursement through the year 2002; (3) a
reduction in reimbursement for hospital outpatient department capital-related
costs of 85% of such reasonable costs for federal fiscal years 1996-2002; (4)
the introduction of a prospective payment system for home health services,
effective October 1996; (5) reductions in payment for clinical laboratory
services; (6) the elimination of updates in payments for ambulatory surgical
center services from 1996-2002: (7) various other reductions in the amount of
payment for physician and hospital services; and (8) the introduction of
additional choices of health plans for Medicare beneficiaries in addition to the
current fee-for-service and Medicare HMO option. Proposed Medicaid changes
include the replacement of the existing federal/state program with block grants
to the states and reduced federal oversight over state plans. The enactment of
large cuts in the amount of Medicare and Medicaid reimbursement for providers
could have an adverse effect on the Company's revenues. At this point in time,
however, it is uncertain which, if any, of these or other changes to the
Medicare and Medicaid programs will be enacted into law, and the Company is
unable to predict how the enactment of any such changes might affect the Company
in the future.

Reimbursement for INFUSX's services from all payors other than Medicare is
paid either at charges, a percentage of charges or a negotiated rate which may
include per diem charges. Medicare patient reimbursement falls under a cost
report-based methodology (skilled nursing services in the home) or a reasonable
cost or fee schedule basis (generally for drugs and related supplies and durable
medical equipment). OBRA 1993 prohibited the Secretary from updating the per
visit cost limits for home health services during cost years beginning on or
after July 1, 1994 and before June 30, 1996.

LICENSING

Outpatient dialysis facilities are subject to state licensing statutes
which regulate the character and competence of the provider and its staff, its
financial resources, the fitness and adequacy of the facility and its medical
personnel and procedures. Licenses and approvals to operate these facilities
are subject to renewal periodically and to revocation upon failure to comply
with the conditions under which they are granted. Each of the facilities owned,
operated or at which services are provided by the Company is and has been duly
licensed continuously since its opening. Salick's inpatient dialysis services
and Cancer Center services are provided pursuant to the contracting hospital's
license.

Presently in California, and certain other states, there is no license
category for the independent licensure of the Cancer Centers. Under these
circumstances, the Company is a provider of the Cancer Centers' services under
the license of and agreements with affiliated medical centers. A Cancer
Center's continued operations as presently structured is dependent upon such
agreements with hospitals. The Company will also consider management agreements
and other relationships as are appropriate.

INFUSX currently operates as a licensed home health agency. It either has
a pharmacy license or arrangements with a licensed pharmacy in those states
where it may not be able to or it is not essential to its operations to have a
pharmacy license. In states where INFUSX provides direct nursing services it
will require licensure as a home health agency. It is also possible that in
some locations INFUSX may become subject to certain regulatory certifications
including Medicare and/or the Joint Commission on the Accreditation of
Healthcare Organizations ("JCAHO") accreditation. In its California, South
Florida and Kansas operations, INFUSX received the highest category of JCAHO
accreditation.

SalickNet's current operations do not require licensure; however, the
Company does anticipate expanding the administrative and professional services
provided to managed care entities. The Company has submitted an application for
licensure as a Third Party Administrator to the Florida Department of Insurance
because of the anticipated expansion of administrative services it provides and
to ensure continued compliance with the law. The Company anticipates it will be
able to obtain any required licensure.

CERTIFICATE OF NEED

Legislation in various jurisdictions requires a certificate of need in
order to establish or substantially expand certain health care activities or
facilities. In such states, a certificate of need must be obtained prior to a
subject party's offering certain new services or committing capital expenditures
in excess of statutory threshold amounts. The required approval is based on
various criteria, such as financial feasibility, impact on other health care
providers and need and access by indigents to the proposed services. Many
states require a certificate of need for either or both a dialysis facility and
a Cancer Center although none is required in California. The Company's
operations are either exempted from certificate of need requirements or the
certificate is not required in certain other states in which the Company is
operating Cancer Centers or considering for expansion.

Each of the Company's current Cancer Centers is a part of the hospital with
which it is affiliated, and therefore a certificate of need for the
establishment of a Cancer Center is only necessary in certain states. Neither
of the USHAWL, SalickNet nor INFUSX current operations require a certificate of
need. It is possible, however, that existing or future laws or regulations

will be interpreted or adopted so as to require certificates of need to be
obtained. Such a requirement could impair the Company's business and expansion
in those areas where a certificate of need is determined to be required. To date
such requirements have not adversely affected the Company's ability to establish
its operations.

In those states where a certificate of need is required for a permanent
cancer center, the Company has found that an interim Cancer Center can generally
be opened without a certificate of need. The inability to ultimately obtain a
certificate of need for a particular location, new program or service will not,
in the Company's opinion, unduly preclude its ability to provide
services at or establish its operations.

FRAUD AND ABUSE

The fraud and abuse provisions of the Social Security Act, as amended,
among other things, impose civil and criminal penalties (including exclusion
from the Medicare and Medicaid programs) upon persons who pay any remuneration
(direct or indirect, in cash or in kind) in return for or to induce the ordering
of, or the making of a referral for, a service or item covered by Medicare or
Medicaid. Law enforcement authorities, HHS and the courts are giving increasing
scrutiny to arrangements between health care providers and referring physicians
to ensure that the arrangements are not designed as mechanisms to exchange
remuneration for patient referrals for services or items for which Medicare or
Medicaid reimbursement may be provided. This scrutiny is not limited to
financial arrangements that involve a direct payment made for the specific
purpose of inducing patient referrals, but extends to payment or other
remuneration mechanisms that carry the potential for inducing referrals. Recent
court decisions have held that the fraud and abuse provisions have been violated
if one purpose (as opposed to a primary or sole purpose) of a payment to a
provider is to induce referrals. Some states have prohibitions similar to the
federal prohibitions, but which are not limited in application to Medicare or
Medicaid patients. Moreover, some states (including those where the Company
engages in business) either have or are considering legislation that would
prohibit, with limited exceptions, referrals by any physician with an ownership
or compensation relationship with the entity to which the referral would be made
regardless of whether the financial relationship was intended to bring about
such referrals.

On July 29, 1991, the Inspector General of HHS published regulations
outlining certain "safe harbors", or defined business practices that will be
deemed not to violate the Medicare and Medicaid fraud and abuse provisions
described above. These include safe harbors for investment interests, personal
service agreements, space and equipment rental agreements, sales of medical
practices, routine waivers of certain deductibles and coinsurance, discounts
received by certain buyers from suppliers and employee-generated income.

Among the safe harbors is one for investment interests in large publicly-
traded entities, defined as those with more than $50 million in net tangible
assets within the previous twelve months or fiscal year, so long as five
specified conditions are met. Another safe harbor is available for investment
interests in other entities if they meet eight conditions including requirements
that no more than 40% be owned by investors who are in a position to make or
influence referrals or furnish items or services to or otherwise generate
business for the entity, and that not more than 40% of the gross revenues of the
entity in the last fiscal year or 12 month period come from referrals, items or
services furnished, or business otherwise generated from investors. The Company
does not have referring physicians as owners or partners in any of its Cancer
Centers or dialysis facilities. However, the Company has interests as a limited
partner in certain independent radiology

facilities that it believes may have physician investors. These facilities
provide services to patients of a Cancer Center pursuant to orders of their
physicians. The Company understands that the interest of such physicians has
been or is in the process of being acquired. While this situation may not,
technically, completely conform to the requirements of the investment interests
safe harbors, the Company believes that its interests in these facilities, if
scrutinized, should be determined not to violate the Medicare and Medicaid fraud
and abuse law for several reasons, including the fact that the Company believes
that there is a material absence of abusive features identified in a special
Fraud Alert on Joint Venture Arrangements issued by the Inspector General in
1989, associated with the Company's involvement in these facilities. The
regulations also include a safe harbor for certain personal services agreements.
While the Company does not believe this to be so, the agreements under which the
Company compensates the physicians who serve as its medical directors may not
completely and technically conform to all of the requirements for this safe
harbor, which dictates, for example, that the exact schedule of work of non-full
time employees and the payment for each work session be established in advance.
However, the Inspector General has indicated that agreements not completely
conforming to a safe harbor will be analyzed on their merits and the Company
believes the arrangements it has with its Medical Directors are reasonable and
do not violate the Medicare and Medicaid fraud and abuse law. Certain physicians
who have patients at Company facilities contract for the use of office space and
related services and the Company believes that these arrangements materially
comply with the applicable safe harbors. Moreover, the Company believes that
both its personal services and rental agreements, as well as its relationships
generally with referring physicians, are appropriate, and in any event, are
materially distinguishable from those types of arrangements described as
potentially abusive by the Inspector General in a 1992 Special Fraud Alert on
Hospital Incentives to Physicians which, while directed at hospitals, also could
apply to other providers.

The preamble to the final rule establishing the safe harbors also makes it
clear that not all arrangements that fail to qualify for a safe harbor will be
deemed unlawful.

On July 21, 1994, clarifications of the safe harbors were proposed by the
Inspector General. Those proposed rules are intended to clarify the original
set of final safe harbor provisions. A variety of modifications are proposed,
including those respecting the investment interest safe harbor, the space and
equipment rental and personal services and management contract safe harbors,
referral services safe harbor and the discount safe harbor. It is unknown
whether the regulations will be finalized in their present form.

In October 1994, the Inspector General issued a Special Fraud Alert
respecting arrangements for the provision of clinical laboratory services. The
Fraud Alerts are publications which reflect the view of the Office of Inspector
General but are not formally promulgated as regulations or enacted as laws. The
October Fraud Alert concerns the Office of Inspector General's view of practices
it believes may implicate the anti-kickback statute when engaged in by clinical
laboratories and health care providers. Several examples of possibly illegal
laboratory services arrangements are given in that Fraud Alert. One of the
examples cited involves arrangements between ESRD facilities and laboratories
where the laboratory offers to perform, at a below market rate, the tests paid
for through the composite rate paid by Medicare to ESRD facilities in order to
obtain referral from the ESRD facility for non-composite rate tests. Also
mentioned as an example in the Fraud Alert are certain situations involving
laboratory waivers of charges to managed care patients where a provider
participates in a managed care plan which either provides a bonus or other
payment if utilization of ancillary services such as laboratory testing is kept
below a particular level or imposes financial penalties if the

provider's utilization of services exceeds pre-established levels. The Inspector
General is concerned that the provider may enter into an arrangement with a
laboratory that has not negotiated a fee schedule with a managed care plan under
which the laboratory, to keep the provider's non-managed care business, agrees
to write-off charges for the provider's managed care work. Other examples are
given of inducements offered by clinical laboratories which may implicate the
anti-kickback statute. The Company does not believe that it does not comply with
this Fraud Alert or that, if required to make changes or modifications,
compliance with this Fraud Alert will materially adversely affect the operations
of the Company.

HHS has designed an interdisciplinary project involving representatives of
federal and state governments and the private sector to detect and investigate
Medicare and Medicaid abuse and misuse in five states: California, Florida,
Illinois, New York and Texas. The project is called "Operation Restore Trust."
HHS has stated that these five states were selected because they account for 40%
of Medicare and Medicaid beneficiaries. Targeted for review are skilled nursing
facilities, home health agencies, and durable medical equipment suppliers. HHS
has stated that the project activities will include, among others, financial
audits by the OIG and HCFA, criminal investigations, referrals by OIG to
appropriate law enforcement officials, and civil and administrative sanction and
recovery actions. HHS is focusing on home care because it is one of the fastest
growing areas in Medicare. The Company conducts home health agency activities
in some of the five states targeted for review. The Company believes that its
home health care business is in compliance with Medicare requirements.

Included in OBRA 1993 were provisions that significantly expanded the scope
of the Ethics and Patient Referral Act, also known as the "Stark Law," beginning
January 1, 1995. The Stark Law originally prohibited a physician from referring
a Medicare or Medicaid patient to any entity for the provision of laboratory
services if the physician or family member of the physician had an ownership
interest or compensation relationship with the entity. The OBRA 1993 revisions
expand the scope of the Stark Law by prohibiting a referral to an entity in
which the physician or family member has an ownership interest or compensation
relationship if the referral is for any of a list of "Designated Health
Services". Violations of the Stark Law are punishable by civil monetary
penalties of up to $15,000 per claim against any person who presents or causes
to be presented a claim for services that the person knows or should have known
were furnished pursuant to a prohibited referral. In addition, civil monetary
penalties of up to $100,000 can be imposed on any physician or entity who enters
into a circumvention scheme to avoid the statutory prohibitions. The expanded
Stark Law prohibits self referrals for eleven categories of items and services,
including not only clinical laboratory services, but also inpatient and
outpatient hospital services, diagnostic radiology and radiation therapy
services. Technical amendments to the Medicare Act passed by Congress in
October 1994 and signed by the President on October 31, 1994, include an
amendment which revises the designated health service of "radiology and other
diagnostic services" to "radiology services, including magnetic resonance
imaging, computerized axial tomography scans and ultrasound services." Because
all of the centers operate under the license of the hospital to which they are
attached, the Company's services (including the services of its Cancer Centers,
clinical laboratory and Infusx) appear to be included in the list of designated
Health Services. Although the list of designated Health Services also includes
radiation therapy, the legislation specifically provides that a request by a
radiation oncologist for radiation therapy does not constitute a referral if
such services are furnished by or under the supervision of the radiation
oncologist pursuant to a consultation requested by another physician. That
self-referral statute also includes a variety of exceptions from this

prohibition, including exceptions involving rental of office space, bona fide
employment relationships and personal service arrangements. Final regulations
relating to clinical laboratory services only ("Stark I Final Regulations") were
issued on August 14, 1995 and were effective September 13, 1995. The Stark I
Final Regulations reflect substantial changes from the proposed rules published
on March 11, 1992. The changes are due in part to the comments received and in
part to retroactive statutory changes effected by the Omnibus Budget
Reconciliation Act of 1993 and the Social Security Amendments of 1994. The
Stark I Final Regulations address only referrals for clinical laboratory
services and the Secretary stated an intention in the Stark I Final Regulations
to cover the other Designated Health Services under a separate rulemaking.
However, she further took the position in the Stark I Final Regulations that the
Stark I Final Regulations will affect how HCFA reviews referrals involving the
Designated Health Services other than clinical laboratory services where the
statutory language appears to apply equally to situations involving referrals
for any of the Designated Health Services, including clinical laboratory
services.

