EXHIBIT 99.1

INDEX TO FINANCIAL STATEMENTS

PAGE
----

BURBANK DIALYSIS GROUP, INC.
Report of Independent Accountants of Price Waterhouse LLP................ F-2
Balance Sheet............................................................ F-3
Statement of Operations and Retained Earnings (Deficit).................. F-4
Statement of Cash Flows.................................................. F-5
Notes to Financial Statements............................................ F-6
PASADENA DIALYSIS CENTER, INC.
Report of Independent Accountants of Price Waterhouse LLP................ F-10
Balance Sheet............................................................ F-11
Statement of Operations and Retained Earnings............................ F-12
Statement of Cash Flows.................................................. F-13
Notes to Financial Statements............................................ F-14
PIEDMONT DIALYSIS, INC.; PERALTA RENAL CENTER
Report of Independent Accountants of Price Waterhouse LLP................ F-17
Combined Balance Sheet................................................... F-18
Combined Statement of Income and Retained Earnings....................... F-19
Combined Statement of Cash Flows......................................... F-20
Notes to Combined Financial Statements................................... F-21
HOUSTON KIDNEY CENTER; NORTHWEST KIDNEY CENTER, LLP; NORTH HOUSTON KIDNEY
CENTER, LLP; HOUSTON KIDNEY CENTER--SOUTHEAST, LLP
Report of Independent Accountants of Price Waterhouse LLP................ F-25
Combined Balance Sheet................................................... F-26
Combined Statement of Income and Partners' Equity........................ F-27
Combined Statement of Cash Flows......................................... F-28
Notes to Combined Financial Statements................................... F-29
BERTHA SIRK DIALYSIS CENTER, INC.; GREENSPRING DIALYSIS CENTER, INC.
Report of Independent Accountants of Price Waterhouse LLP................ F-33
Combined Balance Sheet................................................... F-34
Combined Statement of Income and Retained Earnings....................... F-35
Combined Statement of Cash Flows......................................... F-36
Notes to Combined Financial Statements................................... F-37
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Combined Balance Sheet............................... F-41
Notes to Unaudited Pro Forma Combined Balance Sheet...................... F-42
Unaudited Pro Forma Combined Statements of Income........................ F-43
Notes to Unaudited Pro Forma Combined Statements of Income............... F-46

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of Total Renal Care Holdings, Inc.

In our opinion, the accompanying balance sheet and the related statements of
operations and retained earnings (deficit) and of cash flows present fairly,
in all material respects, the financial position of Burbank Dialysis Group,
Inc. at December 31, 1995, and the results of its operations and its cash
flows for the year 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 audit. We conducted our audit 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 audit provides a reasonable basis
for the opinion expressed above.

PRICE WATERHOUSE LLP

Seattle, Washington
July 3, 1996

F-2

BURBANK DIALYSIS GROUP, INC.

BALANCE SHEET

DECEMBER 31, 1995

ASSETS
------

Current assets
Cash.............................................................. $ 29,000
Accounts receivable, net of allowance for doubtful accounts of
$239,000......................................................... 410,000
Inventories....................................................... 32,000
Amount due from related party..................................... 82,000
---------
Total current assets............................................ 553,000
Property and equipment, net......................................... 46,000
Other assets........................................................ 2,000
---------
$ 601,000
=========

LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------

Current liabilities
Current portion of long-term obligations.......................... $ 63,000
Accounts payable and other liabilities............................ 245,000
Employee compensation and benefits................................ 50,000
Amount due to former shareholder.................................. 185,000
Amount due to related party....................................... 28,000
---------
Total current liabilities....................................... 571,000
---------
Long-term obligations............................................... 212,000
---------
Commitments (Notes 4 and 5)......................................... --
---------
Shareholders' deficit
Common stock, no par value, 1,000 shares authorized, 200 shares
issued and outstanding........................................... 90,000
Accumulated deficit............................................... (272,000)
---------
Total shareholders' deficit..................................... (182,000)
---------
$ 601,000
=========

See accompanying notes to financial statements.

F-3

BURBANK DIALYSIS GROUP, INC.

STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)

YEAR ENDED DECEMBER 31, 1995

Net operating revenue.............................................. $3,044,000
----------
Operating expenses
Facilities....................................................... 2,643,000
General and administrative....................................... 627,000
Provision for doubtful accounts.................................. 93,000
Depreciation and amortization.................................... 30,000
----------
Total operating expenses....................................... 3,393,000
----------
Loss from operations............................................... (349,000)
Interest expense................................................... 26,000
----------
Net loss........................................................... (375,000)
Retained earnings at beginning of year............................. 103,000
----------
Accumulated deficit at end of year................................. $ (272,000)
==========

See accompanying notes to financial statements.

F-4

BURBANK DIALYSIS GROUP, INC.

STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 1995

Cash flows from operating activities
Net loss.......................................................... $(375,000)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization................................... 30,000
Provision for doubtful accounts................................. 93,000
Changes in operating assets and liabilities:
Accounts receivable........................................... 75,000
Other assets.................................................. 5,000
Accounts payable and other liabilities........................ 157,000
Employee compensation and benefits............................ (1,000)
Amount due to related party................................... 67,000
---------
Net cash provided by operating activities................... 51,000
---------
Cash flows from investing activities
Purchases of property and equipment............................... (5,000)
---------
Net cash used in investing activities....................... (5,000)
---------
Cash flows from financing activities
Payments of long-term obligations................................. (51,000)
Payments to former shareholder.................................... (171,000)
---------
Net cash used in financing activities....................... (222,000)
---------
Net decrease in cash................................................ (176,000)
Cash at the beginning of year....................................... 205,000
---------
Cash at the end of year............................................. $ 29,000
=========
Supplemental disclosure of cash flow information
Cash paid for interest.............................................. $ 26,000
=========

See accompanying notes to financial statements.

F-5

BURBANK DIALYSIS GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Burbank Dialysis Group, Inc. (d/b/a Valley Dialysis Associates, the
"Company") was incorporated in 1985 to provide kidney dialysis and related
medical services through one clinic located in Van Nuys, California. As of
December 31, 1995, the Company had seven shareholders.

As discussed in Note 6, effective January 1, 1996, Total Renal Care, Inc.
("TRC"), which operates kidney dialysis facilities throughout the country,
acquired certain of the assets and liabilities of the Company which were
placed into a newly formed partnership as well as the rights to serve all of
its patients. TRC is wholly owned by Total Renal Care Holdings, Inc.

Operating revenues and accounts receivable allowances

Revenues are recognized when services and related products are provided to
patients in need of ongoing life sustaining kidney dialysis treatment.
Operating revenues consist primarily of dialysis and ancillary fees from
patient treatments. These amounts are reported at the amounts expected to be
realized from governmental and private third-party payors, patients and others
for services provided. Receivables which are deemed uncollectible are
reflected in the provision for doubtful accounts as a component of operating
expenses in the statement of operations.

Medicare and Medicaid programs funded by the U.S. Government generally
reimburse the Company under prospective payment systems at amounts different
from the Company's established private rates. Revenues under these programs
are generally recognized at prospective rates which are subject to periodic
adjustment by federal and state agencies. The Company bills nongovernment
third-party payors at established private rates. The Company has contracted
discounts with some of these payors.

During the year ended December 31, 1995, the Company received approximately
64% of its dialysis revenues from Medicare and Medicaid reimbursement
programs. Medicare customarily pays 80% of U.S. Government established rates
for services provided by the Company. The remaining 20% is paid by State of
California Medicaid programs, private insurance companies, or directly by the
patients receiving the services. The State of California Medicaid program
provides coverage as primary payor for dialysis services in certain instances.
The Company has contracts for the provision of dialysis services to members of
certain managed care organizations.

Management does not believe that there are any significant credit risks
associated with receivables from governmental agencies. The remaining net
receivable balance consists of receivables from various payors, subject to
differing economic conditions, and are not believed to represent any
concentrated credit risks to the Company. Furthermore, management adjusts its
reserves associated with these receivables as necessary.

Inventories

Inventories are stated at the lower of cost (first-in first-out) or market
and consist principally of drugs and dialysis related supplies.

F-6

BURBANK DIALYSIS GROUP, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Property and equipment

Property and equipment are carried at cost. Maintenance and repairs are
charged to expense as incurred. Depreciation is recognized on the straight-
line method over the estimated useful lives of the assets which range from
seven to ten years. Leasehold improvements are carried at cost. Depreciation
is recognized on the straight-line method over the lesser of the estimated
useful lives of the assets or the lease term.

Fair value of financial instruments

Financial instruments of the Company primarily consist of cash, receivables
and payables. The carrying value of these financial instruments approximated
fair value at December 31, 1995.

Income taxes

The Company has elected to be taxed as an S Corporation for federal income
tax purposes. As an S Corporation, ordinary corporate income is not taxed at
the corporate level but is passed through and taxed at the shareholder level.
Accordingly, no provision for income taxes is included in the statement of
operations.

Use of estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

2. PROPERTY AND EQUIPMENT

Property and equipment comprise the following:

Medical equipment................................................. $ 323,000
Furniture, fixtures and office equipment.......................... 100,000
Leasehold improvements............................................ 175,000
---------
598,000
Less: accumulated depreciation and amortization................... (552,000)
---------
Net property and equipment...................................... $ 46,000
=========

3. DEBT

At December 31, 1995, the Company had an 8.5% note payable to Saint Joseph
Hospital (the "Saint Joseph Loan"). Principal and interest payments totalling
approximately $7,000 are due monthly and extend into 1999. The note is secured
by the Company's accounts receivable and fixed assets. Annual principal
payments due under the note are as follows:

Years ending December 31,
1996............................................................. $ 63,000
1997............................................................. 69,000
1998............................................................. 75,000
1999............................................................. 68,000
--------
$275,000
========

F-7

BURBANK DIALYSIS GROUP, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

In connection with the transaction described in Note 6, the Saint Joseph
Loan was paid in full subsequent to December 31, 1995 and an equal amount was
borrowed from TRC.

