SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-QSB

(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Transition period from ____________________to_______________

Commission file No. 0-26666

RAMSAY MANAGED CARE, INC.

(Exact name of small business issuer as specified in its charter)

DELAWARE 72-1249464
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

COLUMBUS CENTER
ONE ALHAMBRA PLAZA, SUITE 750
CORAL GABLES, FLORIDA 33134
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

Issuer's telephone number, including area code: (305) 569-6993

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

Yes X No ___
---

The number of shares of the Registrant's Common Stock outstanding at May
20, 1997 follows:

Common Stock, par value $0.01 per share - 6,408,315 shares

Transitional Small Business Disclosure Format (Check one): Yes ______ No X
---

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

RAMSAY MANAGED CARE, INC.

FORM 10-QSB

INDEX

Page
----
Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated balance sheets - March 31, 1997
and June 30, 1996 (unaudited)..................................... 1

Consolidated statements of operations - three and
nine months ended March 31, 1997 and 1996 (unaudited)............. 3

Consolidated statements of cash flows - nine months ended March 31,
1997 and 1996 (unaudited)......................................... 4

Notes to consolidated financial statements -
March 31, 1997 (unaudited)........................................ 6

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........................ 10

Part II. OTHER INFORMATION

Item 5. Other Information................................................... 17

Item 6. Exhibits and Current Reports on Form 8-K............................ 18

SIGNATURES.................................................................. 19

PART I. FINANCIAL INFORMATION

RAMSAY MANAGED CARE, INC.

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

MARCH 31 JUNE 30
1997 1996
------------ ------------

ASSETS
Current assets:
Cash and cash equivalents........................ $ 2,141,000 $ 228,000
Accounts receivable, less allowance for doubtful
accounts of $283,000 and $334,000 at March 31,
1997 and June 30, 1996, respectively............ 1,280,000 846,000
Prepaid expenses................................. 145,000 382,000
Other current assets............................. 388,000 37,000
Current assets of discontinued operation......... 688,000 1,744,000
----------- -----------
Total current assets.............................. 4,642,000 3,237,000

Other assets:
Goodwill and other intangible assets............. 7,905,000 8,152,000
Other non-current assets......................... 75,000 60,000
Other assets of discontinued operation........... 2,253,000 1,862,000
----------- -----------
Total other assets................................ 10,233,000 10,074,000

Property and equipment:
Building and improvements........................ 137,000 128,000
Equipment, furniture and fixtures................ 1,915,000 1,830,000
----------- -----------
2,052,000 1,958,000
Less accumulated depreciation.................... 1,342,000 1,170,000
----------- -----------
Total property and equipment...................... 710,000 788,000
----------- -----------
Total assets...................................... $15,585,000 $14,099,000
=========== ===========

See accompanying notes.

RAMSAY MANAGED CARE, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)

MARCH 31 JUNE 30
1997 1996
------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................ $ 522,000 $ 1,397,000
Accrued salaries and wages...................... 814,000 641,000
Hospital and medical claims payable............. 2,059,000 1,667,000
Other current liabilities....................... 4,762,000 959,000
Line of credit and note payable................. -- 1,900,000
Current portion of long-term debt............... 1,495,000 2,334,000
Current liabilities of discontinued operation... 2,499,000 1,579,000
Reserve for operating loss from
discontinued operation......................... -- 1,830,000
------------ ------------
Total current liabilities........................ 12,151,000 12,307,000

Due to affiliate................................. 1,729,000 1,851,000
Advance from affiliate........................... 2,000,000 1,600,000
Deferred income taxes............................ 1,014,000 986,000
Long-term debt, less current portion............. 4,588,000 5,202,000

Stockholders' equity:
Convertible preferred stock, $.01 par value
- authorized 1,000,000 shares; issued 100,000
shares at March 31, 1997 and -0- shares
at June 30, 1996............................... 3,000,000 --
Common stock, $.01 par value - authorized
20,000,000 shares; issued 6,408,315 shares at
March 31, 1997 and 6,397,304 shares at
June 30, 1996................................... 64,000 64,000
Additional paid-in capital....................... 7,102,000 7,095,000
Accumulated deficit.............................. (16,063,000) (15,006,000)
------------ ------------
Total stockholders' deficit...................... (5,897,000) (7,847,000)
------------ ------------
Total liabilities and stockholders' equity....... $ 15,585,000 $ 14,099,000
============ ============

See accompanying notes.