HCFA has added a new exception for services furnished in an Ambulatory
Surgical Center or an End Stage Renal Dialysis ("ESRD") facility or by a
Hospice, provided that such services are reimbursed by Medicare through the ASC
rate, the ESRD composite rate, or as part of the per-diem hospice charge,
respectively. HCFA reasons that in such instances there is no incentive to
overutilize the clinical laboratory services. HCFA continues to work on issuing
proposed regulations to implement the Stark II expanded physician self-referral
law.

Congress is now poised to consider "Stark III." Congressman Stark himself
already has introduced a bill that would significantly modify the law. For
example, it would, among other things, collapse all of the compensation
exceptions into one generic exception. Congressman Thomas, who now chairs the
House Ways and Means Health Subcommittee that generated the original physician
self-referral law, also has introduced a bill that would even more extensively
revise and dilute the scope of the Stark Bill, to limit, for example, the list
of Designated Health Services to clinical laboratory, community pharmacy,
MRI/computerized tomography and physical therapy services. Also, under Thomas'
bill, the law would no longer prohibit referrals on the basis of compensation
relationships and the Secretary would not be permitted to take enforcement
action based on the Stark II provisions until the Secretary promulgates its
Stark II regulations.

The existing Stark Law and regulations have the effect of restricting the
ability of a company to enter into financial relationships with certain
physicians and physician organizations. While the Company does not believe it
to be so, to the extent, if any, that it may be determined that, or the Company
may come to believe that any of its financial relationships with physicians may
not technically comply with the Stark Law, the Company intends to modify or
eliminate those relationships so that they will either comply or qualify for one
of the Stark Law's exemptions. For this reason, among others, the Company does
not believe that the Stark Law will adversely affect the operations of the
Company.

California has also passed a physician self-referral statute, commonly
known as the "Speier Bill" or "PORA", which became effective January 1, 1995.
Under this statute, referrals of patients for certain designated services by
physicians with direct or indirect ownership interest in, or direct or indirect
compensation relationships with, the entity furnishing the services are
prohibited unless the ownership interests or compensation relationships fall
within certain narrow exceptions. The designated services subject to this
prohibition include, but are not limited to, radiation oncology, laboratory,

diagnostic imaging, home infusion therapy and diagnostic nuclear medicine.
Violations of that statute may result in criminal penalties, civil monetary
penalties of up to $5,000 for each offense, and professional disciplinary action
against the physician, including revocation of licensure. In addition, no
payment may be made by any payor for services furnished pursuant to a prohibited
referral. While the Company does not believe it to be so, to the extent, if
any, that it may be determined that any of the Company's financial relationships
with physicians may not comply with the Speier Bill, the Company intends to
modify or eliminate those relationships so that they either comply or qualify
for one of the Speier Bill's exemptions. For this reason, among others, the
Company does not believe that the Speier Bill will adversely affect the
operations of the Company.

Florida has been one of the leaders in enacting legislation to preclude or
limit referrals by physicians to facilities in which they have an ownership,
control or investment relationship. The Florida Patient Self-Referral Act
precludes or limits referrals by physicians to facilities in which they have an
ownership, control or investment relationship. One of the Company's radiation
facilities in South Florida currently has three physician investors who own less
than two percent (2%) in total and who make no referrals to the facility. The
Company believes it is in full compliance with the law.

Although the Company believes it complies in all material respects with
currently applicable laws and regulations in the fraud and abuse area, the
health care services industry will continue to be subject to substantial
regulation in this area at the federal and state levels, the scope and effect of
which cannot be predicted. Moreover, although the pending budget
reconciliation bill as passed by the House would narrow the scope of the Stark
Law by, among other things, (1) eliminating its application to compensation
relationships between physicians and the entities to which they make referrals
and (2) shortening the list of Designated Health Services, both the House and
the Senate bills now currently under discussion contemplate expanding some of
the fraud and abuse laws to cover all patients (not just Medicare and Medicaid
patients), and increasing the penalties for violation. There is still a
relative scarcity of both case law and binding administrative interpretations of
the statutes and regulations in this area of fraud and abuse. As the law
develops in this area and particularly if the Congress provides for issuance of
advisory opinions in response to specific requests, more guidance may be
available regarding the appropriateness of certain types of relationships
involving physicians and the health care services industry generally. While the
Company does not believe that any of its arrangements are inappropriate, in the
event any are so determined, the Company will take appropriate action as may be
necessary in order to be in compliance. However, no assurance can be given that
the Company's activities will not be reviewed or challenged by regulatory
authorities or prosecutors, will not be limited by future legislation, or if
such events occur, that the Company would not be subject to significant
penalties, including fines and exclusion from Medicare, or that the Company's
operations would not otherwise be adversely affected.

EMPLOYEES

At November 1, 1995, the Company had approximately 1,300 employees. Less
than twenty employees (primarily clerical workers) are subject to a collective
bargaining agreement and all of such employees are employed at one location.
The Company considers its relations with its employees to be good.

INSURANCE

The Company maintains property, casualty, malpractice and various types of
liability insurance policies in significant amounts and, in addition, requires
each physician treating patients at its facilities to provide proof of
independent insurance coverage.

ITEM 2. PROPERTIES

The following table indicates the location, approximate size, date of
commencement of operations and term of agreement for each of the Cancer Centers:

Date
Approximate Operations Term of
Size Commenced Agreement
------------------ ------------ ---------------

Cedars-Sinai 20,000 sq. ft. June 1985 To September 30,
Comprehensive (interim space) 1999
Cancer Center 53,000 sq. ft. January 1988
Los Angeles, CA (permanent center)

Comprehensive 17,500 sq. ft. November 10 years and
Cancer Center (interim space) 1988 3 five-year
at Mount Sinai 35,000 sq. ft. renewal options
Medical Center (permanent center)
Miami Beach, FL

Comprehensive 15,000 sq. ft. March 1989 10 years from
Cancer Center (interim space) completion of
at Temple 45,000 sq. ft. all construction
University (proposed and 2 five-year
Philadelphia, PA permanent center) renewal options

JFK Medical Center 20,000 sq. ft. October To September 30,
Comprehensive 1987 1997
Cancer Center
Atlantis, FL

Alta Bates Medical 10,000 sq. ft. December 15 years
Center Comprehensive (interim space) 1990
Cancer Center 35,000 sq. ft. September
Berkeley, CA (permanent-partial 1994
center)

Desert Hospital 15,000 sq. ft. September 10 years from
Comprehensive 1989 opening of the
Cancer Center permanent Center
Palm Springs, CA and 3 five-year
renewal options

South Florida 9,000 sq. ft. June 1987 10 years
Comprehensive
Cancer Center at
Parkway Regional
Medical Center
No. Miami Beach, FL

South Florida 9,000 sq. ft. June 1987 10 years
Comprehensive
Cancer Center at
Kendall Regional
Medical Center
Miami, FL

Approximate Operations Term of
Size Commenced Agreement
----------------- ------------ ---------

University of 25,000 sq. ft. April 1992 35 years
Kansas Cancer (interim space)
Center, Kansas 45,000 sq. ft
City, Kansas (proposed
permanent center)

Westlake Medical 18,000 sq. ft. October 1993 20 years
Center Comprehensive (interim space)
Cancer Center

In addition, the Company provides its services at a number of satellite and
alternate site facilities in Florida and California located primarily in medical
office services developments.

DIALYSIS CENTERS

The Company operates the following nine facilities which provide chronic
dialysis service on an outpatient basis. The following table indicates the
location of the facility, number of stations approved for licensure, the year
the facility was opened or acquired and the year in which the existing lease
terminates:

Licensed Year
Stations Facility Lease
As of Opened Expiration
8/31/95 or Acquired Date
-------- ----------- ---------------

USHAWL-Cedars-Sinai Dialysis 25 1983 August 2004
8635 W. Third
Cedars-Sinai
Medical Towers
Los Angeles, CA 90048

USHAWL-Villa Gardens Dialysis 35 1972 December 2006
2723 W. Temple Street
Los Angeles, CA 90026

USHAWL-Doctors Dialysis 42 1972 June 1996
706 E. 32nd Street
Los Angeles, CA 90011

USHAWL-Orange County 6 1987 September 1998
Dialysis - North (one additional
1830 W. Romneya Drive 5-year renewal
Anaheim, CA 92801 option)

USHAWL-Mission 12 1987 June 1999
Dialysis (two additional
27862 Puerta Real 5-year renewal
Mission Viejo, CA 92691 options)

USHAWL-Orange County 10 1988 December
Dialysis West 1995 (one
16892 Bolsa Chica Road additional
Huntington Beach, CA 92661 5-year renewal
option)

Licensed Year
Stations Facility Lease
As of Opened Expiration
8/31/95 or Acquired Date
-------- ----------------------------

USHAWL-Orange County 10 1988 April 1997
Dialysis South
31736 Rancho Viejo Road
San Juan Capistrano, CA
92675

USHAWL-Desert Dialysis 20 1990 December 1996
345 Tachevah
Palms Springs, CA 92263

USHAWL-Orange County 25 1993 September 1998
Dialysis - La Palma (three additional
1107 La Palma Ave 5-year renewal
Anaheim, CA 92803 options)

In addition to the Cancer Centers and dialysis facilities described above,
the Company presently leases its corporate and subsidiary headquarters and
offices in Los Angeles, California. These headquarter premises are leased from
Dr. and Mrs. Bernard Salick (the "Lessors"). The offices have approximately
35,000 square feet of space. The lease took effect in July 1991, and, at the
time of occupying such premises, the Company vacated its prior premises which it
had leased under leases from the Lessors and an unrelated third party. The
lease contains a provision which, in the event of certain changes of control of
the Company and the termination or significant changes in the terms or authority
of Dr. Salick's employment with the Company thereafter and prior to the last two
years of the term of the lease, permits the Lessors, if then the lessors of the
building and at their option, to require the lessee of the building to (a)
purchase the building at a formula purchase price, or (b) pay an assumption fee
of $250,000. In light of these provisions, in connection with the April merger
with Zeneca Limited, an agreement was entered into pursuant to which the Company
will purchase this real property from the Lessors for $14,650,000 which purchase
price is approximately $1,160,000 less than the formula purchase price in the
lease. The transaction is expected to be consummated during the 1996 fiscal
year. See Note 3 to the consolidated financial statements.

In October 1993, the Company purchased a 20,000 square foot building
adjacent to its current corporate headquarters in Los Angeles for expansion of
its Corporate and facility activities. The purchase price was $1,200,000 and
the Company renovated and occupied the building in September 1995.

In March 1995 the Company acquired at a cost of $4.675 million a 38,000
square foot building with adjacent land of some 15,000 square feet presently
used for parking available for additional construction located across from the
Cedars-Sinai Comprehensive Cancer Center. The Company expects to renovate the
building and use it in connection with its SalickNet and other business
operations and to enable it to expand its programs and services and provide new
and additional outpatient and ambulatory health care services. If the
additional land is built upon it will be used for similar purposes.

ITEM 3. LEGAL PROCEEDINGS

In the course of its business, the Company and certain officers and
subsidiaries have been named as defendants in lawsuits alleging some form of
liability. The Company is insured for these matters in some instances or has
indemnified such officers. The Company has defenses to these actions which it
intends to vigorously pursue and is unaware of any such pending litigation which
is likely to have a materially adverse effect on the Company.

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

No matters were submitted during the fourth quarter of the fiscal year
ended August 31, 1995 to a vote of security holders through the solicitation of
proxies or otherwise.

EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of the Company are as follows:

PRINCIPAL OCCUPATION OR
NAME AGE POSITION HELD WITH COMPANY
- ---- --- --------------------------

Bernard Salick, M.D. 56 Chairman of the Board of
Directors, Chief Executive
Officer and President

Leslie F. Bell 55 Executive Vice President, Chief
Financial Officer, Secretary and
Director

Michael T. Fiore 41 Executive Vice President-
Chief Operating Officer
and Director

Sheldon S. King 64 Executive Vice President

Barbara Bromley-Williams 56 Senior Vice President-Professional
Services and Director

Anthony LaMacchia 41 Senior Vice President-Operations

Blair L. Hundahl 41 Senior Vice President-Finance

Patricia Wilkinson 54 Vice President-Dialysis Operations

Dr. Salick, founder of the Company, has been Chairman of the Board of
Directors and Chief Executive Officer of the Company since its organization. He
also served as President and Chief Operating Officer until May 1, 1985 and
reassumed those positions on October 2, 1988. Dr. Salick relinquished the
position of Chief Operating Officer in 1993. Dr. Salick was the Medical
Director of USHAWL and Century through 1991. Dr. Salick is an Assistant
Clinical Professor of Medicine at UCLA and on the medical staff of Cedars-Sinai
Medical Center and other hospitals. He is also on the Board of Queens College
(NY), and is a member of the National Advisory Council of the National Kidney
Foundation, the American Society of Nephrology and the American Society of
Clinical Oncology.

Mr. Bell has served as Senior Vice President, Secretary and a Director
of the Company since its organization in 1983. He became Chief Financial
Officer in January 1985. From 1976 through May 1983, Mr. Bell was managing
partner in the law firm of Katz, Hoyt, Bell & Siegel and its predecessor firms
and served as general counsel to the Company. Mr. Bell became Executive Vice
President of the Company in 1990 and is chairman of NATSA, a not-for-profit
entity.

Mr. Fiore joined the Company in May 1986 as Vice President and
Director of Operations. Prior to joining the Company, he was employed in
various capacities by American Medical International, Inc. ("AMI") for more than
six years, where he was a Corporate Vice President. Mr. Fiore, a CPA, was
employed by Peat, Marwick, Mitchell & Co. from 1976 to 1978. He received his
MBA from the Harvard Business School in 1980. Mr. Fiore became a Senior Vice
President of the Company in 1990 and assumed the position of Chief

Operating Officer in 1993. In 1994 Mr. Fiore became Executive Vice President
and a Director of the Company.