4. RELATED PARTY TRANSACTIONS

The Company conducts certain business transactions with Burbank Acute
Dialysis Services ("BADS") and Valley Internal Medicine ("VIM"), both related
parties through the commonality of certain owners. In addition, the Company
operated under an interim management agreement with TRC during the month of
December 1995 (see Note 6). All payments to shareholders during 1995 have been
classified as compensation expense in the statement of operations.

Transactions with BADS include cooperative purchases of medical and other
supplies, consulting services and occasional noninterest bearing cash advances
between the two companies for general operating purposes. At the beginning of
1995, BADS owed the Company approximately $38,500 on which no interest was
accrued. During 1995, BADS advanced $206,000 to the Company and used
approximately $30,000 of dialysis supplies belonging to the Company. The
dollar amount related to such supplies represented the Company's original cost
and was charged to BADS without any mark-up or discount. In addition, $110,000
of compensation expense paid to the owners of the Company was charged to BADS
for consulting services provided. The dollar amount of this charge represented
management's best estimate of the fair value of the services provided.

During 1993 and 1994, the Company advanced $82,000 to VIM which has been
classified as a current asset. The loan is unsecured, does not bear interest
and is due on demand. No interest has been imputed on these advances due to
the immateriality of the amounts involved.

In 1994, the Company purchased a former shareholder's interest in the
Company and distributed the shares to the other owners. The Company paid the
former shareholder with a noninterest bearing note of $511,000. The note,
which matures in January 1997, is payble in 36 equal installments of
approximately $14,200. This note, repaid in full at the time of the
transaction described in Note 6, was classified as a current liability as of
December 31, 1995.

5. COMMITMENTS

The Company leases its dialysis facility under a noncancelable operating
lease expiring in 2000. During the year ended December 31, 1995, $256,000 was
expensed and paid relating to this rental agreement. Future minimum lease
payments as of December 31, 1995 are as follows:

Years ending December 31,
1996........................................................... $ 262,000
1997........................................................... 262,000
1998........................................................... 262,000
1999........................................................... 262,000
2000........................................................... 218,000
----------
$1,266,000
==========

6. SUBSEQUENT EVENTS

Effective January 1, 1996, TRC acquired a 50.1% interest in certain assets
and liabilities of the Company. Under the terms of the purchase agreement, TRC
contributed its 50.1% share into a general partnership, the other partners of
which are the seven shareholders of the Company who contributed the remaining
assets and liabilities.

F-8

BURBANK DIALYSIS GROUP, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Additionally, TRC paid the Saint Joseph Loan in full and loaned an equal
amount to the partnership under identical interest and payment terms. The
partnership has entered into a management services agreement with TRC as well
as covenants-not-to-compete with the Company's shareholders. No accounts in
the accompanying financial statements have been adjusted for the effects of
this transaction.

During December 1995, the Company was subject to a one month interim
operating services agreement with TRC for which it owed approximately $66,000
as of December 31, 1995. This amount, included in the December 31, 1995
financial statements as a liability and expense, was subsequently paid to TRC
in January 1996.

F-9

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of Total Renal Care Holdings, Inc.

In our opinion, the accompanying balance sheet and the related statements of
operations and retained earnings and of cash flows present fairly, in all
material respects, the financial position of Pasadena Dialysis Center, Inc. at
December 31, 1995, and the results of its operations and its cash flows for
the year 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 audit. We conducted our audit 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 audit provides a reasonable basis for the
opinion expressed above.

PRICE WATERHOUSE LLP

Seattle, Washington
July 3, 1996

F-10

PASADENA DIALYSIS CENTER, INC.

BALANCE SHEET

DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
(UNAUDITED)

ASSETS
Current assets
Cash................................................ $ 434,000 $ 122,000
Accounts receivable, less allowance for doubtful
accounts of $277,000 and $285,000 (unaudited),
respectively....................................... 1,061,000 1,149,000
Inventories......................................... 40,000 40,000
Prepaid expenses and other current assets........... 8,000 13,000
---------- ----------
Total current assets.............................. 1,543,000 1,324,000
Property and equipment, net........................... 114,000 94,000
---------- ----------
$1,657,000 $1,418,000
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Accounts payable and accrued expenses............... $ 49,000 $ 65,000
Employee compensation and benefits.................. 449,000 348,000
Dividends payable................................... 42,000 --
---------- ----------
Total current liabilities......................... 540,000 413,000
---------- ----------
Commitments (Note 3).................................. -- --
---------- ----------
Shareholder's equity
Common stock, no par value, 15,000 shares
authorized, issued and outstanding................. 150,000 150,000
Less amount due from shareholder.................... (53,000) (53,000)
Retained earnings................................... 1,020,000 908,000
---------- ----------
Shareholder's equity.............................. 1,117,000 1,005,000
---------- ----------
$1,657,000 $1,418,000
========== ==========

See accompanying notes to financial statements.

F-11

PASADENA DIALYSIS CENTER, INC.

STATEMENT OF OPERATIONS AND RETAINED EARNINGS

THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ----------------------
1995 1995 1996
------------ ---------- ----------
(UNAUDITED)

Net operating revenue...................... $4,746,000 $ 856,000 $1,200,000
---------- ---------- ----------
Operating expenses
Facilities............................... 2,645,000 631,000 769,000
General and administrative............... 2,050,000 516,000 514,000
Provision for doubtful accounts.......... 122,000 82,000 8,000
Depreciation and amortization............ 85,000 18,000 21,000
---------- ---------- ----------
Total operating expenses............... 4,902,000 1,247,000 1,312,000
---------- ---------- ----------
Net loss................................... (156,000) (391,000) (112,000)
Retained earnings at beginning of period... 1,218,000 1,218,000 1,020,000
Dividends.................................. (42,000) -- --
---------- ---------- ----------
Retained earnings at end of period......... $1,020,000 $ 827,000 $ 908,000
========== ========== ==========

See accompanying notes to financial statements.

F-12

PASADENA DIALYSIS CENTER, INC.

STATEMENT OF CASH FLOWS

THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------
1995 1995 1996
------------ --------- ---------
(UNAUDITED)

Cash flows from operating activities
Net loss.................................. $(156,000) $(391,000) $(112,000)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:..............................
Depreciation and amortization........... 85,000 18,000 21,000
Provision for doubtful accounts......... 122,000 82,000 8,000
Changes in operating assets and
liabilities:
Accounts receivable................... 92,000 295,000 (96,000)
Inventories, prepaid expenses and
other assets......................... 16,000 13,000 (5,000)
Accounts payable and accrued expenses. (20,000) 28,000 16,000
Employee compensation and benefits.... 421,000 73,000 (101,000)
--------- --------- ---------
Net cash provided by (used in)
operating activities............... 560,000 118,000 (269,000)
--------- --------- ---------
Cash flows from investing activities
Purchases of property and equipment....... (26,000) (2,000) (1,000)
--------- --------- ---------
Net cash used in investing
activities......................... (26,000) (2,000) (1,000)
--------- --------- ---------
Cash flows from financing activities
Net advances to shareholder............... (110,000) (78,000) --
Dividends................................. (84,000) (84,000) (42,000)
--------- --------- ---------
Net cash used in financing
activities......................... (194,000) (162,000) (42,000)
--------- --------- ---------
Net increase (decrease) in cash............. 340,000 (46,000) (312,000)
Cash at beginning of period................. 94,000 94,000 434,000
--------- --------- ---------
Cash at end of period....................... $ 434,000 $ 48,000 $ 122,000
========= ========= =========

See accompanying notes to financial statements.

F-13

PASADENA DIALYSIS CENTER, INC.

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Pasadena Dialysis Center, Inc. (the "Company"), known as Eaton Canyon
Dialysis Center, was incorporated in 1985 to provide kidney dialysis and
related medical services through one clinic. The Company is owned by a single
shareholder.

As described in Note 5, effective June 1, 1996, Total Renal Care, Inc.
("TRC"), which operates kidney dialysis facilities throughout the country,
acquired certain of the assets and liabilities of the Company which were
placed into a newly formed partnership as well as the rights to serve all of
its patients. TRC is wholly owned by Total Renal Care Holdings, Inc.

Operating revenues and accounts receivable allowances

During the year ended December 31, 1995, the Company received approximately
58% of its dialysis revenues from Medicare and Medicaid reimbursement
programs. Medicare customarily pays 80% of U.S. Government established rates
for services provided by the Company. The remaining 20% is paid by State of
California Medicaid programs, private insurance companies, or directly by the
patients receiving the services. The State of California Medicaid program
provides coverage as primary payor for dialysis services in certain instances.
The Company has contracts for the provision of dialysis services to members of
certain managed care organizations.

Inventories

Inventories are stated at the lower of cost (first-in first-out) or market
and consist principally of drugs and dialysis related supplies.

F-14

PASADENA DIALYSIS CENTER, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Property and equipment

Property and equipment are carried at cost. Maintenance and repairs are
charged to expense as incurred. Depreciation is recognized on the straight-
line method over the estimated useful lives of the assets which range from
five to ten years. Leasehold improvements are carried at cost. Depreciation is
recognized on the straight-line method over the lesser of the estimated useful
lives of the assets or the lease term.

Fair value of financial instruments

Financial instruments of the Company primarily consist of cash, receivables
and payables. The carrying value of these financial instruments approximated
fair value at December 31, 1995.

Income taxes

Use of estimates

Unaudited interim financial statements

The information presented as of March 31, 1996 and the quarters ended March
31, 1995 and 1996 has not been audited. In the opinion of management, the
unaudited interim financial statements include all adjustments consisting
solely of normal recurring adjustments necessary to present fairly the
Company's financial position as of March 31, 1996 and the results of
operations and cash flows for the quarters ended March 31, 1995 and 1996. The
interim results of operations are not necessarily indicative of results which
may occur for the full fiscal year.