RAMSAY MANAGED CARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

QUARTER ENDED NINE MONTHS ENDED
MARCH 31 MARCH 31 MARCH 31 MARCH 31
1997 1996(A) 1997 1996(A)
-------------- -------------------- ------------- ---------------

Revenues:
Managed care revenue.......................... $5,127,000 $5,194,000 $15,425,000 $14,309,000
Clinical fee for service and other revenue.... 1,129,000 560,000 2,453,000 1,440,000
---------- ---------- ----------- -----------
Total revenues................................. 6,256,000 5,754,000 17,878,000 15,749,000

Operating expenses:
Contracted provider services.................. 2,188,000 2,039,000 6,497,000 5,561,000
Salaries, wages and benefits.................. 2,331,000 2,108,000 6,986,000 6,624,000
Management fees charged by related
companies.................................... 46,000 78,000 222,000 210,000
General and administrative expenses........... 1,195,000 1,280,000 3,379,000 3,563,000
Depreciation and amortization................. 305,000 319,000 1,000,000 948,000
Interest and other financing charges.......... 241,000 182,000 675,000 569,000
---------- ---------- ----------- -----------
Total operating expenses....................... 6,306,000 6,006,000 18,759,000 17,475,000
---------- ---------- ----------- -----------

Loss from continuing operations
before income taxes and extraordinary item... (50,000) (252,000) (881,000) (1,726,000)
Income taxes................................... -- -- -- --
Extraordinary item -- loss on early
extinguishment of debt........................ (176,000) -- (176,000) --
---------- ---------- ----------- -----------
Loss from continuing operations after
extraordinary item........................... (226,000) (252,000) (1,057,000) (1,726,000)
---------- ---------- ----------- -----------
Discontinued operation:
Loss from operations of discontinued
HMO operation................................ -- (556,000) -- (1,269,000)
---------- ---------- ----------- -----------
Net loss....................................... $ (226,000) $ (808,000) $(1,057,000) $(2,995,000)
========== ========== =========== ===========

Loss per common share from
continuing operations before
extraordinary item.......................... $ (0.01) $ (0.04) $ (0.14) $ (0.27)
Loss per common share from
extraordinary item.......................... (0.03) 0.00 (0.03) 0.00
Loss per common share from
discontinued operation........................ 0.00 (0.09) 0.00 (0.20)
---------- ---------- ----------- -----------
Loss per common share.......................... $ (0.04) $ (0.13) $ (0.17) $ (0.47)
========== ========== =========== ===========

Weighted average number of shares outstanding.. 6,408,315 6,375,550 6,400,921 6,384,934
========== ========== =========== ===========

(a) Certain amounts for the quarter and nine months ended March 31, 1996 have
been reclassified to reflect the Company's discontinued HMO operation.

See accompanying notes.

RAMSAY MANAGED CARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

NINE MONTHS ENDED
MARCH 31 MARCH 31
1997 1996 (A)
------------------ ------------

CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES
Net loss from continuing operations.............................. $(1,057,000) $(1,726,000)
Adjustments to reconcile net loss from continuing operations
to net cash used in operating activities:
Depreciation and amortization................................. 1,000,000 948,000
Write-off of loan costs on early extinguishment of debt
as extraordinary item....................................... 176,000 --
Other......................................................... 30,000 18,000
Cash flows from (increase) decrease in operating assets:
Accounts receivable, net.................................... (434,000) (35,000)
Prepaid expenses............................................ 237,000 (222,000)
Other current assets........................................ (351,000) 153,000
Cash flow from increase (decrease) in operating liabilities:
Accounts payable............................................ (875,000) (1,033,000)
Accrued salaries and wages.................................. 173,000 326,000
Hospital and medical claims payable......................... 392,000 449,000
Due to affiliate............................................ (122,000) 507,000
Other current liabilities................................... (492,000) 42,000
----------- -----------
Total adjustments................................................ (266,000) 1,153,000
----------- -----------
Net cash used in operating activities............................ (1,323,000) (573,000)
----------- -----------

CASH FLOWS FROM DISCONTINUED OPERATION ACTIVITIES
Net loss from discontinued operation............................. -- (1,269,000)
Adjustments to reconcile net loss from discontinued operation
to net cash used in discontinued operation:
Depreciation and amortization................................. -- 100,000
(Increase) decrease in current assets of
discontinued operation....................................... 1,056,000 233,000
(Increase) decrease in other assets of
discontinued operation....................................... (391,000) (1,257,000)
Increase (decrease) in current liabilities of
discontinued operation....................................... 920,000 759,000
(Decrease) in reserve for operating loss from
discontinued operation....................................... (1,830,000) --
----------- -----------
Total adjustments................................................ (245,000) (165,000)
----------- -----------
Net cash used in discontinued operation.......................... (245,000) (1,434,000)
----------- -----------

See accompanying notes.