Mr. King joined the Company in February 1994 as Executive Vice
President. He was President of Cedars-Sinai Medical Center in Los Angeles from
May 1989 to February 1994. Prior to that, he had been at Stanford University
Medical Center since 1981, and its President since 1986. Mr. King has also
served as Director of the University of California Medical Center, San Diego,
and Executive Director of the Bronx Municipal Hospital Center in New York. The
Company has entered into an agreement with UCLA whereby Mr. King serves through
December 1995 as the Director of UCLA Medical Center.

Ms. Bromley-Williams has served as Vice President-Professional
Services and a Director of the Company since its organization. She has been
employed as Head Nurse and Director of Professional Services of USHAWL since
1972 and Century and its predecessor since 1977. Ms. Bromley-Williams became a
Senior Vice President of the Company in 1990.

Mr. LaMacchia, a Certified Public Accountant, joined the Company in
1984 as its Director of Strategic Planning and Reimbursement and became a Vice
President in 1987. In 1995 Mr. LaMacchia was promoted to Senior Vice President.
From 1981 to 1984, he was employed by Cedars-Sinai Medical Center as Assistant
Director of Finance specializing in financial feasibility and reimbursement.
From 1979 to 1981, Mr. LaMacchia was employed as an auditor by Ernst & Whinney.
From 1976 to 1979, he was a field auditor for Blue Cross of Southern California
specializing in health care audits.

Ms. Hundahl, a Certified Public Accountant, has been employed by the
Company since 1982 as Corporate Controller except for seven months in 1984 when
she was employed by Centurion Savings as Vice President-Finance and Treasurer.
Ms. Hundahl became a Vice President in 1987 and a Senior Vice President in 1995.
For six years prior to joining the Company, Ms. Hundahl was employed by Arthur
Young & Co. and at the time she joined the Company she was an audit manager.

Mrs. Wilkinson joined the Company and became a Vice President in
September 1987, upon the completion of the Company's acquisition of Orange
County Dialysis. She currently serves in that capacity managing the Company's
five Orange County dialysis centers, and Desert Dialysis (Palm Springs). Prior
to the acquisition, Mrs. Wilkinson was employed by Orange County Dialysis, Inc.
and, since its inception in 1972, served as its Chief Executive Officer.

PART II

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

The Company's common stock was traded in the NASDAQ National Market System
under the symbol SHCI until the recapitalization resulting from the merger of
the Company with an indirect wholly owned subsidiary of Zeneca Limited on April
13, 1995 as described in Note 7 to the Company's consolidated financial
statements. Since that date all of the issued and outstanding common stock of
the Company has been owned by a wholly owned subsidiary of Zeneca Limited. The
high and low closing prices of the common stock during the past two fiscal years
through April 13, 1995 by fiscal quarter are set forth on the following table:

High Low
------ -----

1st quarter ended November 30, 1993 16 1/2 13

2nd quarter ended February 29, 1994 17 1/4 14

3rd quarter ended May 31, 1994 19 15 1/2

4th quarter ended August 31, 1994 18 1/2 14 1/4

1st quarter ended November 30, 1994 25 1/8 17 7/8

2nd quarter ended February 28, 1995 35 1/2 24

3rd quarter through April 13, 1995 36 1/2 35 1/8

The Company's callable puttable common stock issued in the recapitalization
has traded in the NASDAQ National Market System since April 13, 1995 under the
symbol SCHID. The high and low closing prices during the two fiscal quarters
since April 13, 1995 are set forth below:

High Low
------ -----

3rd quarter, April 13 to May 31, 1995 35 5/8 34 1/4

4th quarter ended August 31, 1995 37 35

No shares of Preferred Stock have been issued.

Based upon security position listings and the Company's belief, it is
estimated there were more than 1,200 holders of its callable puttable common
stock as of November 15, 1995.

The Company has not declared any cash dividends on its common equity in the
past two years and has no present intention to pay cash dividends in the
foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

The following tables set forth selected consolidated financial information
regarding the Company's operating results and financial position. This
information should be read in conjunction with Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and Notes thereto, appearing elsewhere herein.

Years ended August 31,
(In thousands except per share amounts)
-----------------------------------------------
1995 1994 1993 1992 1991
--------- -------- -------- ------- -------

Operating revenues, net $151,308 $131,529 $115,893 $95,056 $73,773
Operating income $ 17,442 $ 16,679 $ 14,418 $11,686 $ 9,134
Income before income taxes
and cumulative effect
of change in accounting
principle $ 11,451 $ 16,882 $ 14,387 $11,252 $ 7,236
Cumulative effect on
prior years (to August
31, 1994) of expensing
pre-operating costs as
incurred, net of income
taxes $ (3,588)
Net income (Note A) $ 923 $ 10,380 $ 8,976 $ 6,920 $ 4,518

Earnings per share (Note A):
Primary:
Income before
cumulative effect of
change in accounting
principle $ 0.44 $ 1.19 $ 1.05 $ 0.94 $ 0.80
Cumulative effect on
prior years (to
August 31, 1994) of
expensing pre-operating
costs as incurred (0.35)
-------- -------- -------- ------- -------
Net earnings per share $ 0.09 $ 1.19 $ 1.05 $ 0.94 $ 0.80
======== ======== ======== ======= =======

Fully diluted:
Income before
cumulative effect of
change in accounting
principle $ 0.45 $ 1.10 $ 0.98 $ 0.88 $ 0.75
Cumulative effect on
prior years (to August
31, 1994) of expensing
pre-operating costs as
incurred (0.33)
-------- -------- -------- ------- -------
Net earnings per share $ 0.12 $ 1.10 $ 0.98 $ 0.88 $ 0.75
======== ======== ======== ======= =======

Years ended August 31,
(In thousands except per share amounts)
------------------------------------------------

1995 1994 1993 1992 1991
-------- -------- ------- ------- -------

Proforma amounts assuming
pre-operating costs are
retroactively expensed
as incurred:
Net income $ 4,511 $ 9,382 $ 7,531 $ 6,555 $ 4,668
Earnings per common
share-assuming no
dilution $ 0.44 $ 1.08 $ 0.88 $ 0.89 $ 0.83
Earnings per common
share-assuming full
dilution $ 0.45 $ 1.00 $ 0.84 $ 0.84 $ 0.77

Note A: Pre-operating costs of $2,224,000 have been expensed in 1995. In
addition, net income was reduced by $3,588,000 due to the cumulative effect on
prior years of the change in accounting principle to expensing pre-operating
costs as incurred. In prior years, pre-operating costs were deferred and
amortized over a three year period upon commencement of facility operations.
This change in accounting for pre-operating costs was adopted as management
believes this method of accounting better reflects the Company's current methods
of operations and it conforms to Zeneca Group, PLC, the beneficial owner of more
than 50% of the Company's common equity. The pro forma amounts shown in the
five year comparative income statement have been adjusted for the effect of
retroactive application of the change.

In addition, net income in 1995 was adversely affected due to non-recurring
merger transaction expenses of $7,685,000 recorded in connection with the
Company's Agreement and Plan of Merger with Zeneca.

August 31,
(In thousands)
-----------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- -------

Working capital $ 29,975 $ 67,940 $ 63,503 $ 58,732 $26,719
Total assets $207,098 $166,082 $146,401 $131,018 $87,819
Long-term debt and
capitalized leases $ 11,145 $ 39,548 $ 37,231 $ 33,676 $32,541
Stockholders' equity $129,428 $102,295 $ 91,431 $ 82,214 $39,262

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

RESULTS OF OPERATIONS

FISCAL YEAR 1995 COMPARED TO 1994

Operating revenues increased for fiscal 1995 by 15% to $151,308,000 from
$131,529,000 for fiscal 1994. Operating income increased by 4.6% to $17,442,000
versus $16,679,000 for the previous year. In the 1995 fiscal year's fourth
quarter, operating income decreased 19% over the prior year's fourth quarter,
resulting from a charge to operating revenues of $1,500,000, reflecting a change
in estimation of the collectibility of certain accounts receivable. Income
before income taxes and the cumulative effect of the change in accounting
principle (described in Note 1 to the Company's consolidated financial
statements), decreased 32.2% to $11,451,000 from $16,882,000 in fiscal 1994 due
to merger transaction expenses and costs expensed in the current year which were
deferred as pre-operating costs in prior years, as discussed below. Net income
decreased 91% to $923,000 from $10,380,000 for the prior fiscal year and was
0.6% as a percentage of net revenues compared to 7.9% in the prior year.
Primary and fully diluted earnings per share were $0.09 and $0.12, respectively,
in the current fiscal year, down from $1.19 and $1.10, respectively, in the
prior period. Fourth quarter primary and fully diluted earnings per share were
$0.24, down from $0.32 and $0.30, respectively, in the prior year quarter.
Increases in revenues and operating income resulted from growth in patient
volumes and services at the Company's existing facilities, as well as the
Company's recently introduced disease state managed care program, SalickNet, the
results of which were included for the first time in the first quarter of 1995.

Net income and earnings per share were adversely affected in both the
current fiscal year and fourth quarter due to non-recurring merger transaction
expenses of $7,685,000 recorded in fiscal 1995 ($252,000 of which were recorded
in the fourth quarter) in connection with the Company's Agreement and Plan of
Merger with Zeneca Limited. The merger transaction expenses primarily include
legal and accounting fees, travel and other expenses and investment banking
fees, a portion of which the Company believes is not payable until the
acquisition of the remainder of the Company's callable puttable common stock.
Additionally, in the current fiscal year the Company incurred $580,000 in legal,
accounting and other fees associated with the proxy and registration statement
which were charged directly to paid in capital.

Net income and earnings per share were also adversely affected by the
Company's change in accounting principle from deferral of pre-operating costs to
expensing such costs when incurred, as described in Note 1 to the consolidated
financial statements. The Company adopted this new method of accounting for
pre-operating costs as management believes this method of accounting better
reflects the Company's current methods of operations and it conforms to Zeneca
Group, PLC, the beneficial owner of more than 50% of the Company's common
equity. The cumulative effect of the change in accounting principle, $3,588,000
net of income taxes of $2,393,000, as of the beginning of the fiscal year is
reported in the income statement. Additionally, pre-operating costs of
$2,224,000 before income taxes, which would have been deferred under the
previous accounting method, have been expensed in fiscal 1995.

Without giving effect to the above mentioned additional items in the 1995
fiscal year, operating income, income before income taxes and net income would
have been $20,666,000, $22,360,000 and $13,898,000, respectively. Excluding
also the effect of 430,000 additional shares issued to Zeneca Limited as a

result of the Company's merger, primary and fully diluted earnings per share
would have been $1.37 and $1.33, respectively. Without giving effect to the
above mentioned items, primary and fully diluted earnings per share would have
been $0.36 in the current year fourth quarter.

The Company had net interest income of $1,223,000 in the current fiscal
year as compared to net interest expense of $663,000 in the prior year which is
due to conversion of the Company's 7 1/4% debentures in December 1994,
capitalization of interest on borrowings for construction projects, and higher
interest yields on funds invested in marketable securities. Net investment
losses of $104,000 in the current fiscal year versus net investment gains of
$219,000 in the prior period result from having realized substantially all
portfolio capital gains. The Company expects this trend to continue. While not
affecting operating income, this may reduce pre-tax and net income.

Operating results have been and will continue to be adversely affected by
reductions in reimbursement rates mandated by Congress, including those pursuant
to the Omnibus Budget Reconciliation Acts (OBRA) of 1990-1993 which impact
health care providers for many services provided to Medicare beneficiaries. The
principal reductions applicable to the Company are a continuation of the 5.8%
reduction in reimbursement of outpatient cost-based programs through federal
fiscal year 1998; a continuation of the 10% reduction in hospital outpatient
capital reimbursement through federal fiscal year 1998; and a change in the
manner of reimbursement for Erythropoietin for dialysis patients, effective
January 1, 1991 which was further reduced beginning on January 1, 1994. The
Company has implemented strategies, including programs to increase both Medicare
and non-Medicare patient volume and the implementation of cost control programs,
that have mitigated the effect of these changes. See "Impact of Inflation and
Changing Regulation."

Total expenses relative to operating revenues for fiscal 1995 increased
1.2% before interest income and investment expense, as compared to the prior
year. Medical supplies and services expense increased by $6,477,000 during the
period, a 2.3% increase as a percentage of revenues, reflecting claims payments
resulting from the Company's disease state managed care program, increasing
complexity in cancer and dialysis treatment modalities and supplier price
escalations. Salaries and related costs including additional professional,
corporate, and administrative and other personnel necessitated by expansion and
growth, primarily in Cancer Center operations, payments under the Management
Incentive Compensation Plan approved by the stockholders in August 1991, and
increases in compensation and payroll taxes, increased $7,075,000 in the period,
and decreased 0.7% as a percentage of operating revenues. As compared to the
prior year, other administrative expenses for fiscal 1995 increased 0.8%
relative to operating revenues, primarily due to the incremental effect of
increased operations. Contract and occupancy costs decreased 0.1% during the
period, as a percentage of net operating revenues, principally resulting from
expansion of operations into managed care. Depreciation and amortization
decreased by $303,000 during fiscal 1995 because amortization expense decreased
as a result of the Company's change in accounting principle for pre-operating
costs discussed above.

Income taxes were calculated at a 60.6% effective rate in fiscal 1995
versus 38.5% in fiscal 1994 because merger transaction expenses are
substantially non-tax deductible. In fiscal 1994, the Company utilized
available federal capital loss carrryforwards, lowering the Company's tax rates
and increasing cash flow. During fiscal 1994, the Company adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, which did
not have a material effect on the Company's financial statements.