2. PROPERTY AND EQUIPMENT

Property and equipment comprise the following:

Medical equipment................................................. $ 349,000
Furniture, fixtures and office equipment.......................... 48,000
Leasehold improvements............................................ 472,000
---------
869,000
Less: accumulated depreciation and amortization................... (755,000)
---------
Net property and equipment...................................... $ 114,000
=========

F-15

PASADENA DIALYSIS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. COMMITMENTS

The Company leases its dialysis facility from its shareholder under a
noncancelable operating lease expiring in 2006. During the year ended December
31, 1995, $129,000 was expensed and paid relating to this rental agreement.
Future minimum lease payments as of December 31, 1995 are as follows:

Years ending December 31,
1996........................................................... $ 125,000
1997........................................................... 135,000
1998........................................................... 135,000
1999........................................................... 135,000
2000........................................................... 135,000
Thereafter..................................................... 765,000
----------
$1,430,000
==========

4. RELATED PARTY TRANSACTIONS

In addition to dividends and rental payments, the Company paid its
shareholder and his family approximately $2,220,000 as compensation for
administrative services, directorship fees and management services during 1995
and such amounts have been recorded as expenses. The Company periodically
receives cash advances from or advances cash to its shareholder based upon the
respective party's liquidity needs. Such advances are usually settled within
one year. At December 31, 1995, the Company had an advance due from
shareholder in the amount of $53,000 included in shareholder's equity.

5. SUBSEQUENT EVENTS

Effective June 1, 1996, TRC acquired an 87.5% interest in certain assets and
liabilities of the Company. Under the terms of the purchase agreement, TRC
contributed its 87.5% share into a general partnership, the other partner of
which is the Company's sole shareholder who contributed the remaining assets
and liabilities. No accounts in the accompanying financial statements have
been adjusted for the effects of this transaction. In conjunction with the
acquisition, TRC retained the services of the Company's sole shareholder as
medical director, the duties of which include the supervision of the overall
clinical care provided by the Company. Effective June 1, 1996, the partnership
entered into a Management Services Agreement with TRC. The Management Services
Agreement provides TRC with control over the management functions of the
partnership.

F-16

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of Total Renal Care Holdings, Inc.

In our opinion, the accompanying combined balance sheet and the related
combined statements of income and retained earnings and of cash flows present
fairly, in all material respects, the financial position of Piedmont Dialysis,
Inc. and Peralta Renal Center, a California Professional Medical Corporation,
(collectively "the Companies") at December 31, 1995, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Companies' management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit 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 audit provides a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

Seattle, Washington
September 24, 1996

F-17

PIEDMONT DIALYSIS, INC.
PERALTA RENAL CENTER
(A CALIFORNIA PROFESSIONAL MEDICAL CORPORATION)

COMBINED BALANCE SHEET

ASSETS DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)

Current assets:
Cash and equivalents................................ $ 167,061 $ 628,046
Accounts receivable, net of allowance for doubtful
accounts of $35,000 and $35,000 (unaudited),
respectively....................................... 1,088,713 1,006,301
Inventories......................................... 184,601 232,773
Other assets........................................ 4,929 8,845
---------- ----------
Total current assets.............................. 1,445,304 1,875,965
Property and equipment, net........................... 379,734 336,306
---------- ----------
$1,825,038 $2,212,271
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 93,452 $ 111,096
Accrued employee compensation....................... 240,433 250,600
Other liabilities................................... 24,600 24,600
Notes payable to stockholder........................ 168,865 145,000
---------- ----------
Total current liabilities......................... 527,350 531,296
---------- ----------
Stockholders' equity:
Common stock........................................ 410,000 410,000
Retained earnings................................... 887,688 1,270,975
---------- ----------
Total stockholders' equity........................ 1,297,688 1,680,975
---------- ----------
Total liabilities and stockholders' equity........ $1,825,038 $2,212,271
========== ==========

See accompanying notes to the combined financial statements.

F-18

PIEDMONT DIALYSIS, INC.
PERALTA RENAL CENTER
(A CALIFORNIA PROFESSIONAL MEDICAL CORPORATION)

COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS

SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ----------------------
1995 1995 1996
------------ ---------- ----------

Net operating revenues...................... $6,954,031 $3,288,910 $3,864,930
---------- ---------- ----------
Operating expenses:
Facilities................................ 5,627,193 2,697,040 3,034,536
General and administrative................ 803,289 405,370 405,461
Depreciation and amortization............. 157,886 60,612 43,812
---------- ---------- ----------
Total operating expenses................ 6,588,368 3,163,022 3,483,809
---------- ---------- ----------
Income from operations...................... 365,663 125,888 381,121
Interest expense, net....................... (17,051) (3,248) 2,166
---------- ---------- ----------
Net income.................................. 348,612 122,640 383,287
Retained earnings, at beginning of period... 669,076 669,076 887,688
Distributions to stockholders............... (130,000) (80,000)
---------- ---------- ----------
Retained earnings, at end of period......... $ 887,688 $ 711,716 $1,270,975
========== ========== ==========

See accompanying notes to the combined financial statements.

F-19

PIEDMONT DIALYSIS, INC.
PERALTA RENAL CENTER
(A CALIFORNIA PROFESSIONAL MEDICAL CORPORATION)

COMBINED STATEMENT OF CASH FLOWS

SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -------------------
1995 1995 1996
------------ --------- --------
(UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................. $ 348,612 $ 122,640 $383,287
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization............. 157,886 60,612 43,812
Changes in operating assets and
liabilities:
Accounts receivable..................... (229,685) (51,548) 82,412
Inventories............................. (55,364) (24,750) (48,172)
Other assets............................ 800 800 (4,300)
Accounts payable........................ 67,498 14,294 17,644
Accrued employee compensation and other
benefits............................... 18,320 104,822 10,167
--------- --------- --------
Net cash provided by operating
activities........................... 308,067 226,870 484,850
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....... (25,653) (25,653) --
--------- --------- --------
Net cash used by investing activities. (25,653) (25,653) --
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable to stockholder.. (100,983) (55,930) (23,865)
Distributions to stockholders............. (130,000) (80,000) --
--------- --------- --------
Net cash used by financing activities. (230,983) (135,930) (23,865)
--------- --------- --------
Net increase in cash and equivalents........ 51,431 65,287 460,985
Cash and equivalents at beginning of period. 115,630 115,630 167,061
--------- --------- --------
Cash and equivalents at end of period....... $ 167,061 $ 180,917 $628,046
========= ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest...................... $ 20,265 $ 4,069 $ 442
========= ========= ========

See accompanying notes to the combined financial statements.

F-20

PIEDMONT DIALYSIS, INC.
PERALTA RENAL CENTER
(A CALIFORNIA PROFESSIONAL MEDICAL CORPORATION)

NOTES TO COMBINED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Piedmont Dialysis, Inc. ("Piedmont") and Peralta Renal Center, a California
Professional Medical Corporation ("Peralta"), collectively referred to as "the
Companies," were organized to operate kidney dialysis centers and to provide
related medical services in and around Oakland, California. Piedmont and
Peralta each have one free standing facility. Piedmont also has a contact to
provide services to patients of one hospital in the Oakland area.

Effective August 1, 1996, Total Renal Care, Inc. ("TRC"), a wholly owned
subsidiary of Total Renal Care Holdings, Inc. ("TRCH"), which operates kidney
dialysis facilities throughout the country, purchased an 80% interest in the
assets and liabilities of the Companies as discussed in Note 6.

BASIS OF PRESENTATION

The combined financial statements include the accounts of Piedmont and
Peralta. The Companies' financial statements are combined as a result of
common ownership interests. However, each company is a separate legal entity.
All significant intercompany transactions and balances have been eliminated in
combination.

OPERATING REVENUES AND ACCOUNTS RECEIVABLE ALLOWANCES

Revenues are recognized when services and related products are provided to
patients in need of ongoing life sustaining kidney dialysis treatment.
Operating revenues consist primarily of dialysis and ancillary fees from
patient treatments. These amounts are reported at the amounts expected to be
realized from governmental and third-party payors, patients and others for
services provided. Receivables which are deemed uncollectible are reflected in
provision for doubtful accounts as a component of operating expenses in the
statement of income.

Medicare and Medicaid programs funded by the U.S. Government generally
reimburse the Companies under prospective payment systems at amounts different
from the Companies' established private rates. Revenues under these programs
are generally recognized at prospective rates which are subject to periodic
adjustment by Federal and state agencies. The Companies bill nongovernment
third-party payors at established private rates. The Companies have contracts
for the provision of dialysis services to members of certain managed care
organizations.

The Companies provide credit, in the normal course of business, to patients
from (i) the federal and state governments under the Medicare and Medicaid
programs representing approximately 76% of their dialysis revenue in 1995, and
(ii) private pay payors including insurance companies, private carriers and
other third-party payors.

Management does not believe that there are any significant credit risks
associated with receivables from governmental agencies. The remaining net
receivable balance consists of receivables from various payors, subject to
differing economic conditions, and are not believed to represent any
concentrated credit risks to the Companies. Furthermore, management adjusts
reserves associated with these receivables as necessary.

CASH AND EQUIVALENTS

For the purpose of reporting cash flows, cash and equivalents include cash
on hand and other cash equivalents having an initial maturity of three months
or less.

F-21

PIEDMONT DIALYSIS, INC.
PERALTA RENAL CENTER
(A CALIFORNIA PROFESSIONAL MEDICAL CORPORATION)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

INVENTORIES

Inventories are stated at the lower of cost (first-in first-out) or market
and consist principally of drugs and dialysis related supplies.

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost. Maintenance and repairs are
charged to expense as incurred. Depreciation is recognized on the straight
line method over the estimated useful lives of the assets as follows:

ASSET LIFE
----- ----------

Medical equipment................................................. 5-7 years
Furniture, fixtures and office equipment.......................... 5-7 years
Leasehold improvements............................................ 5-14 years

OTHER LIABILITIES

Reimbursements in excess of realizable billings have been reported as other
liabilities.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments primarily consist of cash, receivables, payables, and
debt obligations. The carrying value of these financial instruments
approximated fair value at December 31, 1995.

INCOME TAXES

The Companies are incorporated under Subchapter S (Sub-S) of the Internal
Revenue Code and are not subject to tax at the corporate level for Federal and
state income taxes because the owners include their corresponding income or
loss in their respective federal and state income tax returns.

STOCKHOLDERS' EQUITY

Retained earnings represent undistributed earnings of the Companies, which
are all Sub-S corporations.