RAMSAY MANAGED CARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)

NINE MONTHS ENDED
MARCH 31 MARCH 31
1997 1996 (A)
------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds received in anticipation of sale
of discontinued HMO operation........................ 4,350,000 --
Expenditures for property and equipment, net.......... (94,000) (290,000)
Goodwill, pre-opening and development costs........... (759,000) (430,000)
Other non-current assets.............................. (15,000) 213,000
----------- -----------
Net cash (used in) provided by investing activities... 3,482,000 (507,000)
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Payments on debt...................................... (3,353,000) (915,000)
Repayment on note receivable to purchase
common stock......................................... -- 19,000
Borrowings from affiliate............................. 2,800,000 --
Issuance of common stock.............................. 7,000 30,000
Issuance of preferred stock........................... 545,000 --
----------- -----------
Net cash used in financing activities................. (1,000) (866,000)
----------- -----------
Net (decrease) increase in cash and cash equivalents.. 1,913,000 (3,380,000)
Cash and cash equivalents at beginning of period...... 228,000 3,495,000
----------- -----------
Cash and cash equivalents at end of period............ $ 2,141,000 $ 115,000
=========== ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid (received) during the period for:
Interest............................................. $ 235,000 $ 324,000
=========== ===========
Income taxes......................................... $ (152,000) $ (117,000)
=========== ===========

(a) Certain amounts for the nine months ended March 31, 1996 have been
reclassified to reflect the Company's discontinued HMO operation.

See accompanying notes.

RAMSAY MANAGED CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1997

NOTE 1.

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-B. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation of the interim information are of
a normal recurring nature and have been included. Ramsay Managed Care, Inc.'s
(the "Company") business is seasonal in nature and subject to general economic
conditions and other factors. Accordingly, operating results for the quarter
and nine months ended March 31, 1997 are not necessarily indicative of the
results that may be expected for the year. For further information, refer to
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended June 30, 1996.

The Company was incorporated in the State of Delaware in July 1993, and
commenced operations with the acquisition of Florida Psychiatric Management,
Inc. ("FPM") on October 31, 1993.

Certain amounts for the quarter and nine months ended March 31, 1996 have
been reclassified to reflect the Company's discontinued HMO operation.

NOTE 2.

As of October 30, 1996, the Company entered into a definitive agreement to
sell its discontinued HMO operation to an established healthcare provider (see
"Item 5. - Other Information" below). The closing of the sale was subject to
regulatory approvals, third party consents and other customary closing
conditions. During the quarter, the Company received all necessary consents
and the sale of the Company's discontinued HMO operation was completed on
April 1, 1997. Accordingly, the assets and liabilities of the discontinued
HMO operation will be removed from the Company's books in the fourth fiscal
quarter.

The Company believes that its provision for loss on the sale of the
discontinued HMO operation that was recorded for the year ended June 30,
1996, is adequate.

On March 31, 1997, the Company received the proceeds related to the sale,
totalling $4,350,000, in anticipation of the closing and, in order to effect
the closing on April 1, 1997, immediately applied $2,285,000 to its
outstanding indebtedness with First Union National Bank of Florida (see Note
4). Of the above-mentioned proceeds, $350,000 is

being held in escrow for 180 days from the closing securing the
representations and warranties of the agreement in accordance with the terms
of the sale. Given that the sale was not effective until April 1, 1997, the
total amount received is recorded as other current liabilities in the
accompanying March 31, 1997 balance sheet.

NOTE 3.

As previously announced, on October 1, 1996, the Company and Ramsay Health
Care, Inc. ("RHCI") entered into an Agreement and Plan of Merger providing for
the merger of the Company into a wholly owned subsidiary of RHCI. Following
the merger, all amounts owed to RHCI by the Company will become an
intercompany payable and receivable between the Company and RHCI,
respectively.