FISCAL YEAR 1994 COMPARED TO 1993

Operating revenues increased for fiscal 1994 by 13.5% to $131,529,000 from
$115,893,000 for fiscal 1993. Operating income increased by 15.7% to
$16,679,000 versus $14,418,000 for the previous year. In the 1994 fiscal year's
fourth quarter, operating income increased 24% over the prior year's fourth
quarter. Income before taxes for fiscal 1994 increased 17.3% to $16,882,000
from $14,387,000 in fiscal 1993. Net income increased 15.6% to $10,380,000 from
$8,976,000 for the prior fiscal year and represented 7.9% and 7.7% respectively,
of operating revenues in the corresponding periods. Primary earnings per share
increased 13.3% to $1.19 from $1.05 and fully diluted earnings per share
increased 12.2% to $1.10 from $0.98 in the respective fiscal periods. Fourth
quarter primary earnings per share increased 18.5% to $0.32 from $0.27, and
fully diluted earnings per share increased 20% to $0.30 from $0.25. Increases
in revenues, operating income, net income and earnings per share resulted from
growth in patient volumes and services at the Company's existing facilities.
Operations of the Company's tenth cancer center at Westlake Medical Center in
Westlake, California were included for the first time in the 1994 second
quarter. Although the Company incurred costs in the development of its
SalickNet programs and the Company's bone marrow and stem cell transplantation
program over the past year and one half, revenues realized from these programs
were insignificant in fiscal 1994.

Net interest expense declined 41.4% due to capitalization of interest on
borrowings for construction projects, and higher interest rate yields on funds
invested in marketable securities. Net investment income declined $899,000 due
to trading transactions resulting from restructuring of the Company's portfolio.
The company expects this trend toward lower investment income to continue as
substantially all portfolio capital gains have been realized. While not
affecting operating income, this may reduce pre-tax and net income.

Total expenses relative to operating revenues for fiscal 1994 declined 0.2%
before interest and investment expense, as compared to the prior year. Medical
supplies expense increased by $2,632,000 during the period, a 0.2% increase as a
percentage of revenues, reflecting the increasing complexity in cancer and
dialysis treatment modalities and supplier price escalations. Salaries and
related costs including additional professional, corporate, and administrative
and other personnel necessitated by expansion and growth, primarily in Cancer
Center operations, payments under the Management Incentive Compensation Plan
approved by the stockholders in August 1991, and increases in compensation and
payroll taxes, increased $5,513,000 in the period, and decreased 0.8% as a
percentage of operating revenues. As compared to the prior year, other
administrative expenses for fiscal 1994 remained the same, relative to operating
revenues, primarily due to the incremental effect of increased operations.
Contract and occupancy costs increased 0.1% during the period, as

a percentage of net operating revenues, principally resulting from establishment
of the Company's tenth Comprehensive Cancer Center and expansion of operations
into home care and managed care. Depreciation and amortization increased by
$1,379,000 during fiscal 1994 due to depreciation of additional clinic equipment
placed in service during the past year. Pre-operating and start-up costs, which
are capitalized, are being amortized over three years, beginning with the
commencement of operations.

Income taxes were calculated at a 38.5% rate in fiscal 1994 versus 37.6% in
fiscal 1993. In fiscal 1993, the Company utilized available federal capital
loss carrryforwards, lowering the Company's tax rates and increasing cash flow.
The primary cause for the increase in the effective rate for fiscal 1994 was an
increase in the federal statutory rate. During fiscal 1994, the Company adopted
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, which did not have a material effect on the Company's financial
statements.

LIQUIDITY AND CAPITAL COMMITMENTS

Presently existing and internally generated funds and credit facilities are
expected to be sufficient to satisfy the Company's requirements for working
capital and capital expenditures relating to its present operations in fiscal
1996. The accelerated development, establishment or acquisition of a
significant number of additional Cancer Centers and/or dialysis centers or other
acquisitions or operations may require borrowing or equity financing by the
Company. Working capital at August 31, 1995 was $29,975,000. The decrease in
working capital during the current fiscal year as compared to fiscal 1994 is
principally the result of merger and related transaction expenses, the $0.3125
cash distribution per share to the former common stockholders as the result of
the merger and substantial completion of two permanent cancer centers. The
increase in accounts receivable at August 31, 1995 as compared to August 31,
1994 is due to the previously mentioned increased revenues which resulted from
growth in patient volumes and services provided at the Company's cancer centers
and dialysis facilities.

The Company's principal sources of liquidity consist of cash on hand,
interest-bearing investments, internal cash flow and bank lines of credit which
have been increased from $35,000,000 to $80,000,000. At August 31, 1995,
$18,072,000 had been borrowed under the revolving bank line of credit and
$10,000,000 had been converted to long-term debt payable over five years. The
line of credit agreement provides various options for interest rates. Unless
the Company elects an optional interest rate, borrowings under the line of
credit are subject to the bank's prime rate of interest.

At August 31, 1995, the Company held in its portfolio cash, government and
investment grade debt securities and equity securities. These investments
represent 100% of the total portfolio at fair value and reflect the Company's
policy to invest its funds in government and investment grade securities. In
accordance with Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities ("SFAS 115"), the Company
has increased the carrying value of its portfolio to fair value of $44,631,000
from cost of $44,587,000. As of August 31, 1995, the Company's five largest
investments in municipal and corporate debt securities, all of which were
investment grade aggregated $5,733,000 at fair value, with cost of $5,825,000.
The single largest investment in one company's securities approximated
$1,329,000 with fair value of $1,275,000.

Capital expenditures and the distributions to former common stockholders
pursuant to the merger for fiscal year 1996 are presently estimated to be

approximately $57,000,000. As to other needs, certain equipment and/or
facilities may be acquired through leases or purchase-finance agreements.

IMPACT OF INFLATION AND CHANGING REGULATION

The largest single component of the Company's revenue continues to be
reimbursement at rates which are set or regulated by federal or individual state
authorities. These reimbursement rates are also subject to periodic adjustment
for certain factors, including changes in legislation and regulations, those
imposed pursuant to the federal and individual state budgets, inflation, area
wage indices and costs incurred in rendering the services. The reimbursement
rates may in the future, as they have in the past, also be affected by cost
containment and other legislation, competition, third party payor changes or
other governmental administrative controls or limitations. Changes in the
Medicare and Medicaid system and reimbursement have been proposed by both
Republican and Democrat members of Congress. While the company expects changes
in reimbursement to occur, this may be limited to extensions of previously
implemented reductions scheduled to expire or may include additional changes.
The ultimate impact of any such changes on the Company's business cannot be
predicted, in part due to budgetary constraints and the rapidly evolving changes
in the health care system generally. The Company has developed and/or
implemented plans to deal with this situation and notes that in the past as
reimbursement reductions or changes have occurred, the Company has previously
been able to improve operations by an increased market share and greater
efficiency.

The Omnibus Budget Reconciliation Act of 1990 amended the definition of
"inpatient hospital services" to include all services for which payment may be
made under the DRG system that are provided by a hospital or an entity wholly-
owned or operated by the hospital to a patient during the three days immediately
preceding the date of the patient's admission (or one day for hospitals and
hospital units excluded from the DRG system under technical changes enacted in
October 1994), if such services are diagnostic services (including clinical
diagnostic laboratory tests) or are other services related to the admission, as
defined by the Secretary of Health and Human Services ("the Secretary"). Such
services are not reimbursable separately as hospital outpatient services under
Medicare Part B. These provisions have been in effect since 1991. On January
12, 1994, the Secretary issued interim final regulations implementing this
provision and on September 1, 1995, the Secretary announced she will revise the
regulations to recognize that only the one day immediately preceding the date of
the patient's admission would be considered to be not reimbursable separately as
hospital outpatient services for hospitals and hospital units excluded from the
DRG system.

furnished to hospital outpatients on the basis of the lower of reasonable costs
or an amount based on a blend of the hospital's reasonable costs and a
prospectively set fee schedule amount. On October 1, 1988, this blended payment
system was extended to radiology services furnished to hospital outpatient
patients; the blended payment system was extended further to certain other
diagnostic services on October 1, 1989. In addition, the amount of the blend
that is based on the hospital's reasonable costs has decreased; currently, the
blend is based 42% on hospital costs for surgery and radiology services, and 50%
on hospital costs for other diagnostic services. For surgery services reimbursed
under the blend, the fee schedule portion of the blend is based on the amount of
payment that ambulatory surgery centers would receive for the procedure. For
radiology and diagnostic services reimbursed under the blend, the fee schedule
portion of the blend is based on the amount that physicians would receive if the
procedure were furnished in a physician's office under the Medicare physician
fee schedule.

Legislation in Florida limits charges for certain healthcare services
provided to non-Medicare/Medicaid patients. A substantial portion of this law
has been challenged, a portion declared unconstitutional and is being appealed
in the federal court system and will not be enforced until after such
resolution; however, the limitations on rates respecting radiation therapy
services provided at freestanding, not hospital-based facilities, presently
remains in effect. As substantially all of the Company's radiation therapy
services are hospital-based, the effect of the legislation has not had a
material effect on the Company's operations. Florida also has legislation
precluding or limiting referrals by physicians to facilities in which they have
an ownership, control or investment relationship (the Florida Patient/Self-
Referral Act). One of the Company's radiation facilities in South Florida
currently has three physician investors who own less than two percent (2%) in
total and who make no referrals to the facility. The Company believes it is in
full compliance with the law.

The first of these plans has been successfully marketed in Florida with a major
capitated (per member, per month) agreement entered into with Physician's
Corporation of America currently covering 120,000 members in South Florida (See
"Additional Services" discussion of SalickNet).

To the extent that legislation or regulations may be enacted in the future
which may include outpatient services furnished to Medicare beneficiaries in a
prospective payment system, the Company cannot predict whether or to what extent
such a change would adversely affect its revenues or earnings. In addition, in
1995 Congress began considering extensive changes to the Medicare and Medicaid
programs. Medicare changes under consideration include, among others, (1) a
change in the formula used to calculate hospital outpatient reimbursement under
the blended payment system which generally would result in reducing
reimbursement amounts; (2) an extension of the current 5.8% reduction in
hospital outpatient reasonable cost reimbursement through the year 2002; (3) a
reduction in reimbursement for hospital outpatient department capital-related
costs of 85% of such reasonable costs for federal fiscal years 1996-2002; (4)
the introduction of a prospective payment system for home health services,
effective October 1996; (5) reductions in payment for clinical laboratory
services; (6) the elimination of updates in payments for ambulatory surgical
center services from 1996-2002: (7) various other reductions in the amount of
payment for physician and hospital services; and (8) the introduction of
additional choices of health plans for Medicare beneficiaries in addition to the
current fee-for-service and Medicare HMO option. Proposed Medicaid changes
include the replacement of the existing federal/state program with block grants
to the states and reduced federal oversight over state plans. The enactment of
large cuts in the amount of Medicare and Medicaid reimbursement for providers
could have an adverse effect on the Company's revenues. At this point in time.
however, it is uncertain which, if any, of these or other changes to the
Medicare and Medicaid programs will be enacted into law, and the Company is
unable to predict how the enactment of any such changes might affect the Company
in the future.

The Company believes that health care regulations will continue to change
and, therefore, regularly monitors developments. The Company may modify its
agreements and operations from time to time as the business and regulatory
environments change. While the Company believes it will be able to structure
its agreements and operations in accordance with applicable law, there can be no
assurance that its arrangements will be as successful or not be successfully
challenged.

Labor costs represent the largest dollar component of the Company's total
expenses and necessary increases in the number of personnel, salaries, hourly
rates and insurance costs have resulted in higher dollar amounts of operating
expenses. Rental rates are subject to annual adjustments pursuant to escalation
clauses in the respective leases. In addition, suppliers have sought to pass
along their rising costs to the Company. A significant portion of these higher
costs, however, has been offset by the use of new procedures and equipment,
changes in staff scheduling, improvement in purchase price negotiations and
utilization of supplies, and by increases in treatment and services volume.
Changes in reimbursement rates for Medicare patients have a significant impact
on the results of operations. The rate of inflation has not had a significant
impact on the results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements
and Supplementary Data

Page
Numbers
-------

Report of Independent Accountants................... 43

Consolidated Statements of Income for each of the
Three Years in the Period Ended August 31, 1995... 44 - 45

Consolidated Balance Sheets at August 31,
1995 and 1994..................................... 46 - 47

Consolidated Statements of Cash Flows
for each of the Three Years in the
Period Ended August 31, 1995...................... 48 - 49

Consolidated Statements of Stockholders'
Equity for each of the Three Years in the Period
Ended August 31, 1995............................. 50 - 52

Notes to Consolidated Financial Statements.......... 53 - 64

Financial Statement Schedule

VIII - Allowance for Doubtful Accounts........ 65

All other schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of Salick Health Care, Inc.

In our opinion, the consolidated financial statements listed in the
index appearing on page 42 present fairly, in all material respects, the
financial position of Salick Health Care, Inc. and its subsidiaries at August
31, 1995 and 1994, and the results of their operations and their cash flows for
each of the three years in the period ended August 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

As discussed in Notes 1 and 8 to the consolidated financial
statements, the Company changed its method of accounting for pre-operating costs
in fiscal 1995 and adopted the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes" and SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" in fiscal 1994.