Common stock comprises the following:

Peralta Renal Center--no par value, 100,000 shares authorized; 200 shares
issued and outstanding; and

Piedmont Dialysis, Inc.--no par value, 1,000 shares authorized; 100 shares
issued and outstanding.

MANAGEMENT ESTIMATES

F-22

PIEDMONT DIALYSIS, INC.
PERALTA RENAL CENTER
(A CALIFORNIA PROFESSIONAL MEDICAL CORPORATION)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

2. PROPERTY AND EQUIPMENT

Property and equipment comprise the following:

Medical equipment............................................... $ 806,486
Furniture, fixtures and office equipment........................ 102,386
Leasehold improvements.......................................... 521,269
-----------
1,430,141
Less: accumulated depreciation and amortization................. (1,050,407)
-----------
$ 379,734
===========

3. LEASES

The Piedmont facility is leased under an operating lease expiring April 30,
1999. The lease agreement covers a period of five years and provides a renewal
option for one additional five year term. The Peralta facility is leased under
an operating lease expiring February 16, 1997. This lease agreement also
covers a period of five years but does not provide a renewal option.

Future minimum lease payments under this lease are as follows:

Years ending December 31:
1996............................................................. $166,748
1997............................................................. 139,602
1998............................................................. 137,663
1999............................................................. 46,754
--------
$490,767
========

Rental expense under all operating leases amounted to $170,600 for 1995.

4. RETIREMENT PROGRAMS

The Companies have a 401(k) defined contribution plan which is available to
all employees meeting certain eligibility requirements. Under the plan,
employees can elect to defer a portion of their salaries. The Companies do not
match any portion of the participants' contributions. However, the Companies
have an option to make profit sharing contributions to the plan each fiscal
year. No matching contributions were made by the Companies during 1995.

5. RELATED PARTY TRANSACTIONS

Peralta is indebted under a secured note payable from one of its
stockholders in the principal amount of $135,000, which bears an annual
interest rate of 8.0%. The loan was entered into during October 1993 and
beginning November 1, 1993 payments were due the first of every month for 30
months. As of December 31, 1995, the net balance outstanding on the note is
$23,865.

Piedmont is indebted under an unsecured demand note payable from one of its
stockholders in the amount of $145,000. The agreement stipulates a 10% monthly
interest payment.

F-23

PIEDMONT DIALYSIS, INC.
PERALTA RENAL CENTER
(A CALIFORNIA PROFESSIONAL MEDICAL CORPORATION)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

6. SUBSEQUENT EVENT

Effective June 1, 1996, the Companies entered into an Interim Operating
Services Agreement whereby TRC agreed to provide the Companies with purchasing
services, financial services, and other operating services. The Interim
Operating Services Agreement remained in effect for a two month period ceasing
August 1, 1996. TRC received a fee equal to 80% of the operating income of the
Companies for the effective period. In addition, effective July 31, 1996, the
Companies entered into a General Partnership Agreement with TRC who will act
as general partner with the Companies retaining a 20% minority interest in the
partnership. Furthermore, effective August 1, 1996, the Companies'
stockholders entered into an Asset Purchase Agreement to sell 80% of the
assets, excluding cash, of the Companies to TRC. Effective August 1, 1996, the
Partnerships entered into a Management Services Agreement with TRC. The
Management Services Agreement provides TRC with control over the management
functions of the Partnerships.

F-24

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of Total Renal Care Holdings, Inc.

In our opinion, the accompanying combined balance sheet and the related
combined statements of income and partners' equity and of cash flows present
fairly, in all material respects, the financial position of Houston Kidney
Center (a Texas general partnership), Northwest Kidney Center, LLP, North
Houston Kidney Center, LLP and Houston Kidney Center--Southeast, LLP
(collectively, the Centers) at December 31, 1995 and the results of their
operations and cash flows for the year then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Centers' management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit 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 audit provides a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

Houston, Texas
September 6, 1996

F-25

HOUSTON KIDNEY CENTER
(A TEXAS GENERAL PARTNERSHIP)
NORTHWEST KIDNEY CENTER, LLP
NORTH HOUSTON KIDNEY CENTER, LLP
HOUSTON KIDNEY CENTER--SOUTHEAST, LLP

COMBINED BALANCE SHEET

DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
ASSETS

Current assets:
Cash................................................. $ 348,956 $ 838,930
Accounts receivable, net of allowance for doubtful
accounts of $289,900 and $335,992 (unaudited),
respectively........................................ 1,701,246 1,514,005
Inventories.......................................... 127,222 143,156
Other assets......................................... 34,067 19,560
---------- ----------
Total current assets............................... 2,211,491 2,515,651
Property and equipment, net............................ 545,340 514,820
Other assets........................................... 10,185 9,883
---------- ----------
Total assets....................................... $2,767,016 $3,040,354
========== ==========

LIABILITIES AND PARTNERS' EQUITY

Current liabilities:
Accounts payable and accrued liabilities............. $ 208,391 $ 258,116
Current portion of notes payable..................... 102,000 373,785
Notes payable to partners............................ 155,000 155,000
Accrued employee compensation and benefits........... 348,743 186,655
---------- ----------
Total current liabilities.......................... 814,134 973,556
Notes payable.......................................... 895,642 403,480
---------- ----------
Total liabilities.................................. 1,709,776 1,377,036
Partners' equity....................................... 1,057,240 1,663,318
---------- ----------
Total liabilities and partners' equity............. $2,767,016 $3,040,354
========== ==========

The accompanying notes are an integral part of this statement.

F-26

HOUSTON KIDNEY CENTER
(A TEXAS GENERAL PARTNERSHIP)
NORTHWEST KIDNEY CENTER, LLP
NORTH HOUSTON KIDNEY CENTER, LLP
HOUSTON KIDNEY CENTER--SOUTHEAST, LLP

COMBINED STATEMENT OF INCOME AND PARTNERS' EQUITY

SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ----------------------
1995 1995 1996
------------ ---------- ----------
(UNAUDITED)

Net operating revenues..................... $7,975,817 $3,666,722 $4,851,309
---------- ---------- ----------
Operating expenses:
Facilities............................... 5,480,773 2,535,054 3,412,961
General and administrative............... 547,435 226,907 239,567
Provision for doubtful accounts.......... 512,462 402,738 244,238
Depreciation and amortization............ 221,863 80,251 75,703
Interest expense......................... 91,455 37,908 29,762
---------- ---------- ----------
Total operating expenses............... 6,853,988 3,282,858 4,002,231
---------- ---------- ----------
Net income................................. 1,121,829 383,864 849,078
Partners' equity, beginning of period...... 582,411 582,411 1,057,240
Distributions to partners.................. (647,000) (196,000) (243,000)
---------- ---------- ----------
Partners' equity, end of period............ $1,057,240 $ 770,275 $1,663,318
========== ========== ==========

The accompanying notes are an integral part of this statement.

F-27

HOUSTON KIDNEY CENTER
(A TEXAS GENERAL PARTNERSHIP)
NORTHWEST KIDNEY CENTER, LLP
NORTH HOUSTON KIDNEY CENTER, LLP
HOUSTON KIDNEY CENTER--SOUTHEAST, LLP

COMBINED STATEMENT OF CASH FLOWS

SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, --------------------
1995 1995 1996
------------ --------- ---------
(UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................ $1,121,829 $ 383,864 $ 849,078
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization........... 221,863 80,251 75,703
Loss on sale of equipment............... 5,216
Changes in operating assets and
liabilities:
Accounts receivable, net................ (727,683) (241,969) 187,241
Inventories............................. (49,352) (2) (15,934)
Other current assets.................... (2,963) (22,901) 14,507
Accounts payable and accrued
liabilities............................ 19,326 75,941 49,725
Accrued employee compensation and
benefits............................... 92,128 (81) (162,088)
---------- --------- ---------
Net cash provided by operating
activities........................... 680,364 275,103 998,232
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....... (71,266) (19,002) (44,880)
Proceeds from sale of property and
equipment................................ 4,000
---------- --------- ---------
Net cash used by investing activities... (67,266) (19,002) (44,880)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of partner notes
payable.................................. 155,000
Proceeds from issuance of notes payable... 260,276 344,295 307,000
Payments on notes payable................. (83,366) (197,222) (527,378)
Distributions to partners................. (647,000) (196,000) (243,000)
---------- --------- ---------
Net cash used by financing activities... (315,090) (48,927) (463,378)
---------- --------- ---------
Net increase in cash........................ 298,008 207,174 489,974
Cash at beginning of period................. 50,948 50,948 348,956
---------- --------- ---------
Cash at end of period....................... $ 348,956 $ 258,122 $ 838,930
========== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFOR-
MATION:
Cash paid for interest.................... $ 84,536 $ 37,908 $ 29,762
========== ========= =========

The accompanying notes are an integral part of this statement.

F-28

HOUSTON KIDNEY CENTER
(A TEXAS GENERAL PARTNERSHIP)
NORTHWEST KIDNEY CENTER, LLP
NORTH HOUSTON KIDNEY CENTER, LLP
HOUSTON KIDNEY CENTER--SOUTHEAST, LLP

NOTES TO COMBINED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Houston Kidney Center ("HKC"), a Texas general partnership, Northwest Kidney
Center, LLP ("NKC"), North Houston Kidney Center, LLP ("NHKC") and Houston
Kidney Center-Southeast, LLP ("HKCSE") (collectively, "the Centers") provide
kidney dialysis and related medical services in Houston, Texas.

Effective July 1, 1996, Total Renal Care Holdings, Inc. ("TRCH"), which
operates kidney dialysis facilities throughout the country acquired control of
the partnerships from the partners, as discussed in Note 6.

BASIS OF PRESENTATION

The combined financial statements include the accounts of Houston Kidney
Center, a Texas general partnership, Northwest Kidney Center, LLP, North
Houston Kidney Center, LLP and Houston Kidney Center--Southeast, LLP. The
Centers' financial statements are combined as a result of common ownership.
However, each of the four partnerships are separate legal entities. All
significant intercompany transactions and balances have been eliminated in
combination.

