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                                                                   Exhibit 10.16


                                 AMENDMENT NO. 3
                  TO LOAN AND SECURITY AGREEMENT ("AGREEMENT")
                          DATED JANUARY 31, 1996 AMONG
             AMERICAN SHARED-CURACARE AND CURACARE, INC. (BORROWER),
                AMERICAN SHARED HOSPITAL SERVICES ("GUARANTOR"),
                 ERNEST A. BATES, M.D. ("INDIVIDUAL GUARANTOR"),
              AND DVI BUSINESS CREDIT RECEIVABLES CORP. ("LENDER")

FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to amend the Agreement as follows:

1)  The Agreement shall be renewed for two (2) years effective May 31, 1997.
    Upon execution hereof, Borrower shall pay Lender a renewal fee equal to 1%
    of the Commitment Amount.

2)  Section 2.8 "Interest on the Loans" shall be amended and replaced in its
    entirety with the following:

    "Interest on the Loans": All advances shall bear interest on the unpaid
    principal amount thereof from the date made until paid in full at a
    fluctuating rate equal to the Base Rate plus three and three quarter percent
    (3.75%). The outstanding principal balance of all other Obligations shall
    bear interest from the date such Obligations are due until paid in full at a
    fluctuating rate equal to the Base Rate plus three and three quarter percent
    (3.75%). Interest accrued but not paid pursuant to Section 2.5 shall be
    treated as an Advance if not otherwise paid within five (5) days of the end
    of the month in which it accrues.

Any provision in Amendment No. 3 ("Amendment") hereof that may be contrary to
any provision of the Agreement shall prevail and override the Agreement. Except
as expressly set forth herein, all other provisions of the Agreement shall
remain in full force and effect. Both parties warrant to each other that this
Amendment has been authorized and duly executed and is binding on both parties
hereto as of 30th day of April, 1997.

LENDER:
DVI BUSINESS CREDIT RECEIVABLES CORP.

By: /s/ Cynthia J. Cohn
   ---------------------
Name:  Cynthia J. Cohn

Title:  Executive Vice President

BORROWER:                                          BORROWER:
AMERICAN SHARED-CURACARE                           CURACARE, INC.
A CALIFORNIA PARTNERSHIP

By: /s/ Ernest A. Bates                            By: /s/ Ernest A. Bates
   --------------------------                         --------------------------
Name: Ernest A. Bates, M.D.                        Name: Ernest A. Bates, M.D.

Title: Chairman & CEO, American Shared             Title: President
Hospital Services, general partner

The undersigned acknowledges that DVI has no obligation to provide it with
notice of, or to obtain its consent to, the terms of this Amendment to Loan and
Security Agreement. The undersigned nevertheless acknowledges and agrees to the
terms and conditions of this Amendment and acknowledges that its Guaranty
remains fully valid, binding, and enforceable against it in accordance with its
terms.

GUARANTOR:                                    GUARANTOR:
AMERICAN SHARED HOSPITAL SERVICES             ERNEST A. BATES, M.D., INDIVIDUAL

By: /s/ Ernest A. Bates                       By:  /s/ Ernest A. Bates
   --------------------------                    --------------------------
Print Name: Ernest A. Bates, M.D.             Print Name: Ernest A. Bates, M.D.,
                                                          an Individual
Title: Chairman & CEO

Date: April 23, 1997                          Date: April 23, 1997