/s/ Price Waterhouse LLP

PRICE WATERHOUSE LLP

Los Angeles, California
November 16, 1995

SALICK HEALTH CARE, INC.
CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED AUGUST 31,
------------------------------------------
1995 1994 1993
------------ ------------ ------------

Revenues:
Operating revenues, net (Note 1) $151,308,000 $131,529,000 $115,893,000
------------ ------------ ------------
Expenses:
Medical supplies and services 26,598,000 20,121,000 17,489,000
Salaries and related costs 61,572,000 54,497,000 48,984,000
Other administrative expenses 21,736,000 17,851,000 15,785,000
Contract and occupancy costs
(Notes 3 and 4) 15,749,000 13,867,000 12,082,000
Depreciation and amortization
(Note 1) 8,211,000 8,514,000 7,135,000
------------ ------------ ------------
Total expenses 133,866,000 114,850,000 101,475,000
------------ ------------ ------------
Operating income 17,442,000 16,679,000 14,418,000
Merger transaction expenses (Note 7) (7,685,000)
Net interest income (expense)
(Notes 1,4,5 and 6) 1,223,000 (663,000) (1,131,000)
Net investment (losses) gains
(Note 1) (104,000) 219,000 1,118,000
Minority interest (Note 9) 575,000 647,000 (18,000)
------------ ------------ ------------
Income before income taxes and
cumulative effect of change in
accounting principle 11,451,000 16,882,000 14,387,000
Provision for income taxes
(Note 8) 6,940,000 6,502,000 5,411,000
------------ ------------ ------------
Income before cumulative effect
of change in accounting
principle 4,511,000 10,380,000 8,976,000
Cumulative effect on prior years
(to August 31, 1994) of
expensing pre-operating costs
as incurred (Note 1) (3,588,000)
------------ ------------ ------------
Net income $ 923,000 $ 10,380,000 $ 8,976,000
============ ============ ============

Earnings per share (Note 1)
Primary:
Income before cumulative effect
of change in accounting
principle $ 0.44 $ 1.19 $ 1.05
Cumulative effect on prior years
(to August 31, 1994) of
expensing pre-operating costs
as incurred (0.35)
------------ ------------ ------------
Net earnings per share $ 0.09 $ 1.19 $ 1.05
============ ============ ============

Fully diluted:
Income before cumulative effect
of change in accounting
principle $ 0.45 $ 1.10 $ 0.98
Cumulative effect on prior years
(to August 31, 1994) of
expensing pre-operating costs
as incurred (0.33)
------------ ------------ ------------
Net earnings per share $ 0.12 $ 1.10 $ 0.98
============ ============ ============

SALICK HEALTH CARE, INC.
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)

YEARS ENDED AUGUST 31,
-----------------------------------------------
1995 1994 1993
--------------- -------------- -------------

Weighted average number of
shares used in computing
earnings per share:

Primary 10,311,000 8,709,000 8,565,000
=============== ============== =============

Fully diluted 10,960,000 10,576,000 10,442,000
=============== ============== =============

Proforma amounts assuming
pre-operating costs are
retroactively expensed
as incurred:
Net income $ 4,511,000 $ 9,382,000 $ 7,531,000
Earnings per share:
Primary $ 0.44 $ 1.08 $ 0.88
Fully diluted $ 0.45 $ 1.00 $ 0.84

See accompanying notes to consolidated financial statements.

SALICK HEALTH CARE, INC.
CONSOLIDATED BALANCE SHEETS

AUGUST 31,
--------------------------
ASSETS 1995 1994
------------ ------------

Current assets:
Cash $ 642,000 $ 1,692,000
Marketable securities (Note 1) 44,631,000 45,378,000
Accounts receivable, less allowance
for doubtful accounts of $2,885,000 and
$3,502,000 (Note 1) 36,248,000 31,772,000
Inventories (Note 1) 1,305,000 1,171,000
Prepaid expenses 1,677,000 2,252,000
Other current assets 1,967,000 2,881,000
Refundable income taxes (Note 8) 2,545,000
Deferred income taxes (Note 8) 5,047,000 2,241,000
------------ ------------
Total current assets 94,062,000 87,387,000
Property and equipment, at cost, less
accumulated depreciation and amortization
of $32,841,000 and $25,365,000
(Notes 1 and 4) 101,651,000 60,280,000
Pre-operating costs (Note 1) 5,250,000
Deposits 725,000 3,090,000
Goodwill, net (Notes 1 and 9) 5,494,000 5,421,000
Other assets 5,166,000 4,654,000
------------ ------------
$207,098,000 $166,082,000
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Notes payable to bank (Notes 5 and 6) $ 18,072,000 $ 3,000,000
Accounts payable and accrued liabilities
(Note 2) 41,063,000 13,162,000
Income taxes payable (Note 8) 537,000
Current portion of long-term
obligations (Notes 4 and 6) 4,952,000 2,748,000
------------ ------------
Total current liabilities 64,087,000 19,447,000
Deferred income taxes (Note 8) 67,000 1,545,000
Capitalized lease obligations, less
current portion (Note 4) 5,235,000 4,276,000
Long-term debt, less current portion
(Notes 5 and 6) 5,910,000 35,272,000
Other liabilities 2,400,000
Minority interest (Note 9) (29,000) 3,247,000
------------ ------------
Total liabilities 77,670,000 63,787,000
------------ ------------

SALICK HEALTH CARE, INC.
CONSOLIDATED BALANCE SHEETS

AUGUST 31,
----------------------------
1995 1994
------------ ------------

Commitments and contingencies (Notes 3 and 4)
Stockholders' equity (Note 7)
Preferred stock, $.001 par value
5,000,000 shares authorized,
none issued
Common stock, $.001 par value, 15,000,000
and 25,000,000 shares authorized,
5,657,115 and 8,456,513 shares issued
and outstanding 6,000 8,000
Callable puttable common stock,
$.001 par value, 7,500,000 shares
authorized, 5,634,082 and no shares
issued and outstanding 5,000
Additional paid in capital 79,738,000 54,107,000
Unearned stock awards (6,000)
Unrealized holding gains (losses) 44,000 (526,000)
Retained earnings 49,635,000 48,712,000
------------ ------------
Total stockholders' equity 129,428,000 102,295,000
------------ ------------
$207,098,000 $166,082,000
============ ============

See accompanying notes to consolidated financial statements.

SALICK HEALTH CARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED AUGUST 31,
-------------------------------------------
1995 1994 1993
---- ---- ----

Cash flow provided (used)
by operations:
Net income $ 923,000 $ 10,380,000 $ 8,976,000
Add items not requiring cash:
Depreciation and amortization 8,211,000 8,514,000 7,135,000
Amortization of debt issue
costs 23,000 66,000 66,000
Vested shares issued under
management incentive plan 6,000 49,000 197,000
Deferred income taxes (4,284,000) (477,000) 236,000
Minority interest in loss,
net of distributions (711,000) (666,000) (28,000)
Cumulative effect on prior
years (to August 31, 1994) of
expensing pre-operating costs
as incurred 5,981,000
Merger transaction expenses 6,423,000
Changes in assets and liabilities:
Accounts receivable (6,564,000) (3,318,000) (1,065,000)
Inventories (134,000) (238,000) 353,000
Prepaid expenses 575,000 (394,000) (251,000)
Other current assets 437,000 26,000 (985,000)
Pre-operating costs (728,000) (2,644,000) (2,690,000)
Deposits and other assets 1,170,000 (667,000) 73,000
Accounts payable and
accrued liabilities 2,692,000 228,000 2,380,000
Refundable income taxes (2,545,000) 1,296,000 (1,296,000)
Income taxes payable (537,000) 537,000 (87,000)
------------ ------------ ------------
Net cash flow provided
by operations 10,938,000 12,692,000 13,014,000
------------ ------------ ------------

Cash flow provided (used) by
investing activities:
Proceeds from sales of
marketable securities 58,049,000 32,338,000 27,763,000
Investment in marketable
securities (56,732,000) (34,742,000) (30,809,000)
Additions to property
and equipment (32,264,000) (18,105,000) (12,202,000)
Payment for purchase
of acquisitions (231,000) (248,000) (226,000)
Payments received on amounts
due from minority interest 3,314,000
------------ ------------ ------------
Net cash flow used by
investing activities (31,178,000) (17,443,000) (15,474,000)
------------ ------------ ------------

SALICK HEALTH CARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED AUGUST 31,
---------------------------------------
1995 1994 1993
---- ---- ----

Cash flow provided (used)
by financing activities:
Exercise of stock options $ 4,777,000 $ 619,000 $ 44,000
Tax effect of stock options
exercised credited to
paid in capital 1,985,000
Reduction of capitalized
lease obligations (1,017,000) (711,000) (716,000)
Increase (decrease) in
long-term debt (1,857,000) 4,105,000 5,081,000
Notes payable to bank, net 15,072,000 (593,000)
Stock registration costs
charged to paid in capital (580,000)
Accrued interest on
convertible debentures
credited to paid in capital 810,000
----------- ---------- -----------
Net cash flow provided by
financing activities 19,190,000 4,013,000 3,816,000
----------- ---------- -----------

Increase (decrease) in cash $(1,050,000) $ (738,000) $ 1,356,000
Cash, beginning of period 1,692,000 2,430,000 1,074,000
----------- ---------- -----------
Cash, end of period $ 642,000 $1,692,000 $ 2,430,000
=========== ========== ===========

Schedule of non-cash investing
and financing activities:
Conversion of 7.25% convertible
subordinated debentures due
January 31, 2001 into
common stock $25,573,000 $ 342,000
=========== ==========
Capital lease
obligations incurred for
property and equipment $ 2,250,000 $ 321,000 $ 134,000
=========== ========== ===========
Unrealized holding gains
(losses) $ 570,000 $ (526,000)
=========== ==========
Accrual for purchase of
corporate headquarters $14,650,000
===========
Deferred bond issue costs
charged to paid in capital
upon conversion of the
the subordinated debentures $ 400,000
===========
Special distribution payable
to stockholders $ 6,534,000
===========
Westlake Joint Venture
settlement credited against
amounts due from venture
partner $ 2,565,000
===========

See accompanying notes to consolidated financial statements.

SALICK HEALTH CARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK (NOTE 7)
-----------------------------------------------------------------------------------

CALLABLE PUTTABLE
COMMON STOCK COMMON STOCK UNREALIZED
----------------- -------------------
ADDITIONAL UNEARNED HOLDING
PAR PAR PAID IN STOCK GAINS RETAINED
SHARES VALUE SHARES VALUE CAPITAL AWARDS (LOSSES) EARNINGS
--------- --------- --------- ------------ ------------ --------- ---------- -----------

Balance at August 31,
1992 8,318,492 $ 8,000 $ $ 52,948,000 $ (98,000) $ $ 29,356,000
Shares issued on exer-
cise of stock options 9,557 58,000
Shares issued under
management incentive
plan, less amortiza-
tion of $109,000 15,023 154,000 (45,000)
Amortization of shares
issued in prior years
under management
incentive plan 88,000
Forfeiture of shares
issued under manage-
ment incentive plan (1,336) (14,000)
Net income 8,976,000
---------- --------- --------- ------------ ------------ --------- ---------- ------------
Balance at August 31,
1993 8,341,736 8,000 53,146,000 (55,000) 38,332,000
Shares issued on exer-
cise of stock options 91,469 630,000
Conversion of 7.25%
subordinated deben-
tures 24,425 342,000
Amortization of shares
issued in prior years
under management
incentive plan 49,000
Forfeiture of shares
issued under manage-
ment incentive plan (1,117) (11,000)
Valuation allowance to
reduce portfolio to
fair value (526,000)
Net income 10,380,000
---------- --------- --------- ------------ ------------ --------- ---------- ------------
Balance at August 31,
1994 8,456,513 $8,000 $54,107,000 $ (6,000) $ (526,000) $ 48,712,000

SALICK HEALTH CARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK (NOTE 7)
--------------------------------------------------------------------------------
CALLABLE PUTTABLE
COMMON STOCK COMMON STOCK
------------------ ------------------
UNREALIZED
ADDITIONAL UNEARNED HOLDING
PAR PAR PAID IN STOCK GAINS RETAINED
SHARES VALUE SHARES VALUE CAPITAL AWARDS (LOSSES) EARNINGS
--------- --------- --------- ------- ------------- ---------- -------- ------------

Shares issued on
exercise of stock
options 578,354 $ 1,000 406,625 $ $ 4,777,000 $ $ $
Additional shares
issued upon
recapitalization 23,000
Tax effect of stock
options exercised
credited to paid
in capital 1,985,000
Conversion of 7.25%
subordinated deben-
tures 1,826,734 2,000 25,573,000
Accrued interest on
debentures at
conversion 810,000
Conversion of common
stock into callable
puttable common
stock at merger (5,227,486) (5,000) 5,227,457 5,000
Deferred bond issue
costs charged to
paid in capital (400,000)
Stock registration
costs charged to
paid in capital (580,000)
Special distribution
payable to stock-
holders (6,534,000)
Amortization of
shares issued in
prior years under
management incentive
plan 6,000

SALICK HEALTH CARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK (NOTE 7)
-------------------------------------------------------------------------
CALLABLE PUTTABLE
COMMON STOCK COMMON STOCK
--------------------- ------------------
UNREALIZED
ADDITIONAL UNEARNED HOLDING
PAR PAR PAID IN STOCK GAINS RETAINED
SHARES VALUE SHARES VALUE CAPITAL AWARDS (LOSSES) EARNINGS
-------- ------ -------- ------ ----------- --------- ----------- ------------

Valuation allowance to
increase portfolio to
fair value 570,000
Net income 923,000
--------- ------- --------- ------ ----------- -------- ---------- -----------
5,657,115 $ 6,000 5,634,082 $5,000 $79,738,000 $ -0- $ 44,000 $49,635,000
========= ======= ========= ====== =========== ========= ========== ===========

SALICK HEALTH CARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its subsidiaries. All material intercompany items have been eliminated.

OPERATING REVENUES

Operating revenues are recorded, net of contractual allowances and allowances
for doubtful accounts from standard treatment rates, when treatments are
rendered to patients. These allowances were $102,439,000, $87,029,000, and
$67,084,000 for the years ended August 31, 1995, 1994, and 1993, respectively.
A substantial portion of the Company's revenues is dependent on reimbursement
programs administered by Medicare and other governmental agencies.

PREPAID HEALTH CARE SERVICES

The Company receives premiums as compensation for providing defined health
care services. The Company either provides cancer treatment services at its own
facilities, or pays other providers for cancer treatment services as those
services are performed. Premiums collected for health care services are
recognized as operating revenues in the period for which the member is entitled
to service. Cost of health care is accrued in the period it is provided to the
members and patients based in part on estimates, including a provision for
incurred but not recorded claims. Claims payments are reported as medical
supplies and services in the Company's consolidated statements of income.

MARKETABLE SECURITIES

The marketable securities portfolio includes brokerage cash funds, equity
securities and corporate and government bonds. Marketable securities are stated
at their fair value of $44,631,000 and $45,378,000 as of August 31, 1995 and
1994, respectively. Cost of the marketable securities portfolio was $44,587,000
and $45,904,000 at August 31, 1995 and 1994, respectively. Net realized losses
of $177,000 and $386,000, and net realized gains of $1,027,000, for the years
ended August 31, 1995, 1994 and 1993, respectively, are recorded in net
investment gains (losses). The costs of marketable securities sold are
determined by the specific identification method.