The registration statement filed by RHCI in connection with the merger was
declared effective by the Securities and Exchange Commission on March 25, 1997
and the stockholders of both companies approved the merger on April 18, 1997.
In May, 1997, banks supporting RHCI's credit facility agreed to consent to the
merger subject to certain conditions including the condition that, subsequent
to the merger, the Company is maintained as a separate subsidiary and RHCI
does not make any loans, payments, advances or equity contributions or
investments in the Company. In addition, the terms and conditions of the
required consent to the merger by the holders of RHCI's senior secured and
subordinated secured notes have not yet been determined. Although there can
be no assurances, RHCI has represented to the Company that it expects the
conditions established by its banks will be met, it will reach agreement on
the terms and conditions required by its other holders of debt and,
thereafter, the merger will be effective.

NOTE 4.

The Company's long-term debt consists of the following:

MARCH 31 JUNE 30
1997 1996
----------- -----------

8% unsecured promissory note issued
to Ramsay Health Care, Inc. payable
in installments through June 30, 2001.......... $6,000,000 $6,000,000
Variable rate, 3-year secured term
loan to First Union National Bank
of Florida, Inc................................ -- 1,111,000
8.25% 3-year secured promissory note issued in
connection with the acquisition of HDI,
payable monthly, through June 30, 1997......... 83,000 333,000
Additional secured term loan to First Union
National Bank of Florida, Inc.................. -- 92,000
---------- ----------
6,083,000 7,536,000
Less amounts due within one year................ 1,495,000 2,334,000
---------- ----------
$4,588,000 $5,202,000
========== ==========

On March 31, 1997 the Company repaid its indebtedness with First Union
National Bank of Florida (the "Bank") including a $1,500,000 Revolving Master
Line of Credit (the "Master Revolver"), a $1,667,000 three year variable rate
secured term loan and a $100,000 three year secured term loan. The amount
repaid, including all outstanding interest and charges, totalled $2,285,000.
As a result of this repayment, all security held by the Bank, including the
stock of the Company's discontinued HMO operation, was released.

In connection with the Company's acquisition of certain assets of Human
Dynamics Institute ("HDI"), through a wholly owned subsidiary, FPMBH of
Arizona, Inc., the Company issued a promissory note in the principal amount of
$1,000,000 (the "HDI Note") to Phoenix South Community Mental Health Centers
("Phoenix South"). Interest accrues on the HDI Note at a fixed rate of 8.25%
per annum and is payable monthly in arrears, together with equal installments
of principal, until the HDI Note matures on June 30, 1997. The HDI Note is
secured pursuant to a Stock Pledge Agreement dated June 30, 1994, pursuant to
which Phoenix South has a first priority lien on all of the common stock of
FPMBH of Arizona, Inc.

As of March 31, 1997, total net cash advances made by RHCI to or on behalf
of the Company, including for purposes of partial funding acquisitions and for
working capital and other corporate purposes, totalled $7,798,000. Of this
amount, $6,000,000 is represented by an unsecured, interest bearing (8%)
subordinated promissory note due to RHCI and issued on October 25, 1994. The
remaining amount, which is also unsecured, included $720,000 of accrued
interest on the promissory note since October 1, 1995 and $1,078,000 of
additional amounts paid by RHCI to the Company for certain administrative
services (the "Additional Amount"). Of the $6,000,000 due on the subordinated
promissory note, approximately $1,412,000 is due on or before March 31, 1998,
and the remainder is payable in 13 quarterly installments of approximately
$353,000, beginning June 30, 1998. RHCI has agreed that the payment of
interest on the subordinated promissory note for the period October 1, 1995
through March 31, 1998 will not be required until after April 1, 1998, all on
terms and conditions mutually agreed upon by the Company and RHCI. On April
4, 1997, the Company paid RHCI $750,000, which was applied by RHCI against the
Additional Amount.

As discussed in Note 3, above, the Company and RHCI entered into an
Agreement and Plan of Merger providing for the merger of the Company into a
wholly owned subsidiary of RHCI. Following the merger, all amounts owed to
RHCI by the Company will become an intercompany receivable and payable between
RHCI and the Company, respectively.

NOTE 5.