REVENUE RECOGNITION AND CREDIT RISK

Revenues, consisting primarily of dialysis and ancillary fees, are
recognized when services and related products are provided to patients in need
of ongoing, life sustaining kidney dialysis treatment. These amounts are
reported at the amounts expected to be realized from governmental and third-
party payors, patients and others for services provided. Receivables which are
deemed uncollectible are reflected in the provision for doubtful accounts as a
component of operating expenses.

Medicare and Medicaid programs, funded by the U.S. Government and state
government, respectively, generally reimburse the Centers under prospective
payment systems at amounts different from the Centers' established private
rates. Revenues under these programs are generally recognized at prospective
rates which are subject to periodic adjustment by Federal and state agencies.
The Centers bill nongovernment third-party payors at established private
rates. The Centers have contracts for the provision of dialysis services to
members of certain managed care organizations.

During 1995, the Centers received approximately 80% of their dialysis
revenues from Medicare and Medicaid reimbursement programs. Medicare
customarily pays approximately 80% of Government established rates for
services provided by the Centers. The remaining 20% is paid by the State of
Texas Medicaid programs, private insurance companies, or directly by the
patients receiving the services. The State of Texas Medicaid program provides
coverage as primary payor for dialysis services in certain instances. At
December 31, 1995, approximately 35% of the accounts receivable balance was
due from the Medicare and Medicaid programs.

Management does not believe that there are any significant credit risks
associated with receivables from governmental agencies. The remaining net
receivable balance consists of receivables from various payors, subject to
differing economic conditions, and are not believed to represent any
concentrated credit risks to the Centers. Furthermore, management adjusts its
reserves associated with these receivables as necessary.

F-29

HOUSTON KIDNEY CENTER
(A TEXAS GENERAL PARTNERSHIP)
NORTHWEST KIDNEY CENTER, LLP
NORTH HOUSTON KIDNEY CENTER, LLP
HOUSTON KIDNEY CENTER--SOUTHEAST, LLP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

CASH AND CASH EQUIVALENTS

For the purpose of reporting cash flows, cash and cash equivalents include
cash on hand and other cash equivalents having an initial maturity of three
months or less.

INVENTORIES

Inventories are stated at the lower of cost (first-in first-out) or market
and consist principally of drugs and dialysis related supplies.

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost. Maintenance and repairs are
charged to expense as incurred. Depreciation for leasehold improvements and
other property and equipment is recognized on the straight line and double
declining balance methods, respectively, over the estimated useful lives of
the assets as follows:

ASSET LIFE
----- ---------

Medical and office equipment....................................... 3-5 years
Furniture and fixtures............................................. 7 years
Leasehold improvements............................................. 10 years

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments primarily consist of cash, receivables, payables, and
debt obligations. Due to this current nature or market interest rates,
management believes that the carrying value of these financial instruments
approximated fair value at December 31, 1995.

INCOME TAXES

The Centers are partnerships which are pass through entities for income tax
reporting purposes and, accordingly, earnings are not subject to federal and
state income taxes because the partners include the Centers' income or loss in
their respective federal and state income tax returns.

MANAGEMENT ESTIMATES

F-30

HOUSTON KIDNEY CENTER
(A TEXAS GENERAL PARTNERSHIP)
NORTHWEST KIDNEY CENTER, LLP
NORTH HOUSTON KIDNEY CENTER, LLP
HOUSTON KIDNEY CENTER--SOUTHEAST, LLP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

2. PROPERTY AND EQUIPMENT

Property and equipment comprise the following:

Medical equipment................................................ $ 831,122
Furniture, fixtures and office equipment......................... 241,881
Automobiles...................................................... 3,599
Leasehold improvements........................................... 363,609
----------
1,440,211
Less: accumulated depreciation and amortization.................. (894,871)
----------
$ 545,340
==========

3. NOTES PAYABLE

Long-term obligations consist of the following:

Term note payable to bank, bearing interest at one-half percent
over prime (8.5% at December 31, 1995), due in monthly principal
payments of $6,826 through April 1, 1999)....................... $ 242,102
Term note payable to bank, bearing interest at one percent over
prime (8.5% at December 31, 1995), due in monthly principal
payments of $5,304 through January 15, 2000..................... 215,627
Revolving line of credit payable to bank, bearing interest at one
half percent over prime (8.5% at December 31, 1995), due in
total at June 1, 1997........................................... 200,000
Revolving line of credit payable to bank, bearing interest at one
percent over prime (8.5% at December 31, 1995), due in total in
May 1, 1997..................................................... 115,913
Revolving line of credit payable to bank, bearing interest at
one-half percent over prime (8.5% at December 31, 1995), due in
total at June 1, 1997........................................... 125,000
Revolving line of credit payable to bank, bearing interest at one
percent over prime (8.5% at December 31, 1995), due in July
1997............................................................ 99,000
---------
997,642
Less: current maturities......................................... (102,000)
---------
$ 895,642
=========

Future maturities of notes payable are as follows:

Year ending December 31,
1996.............................................................. $102,000
1997.............................................................. 865,496
1998.............................................................. 130,996
1999.............................................................. 94,761
Thereafter........................................................ 616

F-31

HOUSTON KIDNEY CENTER
(A TEXAS GENERAL PARTNERSHIP)
NORTHWEST KIDNEY CENTER, LLP
NORTH HOUSTON KIDNEY CENTER, LLP
HOUSTON KIDNEY CENTER--SOUTHEAST, LLP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

4. LEASES

Operating leases for the facilities expire between 1997 and 2002. The lease
agreements cover periods of 5 to 8.5 years and provide renewal options for one
to three additional one-year terms.

The Centers also lease 24 dialysis machines. The leases are for 48 months
each and expire between July 1998 and April 1999.

Future minimum lease payments under noncancelable operating leases are as
follows:

Years ending December 31,
1996........................................................... $ 356,200
1997........................................................... 321,708
1998........................................................... 214,861
1999........................................................... 99,099
2000........................................................... 50,625
Thereafter..................................................... 66,825
----------
$1,109,318
==========

Rental expense under all operating leases amounted to $257,000 for 1995.

5. RELATED PARTY TRANSACTIONS

In 1995, certain partners loaned $155,000 to the Centers. The loans bear
interest at 9.5% and are payable upon demand. Accrued interest on the loans at
December 31, 1995 was $6,919.

6. SUBSEQUENT EVENT

Effective July 1, 1996, the Centers entered into an Interim Operating
Services Agreement whereby Total Renal Care, Inc. (TRC) agreed to provide the
Centers with purchasing services, financial services, and other operating
services. The Interim Operating Services Agreement remained in effect for a
one month period ceasing July 31, 1996. TRC received a fee equal to 80% of the
operating income of the Companies for the effective period.

Effective July 1, 1996, the Centers' partners, pursuant to a Partners
Interest, Purchase and Sale Agreement, caused the Centers to contribute all of
their respective assets and certain liabilities to Houston Kidney Center/Total
Renal Care Integrated Service Network Limited Partnership (New Partnership),
in exchange for all of the general and limited partner interests in the New
Partnership and simultaneously distributed all of the general and limited
partnership interest to the Centers' partners. In addition, effective July 31,
1996, the Centers' partners consummated an agreement to sell a one-percent
interest as the sole general partner of the New Partnership to TRC and an
aggregate of seventy-nine percent interest as a limited partner in the New
Partnership to TRC West, Inc. TRC and TRC West, Inc. are subsidiaries of Total
Renal Care Holdings, Inc.

F-32

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of Total Renal Care Holdings, Inc.

In our opinion, the accompanying combined balance sheet and the related
combined statements of income and retained earnings and of cash flows present
fairly, in all material respects, the financial position of Bertha Sirk
Dialysis Center, Inc. and Greenspring Dialysis Center, Inc. (collectively "the
Companies") at December 31, 1995, and the results of their operations and
their cash flows for the year then ended, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Companies' management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit 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 audit provides a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

Philadelphia, Pennsylvania
September 6, 1996

F-33

BERTHA SIRK DIALYSIS CENTER, INC.
GREENSPRING DIALYSIS CENTER, INC.

COMBINED BALANCE SHEET

DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)

ASSETS
Current assets
Cash................................................ $ 19,026 $ 153,039
Accounts receivable, net of allowance for doubtful
accounts of $134,912 and $154,312 (unaudited),
respectively....................................... 935,428 920,581
Inventories......................................... 74,648 57,882
Prepaid expenses.................................... 37,237 63,943
Other current assets................................ 9,417 18,581
---------- ----------
Total current assets............................ 1,075,756 1,214,026
Property and equipment, net........................... 516,919 885,951
Other non-current assets.............................. 2,510 2,657
---------- ----------
Total assets.................................... $1,595,185 $2,102,634
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.................................... $ 106,691 $ 284,597
Accrued expenses.................................... 162,256 132,300
Current maturities of long term debt and lease
obligations........................................ 61,965 182,487
Due to officer...................................... 109,022 47,877
Other liabilities................................... 27,144 45,305
---------- ----------
Total current liabilities....................... 467,078 692,566
Note payable to officer............................... 123,000 310,332
Other non-current liabilities......................... 1,940
Stockholders' equity
Common stock........................................ 1,000 1,000
Retained earnings................................... 1,002,167 1,098,736
---------- ----------
Total stockholders' equity........................ 1,003,167 1,099,736
---------- ----------
Total liabilities and stockholders' equity...... $1,595,185 $2,102,634
========== ==========

The accompanying notes are an integral part of these financial statements.

F-34

BERTHA SIRK DIALYSIS CENTER, INC.
GREENSPRING DIALYSIS CENTER, INC.

COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS

SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ----------------------
1995 1995 1996
------------ ---------- ----------
(UNAUDITED)

Net operating revenues..................... $5,088,160 $2,449,888 $2,674,571
---------- ---------- ----------
Operating expenses
Facilities............................... 3,671,716 1,736,651 2,001,042
General and administrative............... 769,672 373,121 487,759
Provision for doubtful accounts.......... 39,602 19,400
Depreciation and amortization............ 112,205 51,377 64,119
---------- ---------- ----------
Total operating expenses............... 4,593,195 2,161,149 2,572,320
---------- ---------- ----------
Income from operations..................... 494,965 288,739 102,251
Other income............................... 8,993 3,228 5,495
Interest expense........................... (54,253) (21,839) (11,177)
---------- ---------- ----------
Net income................................. 449,705 270,128 96,569
Retained earnings at beginning of period... 552,462 552,462 1,002,167
---------- ---------- ----------
Retained earnings at end of period......... $1,002,167 $ 822,590 $1,098,736
========== ========== ==========

The accompanying notes are an integral part of these financial statements.