In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities. SFAS 115, effective for fiscal years beginning
after December 15, 1993, requires that debt and equity securities which are
available-for-sale, be recorded at fair value in the financial statements and
that unrealized holding gains (losses) be reported as a net amount in a separate
component of stockholders' equity until realized. The Company adopted SFAS 115
in the fourth quarter of fiscal 1994, and consequently, reported unrealized
holding gains of $44,000 and losses of $526,000 as separate components of
stockholders' equity in the Company's balance sheets as of August 31, 1995 and
1994, respectively. Proceeds from sales of available-for-sale securities were
$58,049,000 and $32,338,000 for the years ended August 31, 1995 and 1994,
respectively. Gross

realized gains were $281,000 and $606,000 and gross realized losses were
$458,000 and $992,000 on these sales.

Aggregate cost, market value and unrealized holding gains (losses) for the
major components of the Company's portfolio, at August 31, 1995, are as follows:

Unrealized
Market Holding
Cost Value Gain(Loss)
----------- ----------- ----------

Government debt securities
(due 1995-2025).......... $37,714,000 $37,581,000 $(133,000)
Corporate debt securities
(due 1995-2029).......... 4,551,000 4,548,000 (3,000)
Equity securities.......... 2,094,000 2,274,000 180,000
Cash....................... 228,000 228,000
----------- ----------- ---------

$44,587,000 $44,631,000 $ 44,000
=========== =========== =========

INVENTORIES

Inventories, which are comprised of medical supplies, are stated at the lower
of cost (FIFO) or market.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost less accumulated depreciation.
Depreciation is generally provided on the straight-line method over the
estimated useful life of the asset. The components of property and equipment
and the estimated useful lives by asset category are as follows:

Estimated August 31,
----------------------------
Useful Lives 1995 1994
------------ ------------- -------------

Land.................... $ 2,822,000 $ 932,000
Buildings............... 20-25 years 38,851,000 21,119,000
Leasehold improvements.. 3-25 years 14,296,000 12,668,000
Clinic equipment........ 5-15 years 26,536,000 23,200,000
Furniture and fixtures.. 5-7 years 13,109,000 11,094,000
Automobiles and trucks.. 3-7 years 678,000 610,000
------------ ------------
96,292,000 69,623,000
Less accumulated
depreciation and amortization (32,841,000) (25,365,000)
------------ ------------
63,451,000 44,258,000
Construction in progress 38,200,000 16,022,000
------------ ------------
$101,651,000 $ 60,280,000
============ ============

The above summary of property and equipment includes capitalized leases
(Note 4).

Interest cost is capitalized for construction in progress during the
construction period. Interest capitalized during the years ended August 31,
1995, 1994 and 1993 was $1,920,000, $563,000 and $214,000, respectively.

INCOME TAXES

In 1994 the Company adopted Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes. SFAS 109 requires the use of the liability
method for computing deferred income taxes. Under the new standard deferred tax
liabilities are recognized for taxable temporary differences and deferred tax

SALICK HEALTH CARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

assets are recognized for deductible temporary differences. A valuation
allowance reduces deferred tax assets if it is more likely than not that all, or
some portion, will not be realized. The cumulative effect of prior years at the
date of adoption was not material to the results of operations or the financial
position of the Company. Through August 31, 1993, income taxes were accounted
for under Accounting Principles Board Opinion No. 11.

EARNINGS PER SHARE

Earnings per share, assuming no dilution, is calculated based upon the
weighted average number of common and common equivalent shares outstanding
during each year. Earnings per share, assuming full dilution, is computed as
above and, additionally, assumes conversion of the convertible subordinated
debentures into common stock at the beginning of the fiscal periods presented
(Note 6).

PRE-OPERATING COSTS

Pre-operating costs have been expensed for fiscal 1995. In prior years,
pre-operating costs had been deferred and amortized over a three year period
upon commencement of facility operations. Amortization of these pre-operating
costs was $1,036,000 and $371,000 during the years ended August 31, 1994 and
1993, respectively. Unamortized pre-operating costs were $5,250,000 at August
31, 1994. In the fourth quarter, giving effect to the first quarter of fiscal
1995, the Company recorded the cumulative effect of the change from deferral to
expensing pre-operating costs as incurred of $3,588,000, net of income taxes of
$2,393,000. This change in accounting for pre-operating costs was adopted as
management believes this method of accounting better reflects the Company's
current methods of operations and it conforms to Zeneca Group, PLC, the
beneficial owner of more than 50% of the Company's common equity.

DEBT ISSUE COSTS

Debt issue costs associated with the issuance of the Company's 7.25%
Convertible Subordinated Debentures in 1986 (Note 6) were $1,145,000. These
costs, recorded as other assets were deferred and amortized over the fifteen
year term of the debentures. On December 29, 1994 the Company called for the
redemption on January 20, 1995, of all its outstanding debentures at a
redemption price, including accrued interest through January 20, 1995 of
$1,049.34 per $1,000 of debentures redeemed. The debentures were convertible at
any time prior to the close of business on January 12, 1995 into shares of
common stock of the Company at the rate of $14.00 per share and all outstanding
debentures were converted into common stock. At the time of conversion,
remaining debt issue costs were charged to stockholders' equity. Amortization
of debt issue costs was $23,000, $66,000 and $66,000 during the years ended
August 31, 1995, 1994 and 1993, respectively.

GOODWILL

Goodwill represents the excess of the purchase price over the fair value of
net assets acquired. Goodwill is amortized on a straight line basis over a
period of forty years. Amortization of goodwill during the years ended August
31, 1995, 1994 and 1993 was $159,000, $151,000, and $146,000, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash, accounts receivable, accounts payable and
short-term debt approximate fair value because of the short maturity of these
financial

SALICK HEALTH CARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

instruments. The fair value of the convertible subordinated debentures at August
31, 1994 was estimated based on the trading price of the underlying marketable
securities to which the debentures could be converted. The fair values of other
long-term debt obligations are estimated based on the quoted market prices for
the same or similar issues or on the current rates offered to the Company for
debt of the same remaining maturities. The carrying values of other long-term
debt obligations approximate fair values.

NOTE 2-ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities are comprised of the following:

August 31,
------------------------
1995 1994
----------- -----------

Accounts payable................. $ 6,733,000 $ 4,516,000
Accrued compensation............. 4,485,000 3,107,000
Corporate headquarters purchase.. 14,650,000
Special distribution to
stockholders................... 6,534,000
Merger transaction expenses...... 4,023,000
Other accrued liabilities........ 4,638,000 5,539,000
----------- -----------

$41,063,000 $13,162,000
=========== ===========

NOTE 3-RELATED PARTY TRANSACTIONS

LEASES

The Company and its subsidiaries lease corporate office space from its
Chairman and Chief Executive Officer and his spouse (the "Lessors") under an
operating lease containing operating cost escalation provisions. The lease has
a remaining term of approximately 16 years. Additional office space is leased
for the Company's operations from an entity owned by the Lessors and an
unrelated third party on a month-to-month basis. Aggregate minimum annual
rentals for the years ended August 31, 1995, 1994 and 1993 were approximately
$1,041,000, $1,008,000, and $969,000, respectively. The Company also leases a
dialysis treatment center from the Lessors, as more fully described in Note 4.

The Company and the Lessors are parties to a lease for the Company's
corporate headquarters and related offices and the Lessors, the Company and
Zeneca executed an agreement, dated December 22, 1994 pursuant to which the
Lessors have elected to sell the corporate headquarters to the Company for an
aggregate purchase price of $14,650,000 in cash, which purchase price is
approximately $1,160,000 less than the formula purchase price in the lease under
which the Lessors had the right under certain circumstances to require the
Company to purchase the corporate headquarters.

NOTE 4-LEASES AND COMMITMENTS

The Company leases from the Lessors (See Note 3) a chronic dialysis
treatment center at minimum annual rental of $617,000. The lease has a
remaining term of approximately 11 years and is recorded as a capital lease at
an imputed interest rate of 13.8%. The Company also leases certain clinic
equipment under the terms of capital leases with unrelated third parties.

SALICK HEALTH CARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Annual future minimum lease payments as of August 31, 1995 are as follows:

Year Ending Operating Capital
August 31, Leases Leases
------------ ---------- -----------

1996............................ $1,745,000 $ 1,581,000
1997............................ 1,030,000 1,534,000
1998............................ 927,000 1,509,000
1999............................ 702,000 1,279,000
2000............................ 620,000 568,000
Thereafter...................... 2,676,000 2,735,000
---------- -----------

Total minimum lease payments,
including $2,637,000 under operating
leases and $4,895,000 under capital
leases payable to the Company's
lessors described in Note 3........... $7,700,000 9,206,000
==========

Less interest and
executory costs....................... 2,949,000
-----------
Present value of minimum
lease payments........................ 6,257,000
Less current portion................... (1,022,000)
-----------
$ 5,235,000
===========

Interest rates on capital leases vary from 6% to 9% except as described
above. The following is an analysis of capitalized lease assets included in
property and equipment:

August 31,
-------------------------
1995 1994
----------- -----------

Buildings......... $ 2,858,000 $ 2,858,000
Clinic equipment.. 6,867,000 4,829,000
----------- -----------
9,725,000 7,687,000
Less accumulated
amortization..... (3,373,000) (2,888,000)
----------- -----------
$ 6,352,000 $ 4,799,000
=========== ===========

During the years ended August 31, 1995, 1994 and 1993 rent expense under
operating leases totalled $2,427,000, $2,438,000, and $2,469,000, respectively.

Under the terms of certain agreements that the Company has at various of
its Cancer Centers, it has, in total, annual commitments of up to $4,752,000
plus amounts based on center performance. These agreements terminate at various
dates through 2027, subject to renewal provisions.

NOTE 5-BANK AGREEMENTS

The Company has a business loan agreement with a bank, which was renewed
during the current fiscal year and is subject to renewal in 1998, for lines of
credit of $80,000,000 with interest payable at the bank's prime rate (8.75% at
August 31, 1995) unless the Company elects an optional rate of interest. The
loan agreement requires a 0.1% fee on the difference between the $80,000,000
loan commitment and the amount the Company actually uses. At August 31, 1995,
there was $18,072,000 in outstanding borrowings under the revolving line of
credit. During the year ended August 31, 1995 the Company paid $1,227,000 in
interest expense relating to the revolving line of credit. Under the prior
agreement, the Company
57

SALICK HEALTH CARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

was eligible at its option to convert up to $10,000,000 of the then $35,000,000
available under the business loan agreement to long-term debt payable monthly
upon conversion. In August 1993, the Company converted $5,000,000 of short-term
revolving borrowings to long-term debt and, in August 1994, converted another
$5,000,000 to long-term debt. The principal portion of each conversion is
repayable in sixty monthly installments beginning in the month following
conversion. Interest accrues and is paid monthly on the unpaid principal balance
of the long-term debt portion at 8.62% and 6.85% per annum on the August 1994
and 1993 conversions, respectively.

NOTE 6-LONG-TERM DEBT

Long-term debt consists of the following:

August 31,
-------------------------
1995 1994
----------- -----------

Term bank loan............................. $ 7,083,000 $ 9,000,000
Equipment purchase debt.................... 2,757,000 2,697,000
7.25% convertible subordinated
debentures................................ 25,575,000
----------- -----------
Total long-term debt....................... 9,840,000 37,272,000
Less current portion....................... (3,930,000) (2,000,000)
----------- -----------
$ 5,910,000 $35,272,000
=========== ===========

Equipment purchased under agreements from hospitals at which the Company
operates Cancer Centers becomes payable in full, upon opening of the permanent
Cancer Centers, which are presently expected in fiscal 1996. Interest under one
of the agreements accrues at the rate of 7% per annum and is due upon opening of
the permanent Cancer Center. Under the other agreement, $5,500 is expensed
monthly and is payable until opening of the permanent Cancer Center.

On December 29, 1994 the Company called for redemption on January 20,
1995 of all its outstanding 7 1/4% Convertible Debentures due 2001 at a
redemption price, including accrued interest through January 20, 1995 of
$1,049.34 per $1,000 of debenture redeemed. The debentures were convertible at
any time prior to the close of business on January 12, 1995 into shares of
common stock of the Company at the rate of $14.00 per share and all outstanding
Debentures were converted into common stock. For the purpose of calculating
fully diluted earnings per share for the periods ended August 31, 1995, 1994 and
1993, these debentures were assumed to have been converted into common stock as
of the beginning of the respective periods presented.

During the years ended August 31, 1995, 1994 and 1993, interest payments
made on long-term debt totalled $1,452,000, $2,286,000 and $1,879,000,
respectively. During the years ended August 31, 1995, 1994 and 1993, interest
expense on the lines of credit, capital leases and long-term debt totalled
$3,279,000, $3,605,000 and $3,460,000, respectively.

SALICK HEALTH CARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Long-term debt maturing during the five years subsequent to August 31,
1995 is as follows:

Year Amount
---- -----------

1996........................ $ 3,930,000
1997........................ 2,826,000
1998........................ 2,000,000
1999........................ 1,000,000
2000........................ 83,000
-----------
$ 9,839,000
===========

NOTE 7-STOCKHOLDERS' EQUITY

DESCRIPTION OF CAPITAL STOCK

In August 1991, the state of incorporation of the Company was changed
from California to Delaware by virtue of the merger of Salick Health Care, Inc.,
a California corporation ("Salick California"), into the Company. In connection
with the merger, the Company's authorized capital increased from 15,000,000
shares of common stock, no par value, and 1,000,000 shares of preferred stock,
no par value, to 25,000,000 shares of common stock, $.001 par value, and
5,000,000 shares of preferred stock, $.001 par value, respectively. Other
changes concerning the charter and Bylaws of the Company were also affected by
the merger.