In September, 1996, the Company entered into a loan facility agreement with
Paul Ramsay Hospitals Pty. Limited ("Ramsay Hospitals"), a corporate affiliate
of Paul J. Ramsay, the Chairman of the Board of the Company, pursuant to
which, in consideration for a $100,000 facility fee and an interest rate on
outstanding advances of 15% per annum, the affiliate would advance the Company
up to $2,000,000 for working

capital and general corporate purposes. On March 7, 1997, Ramsay Hospitals
agreed, in consideration for a $150,000 facility fee and an interest rate on
outstanding advances of 15% per annum, to increase this loan facility to
$5,000,000, the additional proceeds of which would be available only to repay
amounts owed by the Company to RHCI.

As of March 31, 1997, $2,000,000 has been advanced under this facility.
Also, on April 4, 1997, an additional $750,000 was advanced under this
facility which was paid to RHCI and applied against the Additional Amount
owed.

NOTE 6.

The provision for income taxes included in the consolidated statements of
operations differs from the amounts computed by applying the normal statutory
rates to income before income taxes because such provision includes (a)
amounts reportable as income for federal income tax purposes which are not
income for financial reporting purposes, (b) amounts deducted for financial
reporting purposes that are not allowable deductions for Federal and state
income tax purposes and (c) amounts for state income taxes applicable to
profitable subsidiaries which do not utilize the operating losses generated by
unprofitable subsidiaries to offset taxable income. At March 31, 1997, the
Company has estimated operating loss carry forwards of approximately $5.0
million for Federal income tax purposes, which expire from 2005 to 2010 and
approximately $6.6 million for state income tax purposes, which expire from
2005 to 2010, and are available to reduce future income taxes.

RAMSAY MANAGED CARE, INC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The Company provides comprehensive managed health care services
ranging from benefit design, case management and claims processing to fully
capitated (at risk) mental health care treatment. The behavioral health
services consist of the management of mental health services and substance
abuse care on behalf of self-insured employers, health maintenance
organizations, insurance companies and government agencies in various
states. The Company not only manages such care but also provides, where
appropriate, the delivery of care through integrated systems involving
clinics and other providers.

At March 31, 1997, the Company operated in 11 states and has a
strategy to consolidate its behavioral health operations through
development and joint venture efforts in various regions of the country in
which it currently operates.

On November 5, 1996, the Company announced that it had entered
into an agreement for the sale of its discontinued HMO operation. On April
1, 1997, this sale was completed (see Note 2 in "Item 1. Financial
Statements" above and "Item 5. Other Information" below).

In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company notes that this
Quarterly Report on Form 10-QSB contains forward-looking statements about
the Company. The Company is hereby setting forth cautionary statements
identifying important factors that may cause the Company's actual results
or financial condition to differ materially from those set forth in any
forward-looking statement. Some of the most significant factors include
(i) the sale of the Company's HMO operation is challenged, (ii) the effects
of competition on the Company's business, including the loss of a major
customer or the loss of members of its provider network of physicians,
hospitals, and other healthcare providers, and (iii) statutory, regulatory
and administrative changes or interpretations of existing statutory and
regulatory provisions affecting the conduct of the Company's businesses, or
the failure to obtain exemptions from the existing statutory or regulatory
provisions. Accordingly, there can be no assurance that any anticipated
future results or financial condition will be achieved.

RAMSAY MANAGED CARE, INC.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated,
certain items of the Company's consolidated statements of operations as a
percentage of the Company's net revenues from continuing operations.

PERCENTAGE OF NET REVENUE
QUARTER ENDED NINE MONTHS ENDED
MARCH 31 MARCH 31
1997 1996 1997 1996
------- ------- -------- ---------

Total revenues......................... 100.0 % 100.0 % 100.0 % 100.0 %
------ ------ ------ -------
Operating expenses:
Contracted provider services........... 35.0 % 35.4 % 36.3 % 35.3 %
Salaries, wages and benefits........... 37.3 % 36.6 % 39.1 % 42.0 %
Other operating expenses............... 19.8 % 23.6 % 20.1 % 24.0 %
Depreciation and amortization.......... 4.9 % 5.6 % 5.6 % 6.0 %
Interest and other financing charges... 3.8 % 3.2 % 3.8 % 3.6 %
------ ------ ------ -------
Total operating expenses............... 100.8 % 104.4 % 104.9 % 110.9 %
------ ------ ------ -------

Income (loss) before income taxes and
extraordinary items................... (0.8)% (4.4)% (4.9) % (10.9) %
====== ====== ====== =======

QUARTER ENDED MARCH 31, 1997
COMPARED TO QUARTER ENDED MARCH 31, 1996

Total revenues in the quarter ended March 31, 1997, were $6.23
million, compared to $5.75 million in the comparable quarter of the prior
fiscal year. The increase in net revenues is attributable mainly through
increased clinical and other revenues as a result of new clinics opened
during calendar years 1995 and 1996, as well as an increase in investment
income.