F-35

BERTHA SIRK DIALYSIS CENTER, INC.
GREENSPRING DIALYSIS CENTER, INC.

COMBINED STATEMENT OF CASH FLOWS

SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, --------------------
1995 1995 1996
------------ --------- ---------
(UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................... $ 449,705 $ 270,128 $ 96,569
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization............ 112,205 51,377 64,119
Changes in operating assets and
liabilities:
Accounts receivable.................... 6,789 145,548 14,847
Inventories............................ (25,530) 5,419 16,766
Prepaid expenses....................... (19,114) 6,485 (26,706)
Other assets........................... (8,191) (4,838) 8,850
Accounts payable....................... (190,036) (93,228) 177,906
Accrued employee compensation and other
benefits.............................. 18,954 (43,988) (30,256)
--------- --------- ---------
Net cash provided by operating
activities.......................... 344,782 336,903 322,095
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment...... (49,769) (11,026) (432,846)
--------- --------- ---------
Net cash used by investing
activities.......................... (49,769) (11,026) (432,846)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable to officer..... (246,963) (141,420)
Payments on leases and other notes....... (57,542) (23,459) (67,945)
Proceeds from issuance of notes payable
to officer.............................. 157,764
Proceeds from issuance of other notes.... 154,945
--------- --------- ---------
Net cash used by financing
activities.......................... (304,505) (164,879) 244,764
--------- --------- ---------
Net decrease in cash....................... (9,492) 160,998 134,013
Cash at beginning of period................ 28,518 28,518 19,026
--------- --------- ---------
Cash at end of period...................... $ 19,026 $ 189,516 $ 153,039
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest..................... $ 20,265 $ 21,839 $ 11,177
========= ========= =========

The accompanying notes are an integral part of these financial statements.

F-36

BERTHA SIRK DIALYSIS CENTER, INC.
GREENSPRING DIALYSIS CENTER, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Bertha Sirk Dialysis Center, Inc. ("Bertha Sirk") and Greenspring Dialysis
Center, Inc. ("Greenspring"), collectively referred to as "the Companies,"
were organized to operate kidney dialysis centers and to provide related
medical services in and around Baltimore, Maryland. Bertha Sirk has one free
standing facility while Greenspring operates at a local hospital. Bertha Sirk
also contracts with two hospitals to perform acute dialysis treatments to
admitted patients.

Effective July, 1996, Total Renal Care, Inc. ("TRC"), which operates kidney
dialysis facilities throughout the country, purchased assets and liabilities
of the Companies as discussed in Note 7. TRC is a wholly owned subsidiary of
Total Renal Care Holdings , Inc. ("TRCH").

BASIS OF PRESENTATION

The accompanying combined financial statements are prepared using the
accrual basis of accounting in accordance with generally accepted accounting
principles.

The combined financial statements include the accounts of Bertha Sirk and
Greenspring due to common ownership of both entities. All significant
intercompany transactions and balances have been eliminated in the
combination.

OPERATING REVENUES AND ACCOUNTS RECEIVABLE ALLOWANCES

Revenues are recognized when services and related products are provided to
patients in need of on-going life sustaining kidney dialysis treatment.
Operating revenues consist primarily of dialysis and ancillary fees from
patient treatments. These amounts are reported at the amounts expected to be
realized from governmental and third-party payors, patients and others for
services provided. Receivables which are deemed uncollectible are reflected in
the provision for doubtful accounts as a component of operating expenses in
the statement of income.

The Companies provide credit, in the normal course of business, to patients
from (i) the federal and state governments under the Medicare and Medicaid
programs representing approximately 60% of their dialysis revenue and net
accounts receivable in fiscal year 1995, respectively, and (ii) private pay
payors including insurance companies, private carriers and other third-party
payors.

Management does not believe that there are any significant credit risks
associated with receivables from governmental agencies. The remaining net
receivable balance consists of receivables from various payors, subject to
differing economic conditions, and are not believed to represent any
concentrated credit risks to the Companies. Furthermore, management adjusts
reserves associated with these receivables as necessary.

CASH AND CASH EQUIVALENTS

For the purpose of reporting cash flows, cash and cash equivalents include
cash on hand and other cash equivalents having an initial maturity of three
months or less.

F-37

BERTHA SIRK DIALYSIS CENTER, INC.
GREENSPRING DIALYSIS CENTER, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

INVENTORIES

Inventories are stated at the lower of cost (first-in first-out) or market
and consist principally of drugs and dialysis related supplies.

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost. Maintenance and repairs are
charged to expense as incurred. Depreciation is recognized on the straight-
line (mid-year convention) method over the estimated useful lives (or lesser
of the lease terms or useful lives for leasehold improvements) of the assets
as follows:

ASSET LIFE
----- ---------

OTHER LIABILITIES

Reimbursements in excess of realizable billings have been reported as other
liabilities.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments primarily consist of cash, receivables, payables, and
debt obligations. The carrying value of these financial instruments
approximated fair value at December 31, 1995.

INCOME TAXES

STOCKHOLDERS' EQUITY

Retained earnings represent undistributed earnings of the Companies, which
are all Sub-S corporations.

Common stock comprises the following:

Bertha Sirk--$1 par value, 100,000 shares authorized; 500 shares issued and
outstanding; and

Greenspring--$1 par value, 100,000 shares authorized; 500 shares issued and
outstanding

MANAGEMENT ESTIMATES

F-38

BERTHA SIRK DIALYSIS CENTER, INC.
GREENSPRING DIALYSIS CENTER, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

2. PROPERTY AND EQUIPMENT

Property and equipment comprise the following:

Medical equipment................................................. $ 635,654
Furniture, fixtures and office equipment.......................... 95,854
Leasehold improvements............................................ 176,783
---------
Total property and equipment.................................... 908,291
Less: accumulated depreciation and amortization................... (391,372)
---------
Net............................................................. $ 516,919
=========

3. LEASES

The Greenspring Facility is leased under two operating leases which expire
on August 31, 2000 and February 28, 2003. Both lease agreements cover a period
of seven years and provide a renewal option for one additional five year term.
The Bertha Sirk facility is leased under two operating leases which both
expire on January 31, 1998. One lease has a term of five years and the other
has a term of seven years and both provide a renewal option for one additional
five year term.

Future minimum lease payments under these leases are as follows:

Years ending December 31:
1996............................................................. $135,890
1997............................................................. 152,341
1998............................................................. 156,568
1999............................................................. 165,479
2000............................................................. 158,194
--------
$768,472
========

Rental expense under all operating leases amounted to $127,374 for 1995.

The Companies have approximately $92,000 of capitalized leased medical
equipment recorded in property, plant and equipment. Accumulated amortization
of $67,000 on this equipment is included in accumulated depreciation. The
lease expires on January 1, 1997.

Future minimum lease payments under this lease are as follows:

Years ended December 31:
1996............................................................... $20,965
1997............................................................... 1,940
-------
$22,905
=======

4. UNUSED BANK CREDIT FACILITIES

As of December 31, 1995 the Companies have unused revolving note facilities
of $140,000 and $100,000 for Greenspring and Bertha Sirk, respectively. The
interest rate for both notes is the prime rate plus one percentage point and
the notes are secured by assets of the Companies. As of July 11, 1996, both
notes were cancelled.

F-39

BERTHA SIRK DIALYSIS CENTER, INC.
GREENSPRING DIALYSIS CENTER, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

5. RETIREMENT PROGRAMS

The Companies have a 401(k) defined contribution plan which is available to
all employees meeting certain eligibility requirements. Under the plan,
employees can elect to defer of up to 10% of their salaries. The Companies
match 50% up to 3% of the employees salary. The Companies have an option to
make profit sharing contributions to the plan each fiscal year. Matching and
profit sharing contributions of approximately $40,000 were accrued by the
Companies during 1995.

6. RELATED PARTY TRANSACTIONS

As of December 31, 1995, Greenspring owes its President $164,000 in the form
of a note payable, which bears an annual interest rate of 10.75%. The loan was
entered into in May of 1994 and the first of 60 monthly payments was in
January of 1995. The note matures on January 1, 2000.

As of December 31, 1995, Bertha Sirk owes its President $39,971 in the form
of a note payable. The note was entered into in 1994, bears interest at 5.7%
and has no due date. Payments are made upon demand from the President.

As of December 31, 1995, Greenspring owes its President $69,051 in the form
of a note payable. The note has no stated interest rate and no due date.
Payments are made upon demand from the President.

7. SUBSEQUENT EVENTS

Effective June 1, 1996, the Companies entered into an Interim Operating
Management Agreement (the "Management Agreement") whereby TRCH agreed to
provide the Companies with management, consulting and advisory services with
respect to personnel, operational policies, equipment and improvements,
billing, bookkeeping, accounting, funds management and other advice as agreed
between TRCH and the Companies. The Management Agreement remained in effect
until the date that TRCH acquired substantially all of the Companies' assets.
TRCH received a fee equal to the operating income of the Companies for the
period the Management Agreement was in effect. In addition, in July, 1996, the
stockholders of the Companies entered into an Asset Purchase Agreement
("Purchase Agreement") to sell all of the assets (except cash), properties,
and rights of the Companies to Total Renal Care, Inc. (TRC). Under the
Purchase Agreement, TRC did not assume, and is not liable for, any debt,
obligations, or liabilities of the Companies incurred prior to the Management
Agreement.