On April 13, 1995 the Company consummated the Agreement and Plan of
Merger with an indirect wholly owned subsidiary of Zeneca Limited ("Zeneca"),
pursuant to which a wholly owned subsidiary of Zeneca acquired approximately 50%
of the equity of the Company on a fully diluted basis. Under the terms of the
Agreement, Company stockholders received in exchange for each share of common
stock held: $18.875 in cash from Zeneca; one-half share of a new callable
puttable common stock issued by the Company and a payment to holders of record
at closing from the Company of $0.625, payable in two equal installments at 180
days and 360 days after closing. The callable puttable common stock carries a
right on the behalf of stockholders to put (sell) the stock to the Company and
an obligation on behalf of Zeneca to fund the purchase, at 2.5 years after
closing at a price of $42 per share. The callable puttable common stock also
carries a right on behalf of the Company to call (buy) the callable puttable
common stock for a period of four years at market price, subject, for the first
2.6 years, to a floor and ceiling per share price. The floor on the call is $42
per share, discounted by 4% per annum compounded if the call is made before 2.5
years, and the ceiling is $50 per share.

The Merger has been accounted for as a recapitalization of the Company.
The common stock issued to Zeneca was capitalized in an amount equal to the cash
consideration received by existing stockholders of the Company in exchange for
their shares. The cash proceeds paid to existing stockholders in exchange for
their shares (including the distribution payable by the Company) was charged to
stockholders' equity. The callable puttable common stock issued to existing
stockholders was capitalized at par value. Cash consideration paid to existing
stockholders upon exercise of the Put and/or the Call will be charged against
stockholders' equity at the date of exercise. Cash consideration received by
the Company from Zeneca to fund the Put and/or the Call will be credited to
stockholders' equity.

SALICK HEALTH CARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

MANAGEMENT INCENTIVE COMPENSATION PLAN

The Company adopted a Management Incentive Compensation Plan following
stockholder approval in August 1991 which provides for payment of cash and/or
the award of shares of common stock which may or may not be subject to
conditions or restrictions on the participant's right to transfer or sell such
shares. This Incentive Plan covers an aggregate of 200,000 shares of common
stock which may be granted to certain officers and key employees of the Company.
During fiscal year 1993 (as respects prior fiscal year results) 15,023 shares of
common stock were issued under this Incentive Plan, none of which are subject to
restrictions as of August 31, 1995.

Unearned stock awards of $6,000 and $55,000 at August 31, 1994 and 1993,
respectively, are recorded as a reduction in stockholders' equity.

STOCK OPTIONS

The Company has authorized 1,100,000 shares of common stock to be granted
as options under its Stock Option Plan. The Company has granted options at fair
market values on the dates of the grants. Transactions for fiscal years 1993,
1994 and 1995 are as follows:

Number of Option Price
Shares Range
---------- ---------------

Balance, August 31, 1992 492,083
Granted 227,500 $10.13 - $11.14
Exercised (9,557) $ 4.50 - $10.50
Forfeited or expired (11,433) $ 5.50 - $10.50
--------
Balance, August 31, 1993 698,593
Granted 5,000 $13.25
Exercised (91,469) $ 5.50 - $10.50
Forfeited (21,669) $10.13 - $10.50
--------
Balance, August 31, 1994 590,455
Exercised (570,354) $ 5.50 - $13.25
Forfeited (1,101) $10.13
--------
Balance, August 31, 1995 19,000
========

The options when granted became exercisable in varying terms of up to
thirty-six months from the grant date and expired five years thereafter. In
case of termination of employment, options not yet exercisable and those not
exercised as provided in the Stock Option Plan are subject to risk of
forfeiture. Upon consummation of the Company's merger agreement with Zeneca
Limited, holders of unexercised options were eligible to convert their options
into options for purchase of the new callable puttable common stock.

In October 1987, options outstanding under the Company's Stock Option
Plan which had been granted at prices ranging from $9.33 to $12.62 per share
were canceled and options at an exercise price of $7.00 to $7.70 per share were
granted to the persons whose options were canceled. Options granted prior to
and during the period of September 1, 1987 through May 31, 1990 at exercise
prices ranging from $7.00 to $12.50 per share were canceled and new options
issued on June 1, 1990 at exercise prices of $5.50 to $6.05 per share.

In 1994 the stockholders approved the Company's adoption of a Non-
Employee Director Stock Option Plan (the "Director Plan"), pursuant to which up
to 100,000

SALICK HEALTH CARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

shares of the Company common stock may be issued upon exercise of options
granted thereunder. The Director Plan provides that on the last business day of
each April, commencing with April 30, 1993, during the term of the Director
Plan, each non-employee Director of the Company will automatically be granted a
non-qualified stock option covering 2,000 shares of the common stock of the
Company. The Plan was terminated effective April 13, 1995 in connection with the
recapitalization.

The price per share to be paid upon exercise of an option granted under
the Director Plan is 100% of the fair market value of a share of common stock on
the date of grant of such option. Each option granted under the Director Plan
has a five-year term and will be exercisable as to fifty percent of the shares
covered thereby on the first anniversary date of the date of grant thereof and
as to all of the shares covered thereby from and after the second anniversary
date of the date of grant thereof. Options for 6,000 shares in 1993 were
granted to three director participants at an exercise price of $10.13 per share.
In addition, on April 30, 1994 options for 6,000 shares were granted to three
director participants at an exercise price of $15.50 per share. Upon
consummation of the Company's merger agreement with Zeneca, holders of
unexercised options were eligible to convert their options into options for
purchase of the new callable puttable common stock and the Director Plan was
terminated. During fiscal 1995, 8,000 options were exercised at an exercise
price of $10.13 to $15.50 per share. Four thousand options remain outstanding
at August 31, 1995.

NOTE 8-INCOME TAXES

The components of the provision (benefit) for income taxes are as
follows:

Years Ended August 31,
------------------------------------
1995 1994 1993
------------ ---------- ----------

Current:
Federal............ $ 6,581,000 $4,436,000 $3,890,000
State.............. 2,308,000 1,589,000 1,285,000
----------- ---------- ----------
8,889,000 6,025,000 5,175,000
----------- ---------- ----------

Deferred:
Federal............ (1,227,000) 418,000 130,000
State.............. (722,000) 59,000 106,000
----------- ---------- ----------
(1,949,000) 477,000 236,000
----------- ---------- ----------
$ 6,940,000 $6,502,000 $5,411,000
=========== ========== ==========

The reconciliation of the provision for income taxes computed at the
federal statutory rate to the reported provision for income taxes as above is as
follows:

Years Ended August 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------

Provision computed at
statutory rate.............. $4,008,000 $5,909,000 $4,913,000
State taxes, net of federal
income tax benefit.......... 1,137,000 1,071,000 916,000
Non deductible merger costs 2,489,000
Markup (markdown) of
investment portfolio...... 62,000 (76,000) (382,000)
Other........................ (756,000) (402,000) (36,000)
---------- ---------- ----------
$6,940,000 $6,502,000 $5,411,000
========== ========== ==========

SALICK HEALTH CARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The Company adopted SFAS 109 during the first quarter of fiscal 1994. The
adoption of SFAS 109 changed the Company's method of accounting for income taxes
from the deferred method to the asset and liability method of accounting for
income taxes. Under SFAS 109, deferred tax liabilities are recognized for
taxable temporary differences and deferred tax assets are recognized for
deductible temporary differences. A valuation allowance reduces deferred tax
assets if it is more likely than not that all, or some portion, will not be
realized. There was no material impact from the adoption of SFAS 109.

The markdown of the investment portfolio represents a capital loss for federal
tax purposes. The effect of the markdown is to decrease the effective tax rates
for fiscal 1993, 1994 and 1995. At August 31, 1995, the Company had
approximately $1,125,000 of capital losses available for carryforward to future
years. The capital losses will expire, if not utilized, in the years ending
August 31, 1996 through 1999. A 100% valuation allowance has been established
to offset the deferred tax benefit associated with the capital loss
carryforward.

The Company's deferred tax assets (liabilities) were comprised of the
following:

August 31,
--------------------------
1995 1994
------------ ------------

Deferred tax assets:
Salary accrual............................. $ 143,000 $ 239,000
State taxes................................ 245,000 522,000
Bad debts.................................. 1,243,000 1,480,000
Capital transactions....................... 506,000 482,000
Stock options.............................. 1,703,000
Business expansion......................... 1,713,000
---------- -----------
Gross deferred tax assets.................. 5,553,000 2,723,000
---------- -----------

Deferred Tax Liabilities:
Depreciation............................... (22,000) (281,000)
Partnerships............................... (45,000) (38,000)
Business expansion......................... (1,226,000)
---------- -----------
Gross deferred tax liabilities............. (67,000) (1,545,000)
---------- -----------

Valuation allowance........................ (506,000) (482,000)
---------- -----------
Net deferred tax assets.................... $4,980,000 $ 696,000
========== ===========

During the years ended August 31, 1995, 1994 and 1993, total tax payments were
$9,931,000, $5,257,000 and $6,559,000, respectively.

NOTE 9-ACQUISITIONS

In 1987, the Company purchased the assets and businesses of Orange County
Dialysis, Inc. and Mission Dialysis Inc. The acquisition has been accounted for
as a purchase. Additional consideration of $195,000, $248,000 and $226,000 has
been paid under a contractual formula for the years ended August 31, 1995, 1994
and 1993, respectively.

In February 1991, the Company purchased for $304,000 a 3.5% limited
partnership interest in Magnetic Imaging Associates, a limited partnership
located in Alameda County, California which is engaged in the business of
providing magnetic resonance imaging services to patients and physicians.

SALICK HEALTH CARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Additionally, in March 1991, the Company purchased for $1,152,000 a 40%
limited partnership interest in Alta CT Services, a limited partnership located
in Alameda County, California, which is engaged in the business of providing CT
scan services. The partnership agreement requires, among other provisions, that
Alta CT Services construct a CT scan facility at the Alta Bates Cancer Center
location.

In November 1993, the Company purchased for $250,000 a 25% limited partnership
interest in Alta Imaging Associates, a limited partnership located in Alameda
County, California which is engaged in the business of providing diagnostic
imaging services.

The three investments are accounted for using the equity method. The combined
carrying value, recorded in other assets, of the investments at August 31, 1995
and 1994 was $1,604,000 and $1,772,000, respectively.

On October 8, 1991, the Company acquired an 80% ownership interest in the
South Florida Radiation Oncology Center (SFROC)in Miami, Florida for $1,315,000
and assumed management of its operations. The financial results of SFROC, net
of the 20% minority interest, have been consolidated with the results of the
Company. During fiscal 1995, the Company acquired substantially all of the
remaining 20% ownership interest from the previous owners.

SALICK HEALTH CARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

NOTE 10-QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data in thousands (except for per share data)
for 1995 and 1994 is as follows:

1995 QUARTER (1) (2) 1ST 2ND 3RD 4TH
-------------------------------------

Operating revenues, net $36,176 $38,170 $39,017 $37,945
Operating income 4,075 4,525 5,180 3,662
Net income (loss) (950) 2,600 (3,556) 2,829
Earnings (loss) per share:
Primary (0.10) 0.26 (0.32) 0.25
Fully diluted (0.06) 0.25 (0.32) 0.25

As previously reported:
Operating revenues, net 35,965 37,981 38,754
Operating income 4,606 4,981 5,575
Net income (loss) 2,960 2,874 (3,319)
Earnings per share:
Primary 0.34 0.29 (0.30)
Fully diluted 0.31 0.28 (0.30)

1994 QUARTER 1ST 2ND 3RD 4TH
------------------------------------

Proforma results assuming
the new method of accounting
is applied retroactively:
Operating revenues, net $29,463 $32,507 $34,436 $35,302
Operating income 2,916 3,649 4,262 4,244
Net income 1,925 2,323 2,472 2,662
Earnings per share:
Primary 0.22 0.27 0.28 0.30
Fully diluted 0.21 0.25 0.26 0.28

As previously reported:
Operating income 3,658 4,016 4,486 4,519
Net income 2,392 2,554 2,606 2,828
Earnings per share:
Primary 0.28 0.29 0.30 0.32
Fully diluted 0.26 0.27 0.28 0.30

(1) Fiscal 1995 quarterly results have been restated for the change in
accounting principle from deferral to expensing pre-operating costs as
incurred. See Note 1.

(2) Fourth quarter results include a charge to operating revenues of $1.5
million, reflecting a change in management's estimation of the
collectibility of certain accounts receivable.

SALICK HEALTH CARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

SALICK HEALTH CARE, INC.
SCHEDULE VIII - ALLOWANCE FOR DOUBTFUL ACCOUNTS
FOR THE THREE YEARS ENDED AUGUST 31, 1995

Balance at Additions Reductions Balance
Beginning Charged to Net of at End
of Year Income Recoveries of Year
---------- ----------- ------------ ----------

1993 $3,958,000 $ 9,603,000 $(10,188,000) $3,373,000

1994 $3,373,000 $ 9,992,000 $ (9,863,000) $3,502,000

1995 $3,502,000 $10,521,000 $(11,138,000) $2,885,000

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

During the past three fiscal years there have been no changes in the
Company's independent accountants and no disagreements on any matter of
accounting principles or practices or financial statement disclosure.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information required by this item for Directors is incorporated by
reference herein to the Proxy Statement of the Company to be filed pursuant to
Regulation 14A.

The information required by this item for executive officers and
significant employees is set forth in Part I of this report under the heading
"EXECUTIVE OFFICERS OF THE REGISTRANT".

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this item is incorporated by reference herein
to the Proxy Statement of the Company to be filed pursuant to Regulation 14A.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this item is incorporated by reference herein
to the Proxy Statement of the Company to be filed pursuant to Regulation 14A.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this item is incorporated by reference herein
to the Proxy Statement of the Company to be filed pursuant to Regulation 14A.

PART IV

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

(A) (1) Financial Statements
--------------------

The financial statements required pursuant to this Item are listed and have
been filed as a part of this Report under Part II, Item 8.

(2) Financial Statement Schedules
-----------------------------

The financial statement schedule required pursuant to this Item is listed
and has been filed as a part of this Report under Part II, Item 8.

Schedules not listed are omitted because they are inapplicable or because
the required information is given in the Consolidated Financial Statements or
Notes thereto.