Contracted provider services expenses increased to $2.19 million in
the March 1997 quarter compared to $2.04 million in the March 1996 quarter.
This increase shows a slight increase in utilization of behavioral health
services on managed care contracts held.

Other operating expenses, comprising salaries and wages, and general
and administrative expenses increased from $3.47 million to $3.57 million,
but decreased as a percentage of total revenues, reflecting increased
efficiencies of the Company's managed behavioral health division.

The Company recorded a loss from continuing operations before income
taxes and an extraordinary item of $50,000 compared to a loss from
continuing operations before income taxes of $252,000 incurred in the same
quarter of the prior year. The Company's results continue to be impacted by
corporate costs generally associated with

RAMSAY MANAGED CARE, INC.

being a public company, increased interest expense, as well as continuing
start up-costs in the clinical operations of the Company.

In the March 1997 quarter, the Company recorded an extraordinary item
totalling $176,000 related to the write-off of unamortized loan costs on
the early extinguishment of debt.

At June 30, 1996, the Company established reserves for future losses
expected to be incurred by its discontinued HMO operation and an expected
loss on sale of its discontinued HMO operation. During the quarter ended
March 31, 1997, losses incurred by the discontinued HMO operation and
charged against these reserves totalled $595,000. In the prior year
comparable period, the discontinued HMO operation recorded a loss of
$556,000.

NINE MONTHS ENDED MARCH 31, 1997
COMPARED TO NINE MONTHS ENDED MARCH 31, 1996

Total revenues in the nine months ended March 31, 1997, were $17.88
million compared to $15.75 million in the comparable nine months of the
prior fiscal year. The increase in net revenues is attributable to new or
expanded managed care contracts obtained, particularly in North Carolina
effective October, 1995 and Texas effective September, 1996. Clinical fee
for service and other revenues increased as a result of new clinics opened
during calendar years 1995 and 1996 as well as an increase in investment
income.

Contracted provider services expenses increased to $6.5 million in
the nine months ended March 31, 1997, compared to $5.56 million in the
prior year period. This increase is reflective of an increase in
utilization of behavioral health services on managed care contracts held
between periods.

Other operating expenses, comprising salaries and wages, and general
and administrative expenses increased from $10.40 million to $10.59 million
but decreased as a percentage of total revenues, reflecting the increased
efficiencies of the Company's managed behavioral health division given its
expanded business base.

The Company recorded a loss from continuing operations before income
taxes and extraordinary item of $881,000 compared to a loss from continuing
operations before income taxes and extraordinary item of $1,726,000
incurred in the same period in the prior year. The Company's results
continue to be impacted by corporate costs generally associated with being
a public company, increased interest and amortization expenses, as well as
continuing start up-costs in the clinical operations of the Company.

RAMSAY MANAGED CARE, INC.

In the period, the Company recorded an extraordinary item totalling
$176,000 related to the write-off of unamortized loan costs on the early
extinguishment of debt.

At June 30, 1996, the Company established reserves for future losses
expected to be incurred by its discontinued HMO operation and an expected
loss on sale of its discontinued HMO operation. For the nine months ended
March 31, 1997, losses incurred by the discontinued HMO operation and
charged against these reserves totalled $2,253,000. In the prior year
comparable period, the discontinued HMO operation recorded a loss of
$1,269,000.

LIQUIDITY AND CAPITAL RESOURCES

General. In connection with the distribution of the Company's
common stock on April 24, 1995 by Ramsay Health Care, Inc. ("RHCI") to its
shareholders (the "Distribution"), the Company and RHCI entered into the
Second Amended and Restated Distribution Agreement (the "Distribution
Agreement"). Pursuant to the Distribution Agreement, each of RHCI and the
Company has agreed to pay to the other the net amount of all outstanding
intercompany receivables and payables as of April 24, 1995 (other than
those evidenced by the $6 million unsecured subordinated promissory note
issued by the Company to RHCI representing certain advances made by RHCI to
or on behalf of the Company (the "Subordinated Promissory Note") which are
governed by the terms thereof). As of March 31, 1997, the Company owed
RHCI approximately $1,078,000 in relation to these items, and in addition,
accrued interest on the Subordinated Promissory Note of $720,000. See the
discussion below under "Indebtedness" concerning RHCI's agreement not to
require repayment of net cash advances and accrued interest on the
Subordinated Promissory Note until after April 1, 1998.