F-40

TOTAL RENAL CARE HOLDINGS, INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

JUNE 30, 1996
(IN THOUSANDS)

OTHER
COMBINED
THE COMPANY DEBT ACQUISITIONS PRO FORMA
(HISTORICAL) RETIREMENT(e) (HISTORICAL) ADJUSTMENTS COMBINED
------------ ------------- ------------ ----------- --------

Cash and cash
equivalents............ $ 39,969 $(28,499) $ 2,295 $(16,486)(a)
(1,830)(b)
4,551 (f)
Accounts receivable,
net.................... 82,375 8,485 (1,734)(b) $ 89,126
Other current assets.... 9,075 724 (73)(b) 9,726
-------- -------- ------- -------- --------
Total current assets.. 131,419 (28,499) 11,504 (15,572) 98,852
Property and equipment,
net.................... 44,456 4,954 (302)(b) 49,108
Intangible assets, net.. 111,611 (1,866) 821 57,784 (a) 168,350
Other assets............ 3,560 259 (77)(b) 3,742
-------- -------- ------- -------- --------
$291,046 $(30,365) $17,538 $ 41,833 $320,052
======== ======== ======= ======== ========
Current liabilities..... $ 23,366 $ (5,139) $ 4,276 $ (1,197)(b) $ 25,857
4,551 (f)
Long-term debt.......... 59,101 (17,503) 3,207 (3,207)(b) 90,578
48,980 (a)
Other long-term
liabilities............ 523 25 (25)(b) 523
Minority interest....... 4,541 -- 931 (c) 5,472
Common stock............ 26 472 (472)(d) 26
Additional paid-in
capital................ 234,369 1,283 547 (a)(d) 236,199
Notes receivable from
stockholders........... (2,727) -- -- (2,727)
Retained earnings
(deficit).............. (28,153) (7,723) 8,275 (8,275)(d) (35,876)
-------- -------- ------- -------- --------
$291,046 $(30,365) $17,538 $ 41,833 $320,052
======== ======== ======= ======== ========

F-41

TOTAL RENAL CARE HOLDINGS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET

1. BASIS OF PRESENTATION

The Unaudited Pro Forma Combined Balance sheet of Total Renal Care Holdings,
Inc. as of June 30, 1996 gives effect to the acquisition of the Insignificant
Acquisitions, in each case as if such acquisitions were consummated on June
30, 1996. The pro forma adjustments are based on consideration exchanged,
including the estimated fair value of assets acquired, liabilities assumed and
common stock issued. The actual adjustments, which will be based on valuations
of fair value as of the date of acquisition, may differ from those made
herein.

2. PRO FORMA ADJUSTMENTS

(a) To record the Insignificant Acquisitions as follows (in thousands):

Purchase price...................................................... $67,296
Net book value of assets acquired................................... 9,512
-------
Purchase price allocated to intangible assets....................... $57,784
=======

The purchase prices of the Insignificant Acquisitions were paid with cash of
$16,486,000, borrowings of $48,980,000 and common stock of Total Renal Care
Holdings, Inc. valued at $1,830,000.

(b) To reflect assets and liabilities not acquired by the Company.

(c) The Company purchased a less than 100% interest in five partnerships
which are consolidated for financial reporting purposes. This entry is to
record the minority interest in such partnerships.

(d) To eliminate the equity of the acquired businesses.

(e) To reflect the repurchase of $27.4 million in debt for $28.4 million and
the completion of a tender offer pursuant to which the Company purchased its
remaining 12% Senior Subordinated Discount Notes for $40.1 million, $40.0
million of which was financed using the senior credit facility. These
repurchases resulted in an extraordinary loss of $7.7 million.

(f) To reclassify book overdraft to current liabilities.

F-42

TOTAL RENAL CARE HOLDINGS, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)

SOUTH
CAREMARK CAROLINA
THE COMPANY FACILITIES FACILITIES
6 MONTHS 2 MONTHS 2 MONTHS
ENDED ENDED ENDED OTHER
JUNE 30, FEBRUARY 28, FEBRUARY 28, COMBINED
1996 DEBT 1996 1996 ACQUISITIONS PRO FORMA
(HISTORICAL) RETIREMENT(a) (HISTORICAL) (HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
------------ ------------- ------------ ------------ ------------ ----------- --------

Net operating revenues.. $114,820 $7,805 $1,133 $26,415 $ (797)(b) $149,376
Operating expenses...... 93,713 8,250 1,055 22,786 2,429 (c) 128,233
-------- ------ ------ ------- ------- --------
Operating income........ 21,107 (445) 78 3,629 (3,226) 21,143
Interest expense, net... 2,537 $(536) 127 (1) 127 (253)(d) 4,167
2,166 (e)
-------- ----- ------ ------ ------- ------- --------
Income before income
taxes, minority
interests and
extraordinary item..... 18,570 536 (572) 79 3,502 (5,139) 16,976
Income taxes............ 7,151 (232) 26 (408)(f) 6,537
-------- ----- ------ ------ ------- ------- --------
Income before minority
interest and
extraordinary item..... 11,419 536 (340) 79 3,476 (4,731) 10,439
Minority interest in
income of consolidated
subsidiaries........... 1,417 233 (g) 1,650
-------- ----- ------ ------ ------- ------- --------
Income before
extraordinary item..... $ 10,002 $ 536 $ (340) $ 79 $ 3,476 $(4,964) $ 8,789
======== ===== ====== ====== ======= ======= ========
Income per share before
extraordinary item..... $ 0.40 $ 0.34
======== ========
Weighted average number
of common shares and
equivalents
outstanding............ 24,837 728 (h) 25,565
======== ======= ========

F-43

TOTAL RENAL CARE HOLDINGS, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

SEVEN MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS)

SOUTH
MIAMI SOUTHWEST CAREMARK CAROLINA
THE COMPANY FACILITIES FACILITIES FACILITIES FACILITIES
7 MONTHS 1 MONTH 6 MONTHS 7 MONTHS 7 MONTHS
ENDED ENDED ENDED ENDED ENDED OTHER
DECEMBER 31, INITIAL JUNE 30, NOVEMBER 30, DECEMBER 31, DECEMBER 31, COMBINED
1995 PUBLIC DEBT 1995 1995 1995 1995 ACQUISITIONS
(HISTORICAL) OFFERING(i) RETIREMENT(j) (HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL)
------------ ----------- ------------- ------------ ------------ ------------ ------------ ------------

Net operating
revenues....... $89,711 $526 $2,224 $27,340 $3,957 $37,255
Operating
expenses....... 71,245 $ (64) 449 2,071 29,657 3,682 32,324
------- ------- ---- ------ ------- ------ -------
Operating
income......... 18,466 64 77 153 (2,317) 275 4,931
Interest
expense, net... 5,584 (2,505) $(587) -- 41 452 -- 256
------- ------- ----- ---- ------ ------- ------ -------
Income before
income taxes,
minority
interests and
extraordinary
item........... 12,882 2,569 587 77 112 (2,769) 275 4,675
Income taxes.... 4,631 1,028 -- -- -- (1,140) -- 87
------- ------- ----- ---- ------ ------- ------ -------
Income before
minority
interest and
extraordinary
item........... 8,251 1,541 587 77 112 (1,629) 275 4,588
Minority
interest in
income of
consolidated
subsidiaries... 1,784 -- -- -- -- -- -- --
------- ------- ----- ---- ------ ------- ------ -------
Income before
extraordinary
item........... $ 6,467 $ 1,541 $ 587 $ 77 $ 112 $(1,629) $ 275 $ 4,588
======= ======= ===== ==== ====== ======= ====== =======
Income per share
before
extraordinary
item........... $ 0.36
=======
Weighted average
number of
common shares
and equivalents
outstanding.... 17,824
=======

PRO FORMA
ADJUSTMENTS COMBINED
------------- --------

Net operating
revenues....... $ (351)(b) $160,662
Operating
expenses....... 4,478 (c) 143,842
--------- --------
Operating
income......... (4,829) 16,820
Interest
expense, net... (628)(d) 5,256
2,643 (e)
--------- --------
Income before
income taxes,
minority
interests and
extraordinary
item........... (6,844) 11,564
Income taxes.... (214)(f) 4,392
--------- --------
Income before
minority
interest and
extraordinary
item........... (6,630) 7,172
Minority
interest in
income of
consolidated
subsidiaries... 190 (g) 1,974
--------- --------
Income before
extraordinary
item........... $ (6,820) $ 5,198
========= ========
Income per share
before
extraordinary
item........... $ 0.19
========
Weighted average
number of
common shares
and equivalents
outstanding.... 9,654 (k) 27,478
========= ========

F-44

TOTAL RENAL CARE HOLDINGS, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

YEAR ENDED MAY 31, 1995
(IN THOUSANDS)

SOUTH
CHICAGO MIAMI CAREMARK CAROLINA
FACILITIES FACILITIES FACILITIES FACILITIES
THE COMPANY 11 MONTHS 12 MONTHS 12 MONTHS 12 MONTHS
YEAR ENDED ENDED ENDED ENDED ENDED
MAY 31, AUGUST 1, INITIAL APRIL 30, MAY 31, MAY 31, MAY 31,
1995 1994 PUBLIC DEBT 1995 1995 1995 1995
(HISTORICAL) TRANSACTION(l) OFFERING(m) RETIREMENT(n) (HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL)
------------ -------------- ----------- ------------- ------------ ------------ ------------ ------------

Net operating
revenues....... $ 98,968 $ 9,691 $ 6,311 $ 45,599 $ 6,306
Operating
expenses....... 81,809 $ 772 $ (100) 8,587 5,385 45,456 5,746
-------- ------- ------- ------- ------- -------- -------
Operating
income......... 17,159 (772) 100 1,104 926 143 560
Interest
expense, net... 7,203 1,811 (3,141) $(1,116) 28 -- 866 --
-------- ------- ------- ------- ------- ------- -------- -------
Income before
income taxes,
minority
interests and
extraordinary
item........... 9,956 (2,583) 3,241 1,116 1,076 926 (723) 560
Income taxes.... 3,511 (1,032) 1,329 115 (298)
-------- ------- ------- ------- ------- ------- -------- -------
Income before
minority
interest and
extraordinary
item........... 6,445 (1,551) 1,912 1,116 961 926 (425) 560
Minority
interest in
income of
consolidated
subsidiaries... 1,593
-------- ------- ------- ------- ------- ------- -------- -------
Income before
extraordinary
item........... $ 4,852 $(1,551) $ 1,912 $ 1,116 $ 961 $ 926 $ (425) $ 560
======== ======= ======= ======= ======= ======= ======== =======
Income per share
before
extraordinary
item........... $ 0.22
========
Weighted average
number of
common shares
and equivalents
outstanding.... 15,316
========