(3) Exhibits
--------

2 Copy of Agreement and Plan of Merger between Salick
Health Care, Inc. and the Company. Incorporated by
reference to Exhibit 1 of the Registration Statement
on Form 8-B of the Company dated August 28, 1991.

2(a) Agreement and Plan of Merger, dated as of December 22,
1994, as amended, by and among the Company, Zeneca
Limited and Atkemix Thirty-nine Inc. Incorporated
by reference to Annex A to the Proxy Statement
Prospectus of the Company dated March 13, 1995
forming a part of the Company's Registration
Statement on Form S-4 dated March 13, 1995 -
No. 33-58057.

3(a) Certificate of Incorporation of Salick Health Care,
Inc. Incorporated by reference to Annex B to the
Proxy Statement Prospectus of the Company dated
March 13, 1995 forming part of the Company's
Registration Statement on Form S-4 dated March 13,
1995 - No. 33-58057.

3(b) Bylaws of the Company. Incorporated by reference
to Annex C to the Proxy Statement Prospectus dated
March 13, 1995 forming a part of the Company's
Registration Statement on Form S-4 dated March 13,
1995 - No. 33-58057.

4(a) Business Loan Agreement of the Company with Bank
of America NT&SA dated August 1, 1995.

4(b) Specimen form of certificate of Callable Puttable
Common Stock of the Company. Incorporated by
reference to Exhibit 4.3 of the Registration
Statement on Form S-4 of the Company dated
March 13, 1995 - No. 33-58057.

10(a) Chronic Dialysis Unit Management Agreement, as
amended, with Cedars-Sinai Medical Center dated
June 8, 1983. Incorporated by reference to Exhibit
of same number of the Registration Statement on
Form S-l of the Company dated March 6, 1985-No.
2-95552.

10(a-1) Fourth Amendment to Chronic Dialysis Unit
Management Agreement, dated June 1987.
Incorporated by reference to Exhibit of same
number of the Registration Statement on Form 8-B
of the Company dated August 28, 1991.

10(a-2) Fifth Amendment to Chronic Dialysis Unit Management
Agreement, dated October 1990. Incorporated by
reference to Exhibit of same number of the Registration
Statement on Form 8-B of the Company dated August 28,
1991.

10(b) Acute Dialysis Unit Management Agreement, as amended,
with Cedars-Sinai Medical Center dated June 8, 1983.
Incorporated by reference to Exhibit of same number of
the Registration Statement on Form S-l of the Company
dated March 6, 1985 - No. 2-95552.

10(b-1) Third Amendment to Acute Dialysis Unit Management
Agreement, dated October 1990. Incorporated by
reference to Exhibit of the same number of the
Registration Statement on Form 8-B of the Company
dated August 28, 1991.

10(c) Acute Dialysis Unit Service Agreement, as amended,
with Temple Hospital dated May 27, 1981. Incorporated
by reference to Exhibit of same number of the
Registration Statement on Form S-l of the Company
dated March 6, 1985 - No. 2-95552.

10(e) Agreement of Company's subsidiary, Comprehensive
Cancer Centers, Inc., with Cedars-Sinai Medical Center
dated December 12, 1984. Incorporated by reference to
Exhibit of same number of the Registration Statement on
Form S-l of the Company dated March 6, 1985 -
No. 2-95552.

10(f) Lease Agreement with Hy-Norm Properties dated June 2,
1976. Incorporated by reference to Exhibit of same
number of the Registration Statement on Form S-l of
the Company dated March 6, 1985 - No. 2-95552.

10(h) Lease Agreement with Cedars-Sinai Medical Center dated
June 8, 1983. Incorporated by reference to Exhibit of
same number of the Registration Statement on Form S-l of
the Company dated March 6, 1985 - No. 2-95552.

10(i) Lease Agreement of USHAWL, Inc. with Bernard and Gloria
Salick, as amended, dated May l, 1983. Incorporated by
reference to Exhibit of same number of the Registration
Statement on Form S-l of the Company dated March 6,
1985 - No. 2-95552.

10(j) Commercial Lease between Bernard and Gloria and the
Company dated May 1991, as modified. Incorporated by
reference to Exhibit of the same number of the
Registration Statement on Form 8-B of the Company
dated August 28, 1991.

10(j-1) Agreement among Bernard Salick, M.D. and Gloria Salick,
individually, Bernard Salick, M.D., as Trustee, the
Company and Atkemix Thirty-nine Inc. dated December
22, 1994 regarding an option to convey or continue to
lease commercial real estate to the Company.

*10(k) Stock Option Plan. Incorporated by reference to
Exhibit of same number of the Registration Statement
on Form S-l the Company dated March 6, 1985 -
No. 2-95552.

*10(k-1) First amendment to Stock Option Plan. Incorporated by
reference to Exhibit of same number of the Form 10-K of
the Company for the year ended August 31, 1987.

*10(k-2) Second amendment to Stock Option Plan effective January
20, 1987. Incorporated by reference to Exhibit of same
number of the Form 10-K of the Company for the year
ended August 31, 1990.

*10(k-3) Third amendment to Stock Option Plan effective November
1, 1990. Incorporated by reference to Exhibit of same
number of the Form 10-K of the Company for the year
ended August 31, 1990.

*10(k-4) Fourth amendment to Stock Option Plan effective January
13, 1994. Incorporated by reference to Exhibit of same
number of the Form 10-K of the Company for the year
ended August 31, 1994.

*10(l) Second Amended and Restated Employment Agreement, dated
as of December 22, 1994, by and between the Company and
Bernard Salick, M.D. Incorporated by reference to
Exhibit 10.3 to the Form 8-K of the Company with date
of earliest event reported being April 13, 1995.

*10(l-1) Agreement Not to Compete, dated as of December 22,
1994, between the Company and Bernard Salick, M.D.
Incorporated by reference to Exhibit 10.4 to the
Form 8-K of the Company with date of earliest event
reported being April 13, 1995.

*10(m) Employment Agreement with Gerald Rosen, M.D.
Incorporated by reference to Exhibit of same number
of the Form 10-K of the Company for the year ended
August 31, 1990.

*10(n) Second Amended and Restated Employment Agreement, dated
as of April 13, 1995, by and between the Company and
Leslie F. Bell. Incorporated by reference to Exhibit
10.5 to the Form 8-K with date of earliest event
reported being April 13, 1995.

*10(n-1) Agreement Not to Compete, dated as of April 13, 1995,
between the Company and Leslie F. Bell. Incorporated
by reference to Exhibit 10.6 to the Form 8-K with
date of earliest event reported being April 13, 1995.

10(s) Letter Agreement dated February 22, 1985 with Cedars-
Sinai Medical Center concerning terms of Chronic Unit
Management Agreement filed as Exhibit 10(a) and Acute
Dialysis Unit Management Agreement filed as Exhibit
10(b). Incorporated by reference to Exhibit 10(t) of
the Registration Statement on Form S-l of the Company
dated March 6, 1985 - No. 2-95552.

10(v) Agreement in Principle between the Company and
American Medical International, Inc. Incorporated by
reference to Exhibit 10(x) of the Registration statement
on Form S-1 of the Company dated January 31, 1986 -
No. 33-2898.

10(w) Letter agreement from Cedars-Sinai Medical Center
dated as of August 1, 1985 addressed to the Company's
subsidiary Comprehensive Cancer Centers, Inc.
Incorporated by reference to Exhibit of the same
number of the Registration Statement on Form 8-B of
the Company dated August 28, 1991.

10(x) Agreement between the Company's subsidiary
Comprehensive Cancer Centers, Inc. and Cedars-Sinai
Medical Center dated February 26, 1990. Incorporated
by reference to Exhibit of the same number of the
Registration Statement on Form 8-B of the Company dated
August 28, 1991.

*10(y) 1988 Employee Qualified Stock Purchase Plan.
Incorporated by reference to Exhibit "A" to the Proxy
Statement of the Company dated January 12, 1989.

*10(y-1) First amendment to 1988 Employee Qualified Stock
Purchase Plan effective January 2, 1991. Incorporated
by reference to Exhibit of the same number of the
Form 10-K of the Company for the year ended August
31, 1991.

*10(z) Management Incentive Compensation Plan. Incorporated
by reference to Annex C to the Proxy Statement of the
Company dated July 29, 1991.

*10(aa) Second Amended and Restated Employment Agreement, dated
as of April 13, 1995, by and between the Company and
Michael T. Fiore. Incorporated by reference to Exhibit
10.7 to the Form 8-K with date of earliest event
reported being April 13, 1995.

*10(aa-1) Agreement Not to Compete, dated as of April 13, 1995,
between the Company and Michael T. Fiore. Incorporated
by reference to Exhibit 10.8 to the Form 8-K with
date of earliest event reported being April 13, 1995.

10(bb) Form of Indemnification Agreement. Incorporated by
reference to Exhibit "C" to the Proxy Statement of
the Company dated December 29, 1987.

10(cc) Governance Agreement, dated as of December 22, 1994,
as by and among the Company, Bernard Salick, M.D. and
Zeneca Limited. Incorporated by reference to Exhibit
10.1 to the Form 8-K of the Company with date of
earliest event reported being December 22, 1994.

10(cc-1) Amendment No. 1 to Governance Agreement, dated as of
March 7, 1995, by and among the Company, Bernard
Salick, M.D. and Zeneca Limited. Incorporated by
reference to Exhibit 2.5 of the Company's Registration
Statement on Form 8-A relating to the Company's Callable
Puttable Common Stock.

10(dd) Employee Agreement with Sheldon S. King.
Incorporated by reference to Exhibit of the same number of
the Form 10-K/A of the Company for the year ended August 31, 1994.

11 Computation of Net Earnings per Common Share.

18 Letter from Price Waterhouse LLP regarding change in
method of accounting.

21 List of Subsidiaries. Incorporated by reference to
Exhibit of the same number of the Form 10-K of the
Company for the year ended August 31, 1994.

23 Consent of Independent Accountants.

27 Financial Data Schedules.

* Indicates management contract or compensatory plan or
arrangement requires to be filed as an exhibit to this
Form 10-K.

(B) Reports on Form 8-K.
-------------------

No report was filed on Form 8-K by the Company during the quarter
ended August 31, 1995.

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Salick Health Care, Inc.
(Company)

By:/s/ Bernard Salick, M.D.
------------------------
Bernard Salick, M.D.
Chairman of the Board,
Chief Executive Officer
and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.

Signature Title Date
- --------- ----- ----

/s/ BERNARD SALICK, M.D. Chairman of the Board, 11/28/95
- ------------------------------ --------
Bernard Salick, M.D. Chief Executive Officer and
President

/s/ LESLIE F. BELL Executive Vice President, Chief 11/28/95
- ------------------------------ --------
Leslie F. Bell Financial Officer, Secretary
and Director

/s/ MICHAEL T. FIORE Executive Vice President, Chief 11/28/95
- ------------------------------ --------
Michael T. Fiore Operating Officer and Director

/s/ BARBARA BROMLEY-WILLIAMS Senior Vice President- 11/28/95
- ------------------------------ --------
Barbara Bromley-Williams Professional Services and
Director

/s/ THOMAS MINTZ, M.D. Director 11/28/95
- ------------------------------ --------
Thomas Mintz, M.D.

Director
- ------------------------------ --------
Thomas F. W. McKillop

/s/ MICHAEL CARTER, M.D. Director 11/28/95
- ------------------------------ --------
Michael Carter, M.D.

Director
- ------------------------------ --------
Clifford Richard Guy, M.D.

Director
- ------------------------------ --------
John G. Goddard

Director
- ------------------------------ --------
Robert Black

/s/ BLAIR L. HUNDAHL Senior Vice President-Finance 11/28/95
- ----------------------------- --------
Blair L. Hundahl (Principal Accounting Officer)

SALICK HEALTH CARE, INC.
EXHIBIT INDEX

Exhibit
- -------

4(a) Business Loan Agreement of the Company with Bank
of America NT&SA dated August 1, 1995.

Exhibit
- -------

*10(k) Stock Option Plan. Incorporated by reference to
Exhibit of same number of the Registration Statement
on Form S-l the Company dated March 6, 1985 -
No. 2-95552.

*10(k-1) First amendment to Stock Option Plan. Incorporated by
reference to Exhibit of same number of the Form 10-K of
the Company for the year ended August 31, 1987.

*10(k-2) Second amendment to Stock Option Plan effective January
20, 1987. Incorporated by reference to Exhibit of same
number of the Form 10-K of the Company for the year
ended August 31, 1990.

*10(k-3) Third amendment to Stock Option Plan effective November
1, 1990. Incorporated by reference to Exhibit of same
number of the Form 10-K of the Company for the year
ended August 31, 1990.

*10(k-4) Fourth amendment to Stock Option Plan effective January
13, 1994. Incorporated by reference to Exhibit of same
number of the Form 10-K of the Company for the year
ended August 31, 1994.

*10(m) Employment Agreement with Gerald Rosen, M.D.
Incorporated by reference to Exhibit of same number
of the Form 10-K of the Company for the year ended
August 31, 1990.

Exhibit
- -------

*10(y) 1988 Employee Qualified Stock Purchase Plan.
Incorporated by reference to Exhibit "A" to the Proxy
Statement of the Company dated January 12, 1989.

*10(z) Management Incentive Compensation Plan. Incorporated
by reference to Annex C to the Proxy Statement of the
Company dated July 29, 1991.

10(bb) Form of Indemnification Agreement. Incorporated by
reference to Exhibit "C" to the Proxy Statement of
the Company dated December 29, 1987.

Exhibit
- -------

10(dd) Employee Agreement with Sheldon S. King. Incorporated by
reference to Exhibit of the same number of the Form 10-K/A
of the Company for the year ended August 31, 1994.

11 Computation of Net Earnings per Common Share.

18 Letter from Price Waterhouse LLP regarding change
in method of accounting.

21 List of Subsidiaries. Incorporated by reference to
Exhibit of the same number of the Form 10-K of the
Company for the year ended August 31, 1994.

23 Consent of Independent Accountants.

27 Financial Data Schedules.

* Indicates management contract or compensatory plan or
arrangement requires to be filed as an exhibit to this
Form 10-K.