During the nine months ended March 31, 1997 and 1996, the Company's
continuing operations used net cash of approximately $1.3 million and $0.6
million, respectively. The Company anticipates that its sources of
liquidity during fiscal 1997 primarily will be funds from the sale of its
discontinued HMO operation, the proceeds from a $3 million private
placement of preferred stock discussed under "Indebtedness" below and
advances from an affiliate discussed under "Indebtedness" below. See also
"Item 5 -Other Information" below.

The Company expects to use its sources of liquidity to pay down
indebtedness as discussed under "Indebtedness" below, for working capital
and other general corporate purposes, including for the payment of costs
and expenses discussed above and costs associated with the continued
development of its managed mental healthcare business.

RAMSAY MANAGED CARE, INC.

As discussed below (see "Indebtedness") the Company believes that,
should the merger with RHCI be delayed extensively, it may require
additional funds for working capital and general corporate purposes.

Indebtedness. On March 31, 1997, the Company repaid all of its
indebtedness with First Union National Bank of Florida (the "Bank")
including its $1,500,000 Revolving Master Line of Credit (the "Master
Revolver"), the $1,667,000 three year variable rate secured term loan and
the $100,000 three year secured term loan. The amount repaid, including
all outstanding interest and charges, totaled $2,285,000.

In connection with the Company's acquisition of the assets of HDI,
through a wholly owned subsidiary FPMBH of Arizona, Inc., the Company
issued a promissory note in the principal amount of $1,000,000 (the "HDI
Note") to Phoenix South Community Mental Health Centers ("Phoenix South").
Interest accrues on the HDI Note at a fixed rate of 8.25% per annum and is
payable monthly in arrears, together with equal installments of principal,
until the HDI Note matures on June 30, 1997. The HDI Note is secured
pursuant to a Stock Pledge Agreement dated June 30, 1994, pursuant to which
Phoenix South has a first priority lien on all of the common stock of FPMBH
of Arizona, Inc. (f/k/a Ramsay HDI).

In addition, in connection with the Distribution of the Company from
RHCI, the Company issued to RHCI the Subordinated Promissory Note in the
principal amount of $6,000,000, evidencing certain funds advanced to or on
behalf of the Company by RHCI, including in connection with the acquisition
of certain acquired businesses. Prior to its issuance, the amounts
evidenced by the Subordinated Promissory Note were recorded as intercompany
indebtedness between the Company and RHCI. Interest accrues on the
Subordinated Promissory Note at an annual fixed rate of 8%.

The Subordinated Promissory Note is unsecured and is subordinated
and junior in right of payment to all indebtedness of the Company and its
subsidiaries incurred in connection with the acquisition of HDI and future
acquisitions of other managed mental health care services businesses, and
any other Senior Indebtedness (as defined in the Subordinated Promissory
Note), including any bank indebtedness of the Company or its subsidiaries.
At the present time, Senior Indebtedness outstanding is comprised of the
HDI Note.

RAMSAY MANAGED CARE, INC.

Subordinated Promissory Note, approximately $1,412,000 is due on or before
March 31, 1998 and the remainder is payable in 13 quarterly installments of
approximately $353,000, beginning June 30, 1998. RHCI has agreed that the
payment of interest on the Subordinated Promissory Note for the period
October 1, 1995 through March 31, 1998 will not be required until after
April 1, 1998, all on terms and conditions mutually agreed upon by the
Company and RHCI. On April 4, 1997, the Company paid RHCI $750,000, which
was applied by RHCI against the Additional Amount.

If the Merger between RHCI and the Company as discussed in Note 3
above, is not consummated, the Company will attempt to satisfy its
obligations to RHCI by (a) paying certain of the amounts owed to RHCI with
any remaining proceeds from the sale of Apex and internally generated cash,
(b) seeking a renegotiation of the terms associated with the amounts owed
to RHCI or (c) exploring other financing options to be determined.