OTHER
COMBINED
ACQUISITIONS PRO FORMA
(HISTORICAL) ADJUSTMENTS COMBINED
------------ -------------- ---------

Net operating
revenues....... $ 71,902 $ (209)(b) $ 238,568
Operating
expenses....... 65,955 9,129 (c) 222,739
-------- --------- ---------
Operating
income......... 5,947 (9,338) 15,829
Interest
expense, net... 534 (1,159)(d) 9,249
4,223 (e)
-------- --------- ---------
Income before
income taxes,
minority
interests and
extraordinary
item........... 5,413 (12,402) 6,580
Income taxes.... 120 (1,425)(f) 2,320
-------- --------- ---------
Income before
minority
interest and
extraordinary
item........... 5,293 (10,977) 4,260
Minority
interest in
income of
consolidated
subsidiaries... 161 (g) 1,754
-------- --------- ---------
Income before
extraordinary
item........... $ 5,293 $ (11,138) $ 2,506
======== ========= =========
Income per share
before
extraordinary
item........... $ 0.09
=========
Weighted average
number of
common shares
and equivalents
outstanding.... 11,404(o) 26,720
========= =========

F-45

TOTAL RENAL CARE HOLDINGS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME

1. BASIS OF PRESENTATION

The Unaudited Pro Forma Combined Statement of Income for the six months
ended June 30, 1996 gives effect of the acquisition by the Company of the
Nephrology Services Business of Caremark International Inc. on March 15, 1996
(the "Caremark Facilities"), two facilities located in South Carolina on March
15, 1996 (the "South Carolina Facilities") and individually insignificant
acquisitions consummated during the period January 1, 1996 through September
30, 1996, and individually insignificant acquisitions which were probable as
of October 18, 1996, in each case as if such acquisitions were consummated on
January 1, 1996. The Unaudited Pro Forma Combined Statement of Income for the
six months ended June 30, 1996 also gives effect to the retirement of all
outstanding Senior Subordinated Discount Notes in July and September 1996 (the
"Debt Retirement") as if it occurred on January 1, 1996.

The Unaudited Pro Forma Combined Statement of Income for the seven months
ended December 31, 1995 gives effect to the acquisition by the Company of
three facilities located in the Miami area on July 17, 1995 (the "Miami
Facilities"), two facilities located in Texas on December 1, 1995 (the
"Southwest Facilities"), the Caremark Facilities, the South Carolina
Facilities and individually insignificant acquisitions consummated during the
period June 1, 1995 through September 30, 1996, and individually insignificant
acquisitions which were probable as of October 18, 1996, in each case as if
such acquisitions were consummated on June 1, 1995. The Unaudited Pro Forma
Combined Statement of Income for the seven months ended December 31, 1995 also
gives effect to the Company's initial public offering on October 30, 1995 (the
"Initial Public Offering"), the Company's secondary offering on April 3, 1996
(the "Secondary Offering") and the Debt Retirement as if such transactions
occurred on June 1, 1995.

The Unaudited Pro Forma Combined Statement of Income for the fiscal year
ended May 31, 1995 gives effect to the acquisition by the Company of five
facilities located in the Chicago area on May 1, 1995 (the "Chicago
Facilities"), the Miami Facilities, the Caremark Facilities, the South
Carolina Facilities and individually insignificant acquisitions consummated
during the period June 1, 1994 through September 30, 1996, and individually
insignificant acquisitions which were probable as of October 18, 1996, in each
case as if such acquisitions were consummated on June 1, 1994. The Southwest
Facilities, which commenced operations in April 1995, had de minimis
operations during the twelve months ended May 31, 1995 and, therefore, are not
included in the Unaudited Pro Forma Combined Statement of Income for the
fiscal year ended May 31, 1995. The Unaudited Pro Forma Combined Statement of
Income for the fiscal year ended May 31, 1995 also gives effect to the sale by
Tenet Healthcare Corporation of approximately 75% of its ownership interest in
the Company to DLJ Merchant Banking Partners, L.P. and certain of its
affiliates in August 1994 (the "August 1994 Transaction"), the Initial Public
Offering, the Secondary Offering and the Debt Retirement as if such
transactions occurred on June 1, 1994.

The pro forma adjustments are based on consideration exchanged, including
the estimated fair value of assets acquired, liabilities assumed and common
stock issued. The actual adjustments, which will be based on valuations of
fair value as of the date of acquisition, may differ from those made herein.

Net income per common share data and weighted average number of shares and
equivalents outstanding for the six months ended June 30, 1996, for the seven
months ended December 31, 1995 and for the fiscal year ended May 31, 1995
assume that any shares issued in connection with the acquisitions were
outstanding from January 1, 1996 and June 1, 1995 and 1994, respectively.

2. PRO FORMA ADJUSTMENTS

(a) To reflect the Debt Retirement as if it occurred on January 1, 1996 by
recording the pro forma effect of the reduction in interest expense assuming
the Debt Retirement described in note (e) in the notes to the Unaudited Pro
Forma Combined Balance Sheet offset by interest income foregone.

F-46

TOTAL RENAL CARE HOLDINGS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME--(CONTINUED)

(b) To eliminate management fees earned by the combined entities.

(c) To amortize goodwill, non-compete agreements and patient charts
resulting from the acquisitions on a straight-line basis over 25, 10 or 5
years, respectively.

(d) To eliminate interest expense on borrowings not assumed by the Company.

(e) To record interest expense resulting from acquisitions funded in whole
or in part by borrowings from the senior credit facility.

(f) To record income tax effects related to the pro forma adjustments.

(g) To record the minority interest income from five partnerships acquired
(see note (c) to the Unaudited Pro Forma Combined Balance Sheet).

(h) Income per share and weighted average number of common shares and
equivalents outstanding assume 62,000 shares and share equivalents issued to
purchase the individually insignificant acquisitions were outstanding for the
entire six-month period ended June 30, 1996.

Income per share and weighted average number of common shares and
equivalents outstanding also assume that shares issued in the Secondary
Offering to the extent that cash generated from such shares were used to
purchase facilities and were outstanding from January 1, 1996 to the date of
the Secondary Offering as follows:

Caremark Facilities................................................ 1,741,000
All other acquisitions............................................. 926,000

(i) To reflect the Initial Public Offering and subsequent use of proceeds to
redeem subordinated debt as if it occurred on June 1, 1995. Specifically, to
reduce interest expense assuming paydown of a portion of the 12% senior
subordinated debt and amounts outstanding under the line of credit. On
December 7, 1995 the Company redeemed 35% of the accreted value of the 12%
senior subordinated debt equaling $28,749,000 at a redemption premium of 111%
for a redemption price of $31,912,000. An extraordinary loss of $2,555,000
(net of income tax effect) resulted from this transaction which is not
included on the Unaudited Pro Forma Combined Statement of Income. The
additional reduction in interest expense incurred under the line of credit
assumes that cash generated by the stock offering was used to purchase all
facilities acquired and that the line of credit was not drawn for these
acquisitions.

(j) To reflect the Debt Retirement as if it occurred on June 1, 1995. See
note (e) to the Unaudited Pro Forma Combined Balance Sheet.

(k) Income per share and weighted average number of common shares and
equivalents outstanding assume the following shares and share equivalents
issued to purchase facilities were outstanding for the entire seven month
period ended December 31, 1995:

Miami Facilities..................................................... 333,000
Southwest Facilities................................................. 35,000
All other acquisitions............................................... 471,000

F-47

TOTAL RENAL CARE HOLDINGS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME--(CONTINUED)

such shares (instead of the senior credit facility) would have been used to
purchase facilities were outstanding from June 1, 1995 to the date of the
Initial Public Offering or December 31, 1995, respectively, as follows:

Chicago Facilities................................................. 505,000
Miami Facilities................................................... 345,000
South Carolina Facilities.......................................... 803,000
Caremark Facilities................................................ 1,741,000
All other acquisitions............................................. 2,630,000

Income per share and weighted average number of common shares and
equivalents also assume that 2,233,000 shares issued in the Initial Public
Offering to redeem the 12% senior subordinated debt were outstanding from June
1, 1995 to the date of the Initial Public Offering.

(l) To reflect the August 1994 Transaction as if it occurred on June 1,
1994. Specifically, to reflect an increase in general and administrative
expenses ($625,000) for estimated incremental costs of the Company as a stand-
alone entity, increases in interest expense ($1,811,000), amortization
expenses ($105,000) and bank fees ($42,000) related to the issuance of the 12%
senior subordinated debt, and a corresponding decrease in income taxes
($1,032,000) for the tax effect of the pro forma adjustments.

(m) To reflect the Initial Public Offering and subsequent use of proceeds to
redeem subordinated debt as if it occurred on June 1, 1994. See note (j)
above.

(n) To reflect the Debt Retirement as if it occurred on June 1, 1994. See
note (e) in the notes to the Unaudited Pro Forma Combined Balance Sheet.

(o) Income per share in the audited financial statements for the year ended
May 31, 1995 was computed as if the August 1994 Transaction had occurred on
June 1, 1994. Income per common share and weighted average numbered of common
shares and equivalents outstanding computed using such assumptions were $0.22
and 15,316,000, respectively.

Income per share and weighted average number of common shares and
equivalents outstanding assume the following shares and share equivalents
issued to purchase facilities were outstanding for the entire year:

Chicago Facilities................................................. 515,000
Miami Facilities................................................... 333,000
All other acquisitions............................................. 1,029,000

Income per share and weighted average number of common shares and
equivalents outstanding also assume that shares issued in the Initial Public
Offering and Secondary Offering to the extent that cash generated from such
shares (instead of the senior credit facility) would have been used to
purchase facilities were outstanding for the entire year as follows:

Chicago Facilities................................................. 707,000
Miami Facilities................................................... 483,000
South Carolina Facilities.......................................... 803,000
Caremark Facilities................................................ 1,741,000
All other acquisitions............................................. 2,991,000

F-48