In June 1996, at the request of the Company, Ramsay Hospitals agreed
to loan the Company up to $3,000,000 for working capital and general
corporate purposes. On June 28, 1996, the Company borrowed $1,600,000,
which was evidenced by a demand promissory note (the "First Hospitals
Note") payable to Ramsay Hospitals with an interest rate of 12% per annum.
In addition, on August 7 and August 8, 1996, the Company borrowed an
aggregate of $800,000, which was evidenced by a demand promissory note (the
"Second Hospitals Note") payable to Ramsay Hospitals in the principal
amount of the lesser of the amount borrowed or $1,400,000, with an interest
rate of 12% per annum. On September 10, 1996, as described below, the First
Hospitals Note and the Second Hospitals Note were repaid and cancelled.

On September 10, 1996, the Company entered into a stock purchase
agreement with Ramsay Hospitals, pursuant to which Ramsay Hospitals
purchased 100,000 shares of Series 1996 Convertible Preferred Stock at a
purchase price of $3,000,000. The purchase price was paid by (i) offset
against the outstanding principal amounts under the First Hospitals Note
and the Second Hospitals Note ($1,600,000 and $800,000, respectively), (ii)
offset against the aggregate accrued unpaid interest on such notes through
September 10, 1996 ($54,667) and (iii) $545,333 in cash. In connection
with the purchase of the 100,000 shares of Series 1996 Convertible
Preferred Stock by Ramsay Hospitals, the Company issued warrants to Ramsay
Hospitals to purchase 300,000 shares of common stock, at an exercise price
of $1.00 per share.

In September, 1996, the Company entered into a loan facility
agreement with Ramsay Hospitals, pursuant to which, in consideration for a
$100,000 facility fee and an interest rate on outstanding advances of 15%
per annum, Ramsay Hospitals would advance the Company up to $2,000,000 for

RAMSAY MANAGED CARE, INC.

working capital and general corporate purposes. On March 7, 1997, Ramsay
Hospitals agreed, in consideration for a $150,000 facility fee and an
interest rate on outstanding advances of 15% per annum, to increase this
loan facility to $5,000,000, the additional proceeds of which would be
available only to repay amounts owed by the Company to RHCI.

As of March 31, 1997, $2,000,000 has been advanced under this
facility. Also, on April 4, 1997, an additional $750,000 was advanced
under this facility which was paid to RHCI and applied against the
Additional Amount owed.

The Company may be required to raise additional funds for working
capital, general corporate purposes, development and growth beyond its
immediate plans and/or to remain competitive with its larger competitors.
Any additional equity financing may result in substantial dilution to the
stockholders of the Company. Except for the financing provided by the
above mentioned affiliate commitment, the Company has made no arrangements
to obtain any additional debt financing, and there can be no assurance that
the Company will be able to obtain any required additional funds.

RAMSAY MANAGED CARE, INC.

PART II - OTHER INFORMATION

ITEM 5. OTHER INFORMATION

The Company sold all of the issued and outstanding shares of common
stock, $.01 par value (the "Apex Shares"), of Apex Healthcare, Inc.
("Apex"), a Delaware corporation and wholly owned subsidiary of the
Company, to RoTech Medical Corporation ("RoTech"), a Delaware corporation,
pursuant to a Stock Purchase Agreement dated as of October 30, 1996. Apex
is engaged in the business of operating HMOs and related businesses in the
states of Alabama, Louisiana and Mississippi. The purchase price for the
Apex Shares was $4,350,000. The determination of the consideration for the
sale of Apex Shares was based on negotiations between the Company and
RoTech.

During the quarter, the Company received all necessary consents and
the sale of the Company's discontinued HMO operation was completed on April
1, 1997. (See Note 2 in "Item 1. Financial Statements" above).

RAMSAY MANAGED CARE, INC.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

The exhibits required to be filed as part of this Quarterly Report
on Form 10-QSB are as follows:

Exhibit 11 Computation of Net Income (Loss) per Share

Exhibit 27 Financial Data Schedule

(b) Current Reports on Form 8-K

There were no Current Reports on Form 8-K filed with the
Commission during the quarter ended March 31, 1997.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereupon duly authorized.

RAMSAY MANAGED CARE, INC.
Registrant

/s/ Warwick D. Syphers
-----------------------------------
Warwick D. Syphers
Chief Financial Officer

Date: May 20, 1997