UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                       ----------------------------------

                                    FORM 10-Q

             [X] Quarterly Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934
                For the quarterly period ended September 30, 1996

            [ ] Transition Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934
                         For the transition period from
                                _____  to  _____


                         Commission File Number: 0-22392
                              --------------------

                          PRIME MEDICAL SERVICES, INC.
             (Exact name of registrant as specified in its charter)

             DELAWARE                             74-2652727
(State or other jurisdiction of                (I.R.S. Employer
 incorporation or organization)               Identification No.)

               1301 Capital of Texas Highway, Austin, Texas 78746
               (Address of principal executive offices) (Zip Code)

                                 (512) 328-2892
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

YES X     NO
   ----       ----

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common equity, as of the latest practicable date.



                                             Number of Shares Outstanding at
    Title of Each Class                              October 31, 1996
    -------------------                      -------------------------------
Common Stock, $.01 par value                             19,078,933









<PAGE>















                                     PART I


                              FINANCIAL INFORMATION







































                                       -2-


<PAGE>



                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

($ in thousands, except per share data)
<TABLE>
<CAPTION>
                                                           Three Months Ended                 Nine Months Ended
                                                              September  30,                    September 30,
                                                       1996                1995             1996              1995
                                                      -----               ------           ------            -----
<S>                                               <C>              <C>               <C>               <C>
Fee revenue:
     Lithotripsy:
          Fee revenues                            $        22,118  $         4,810   $        45,231   $        12,964
          Management fees                                   1,485              656             3,099               849
          Equity income                                       496              459             1,247               894
                                                  ---------------  ---------------   ---------------   ---------------
                                                           24,099            5,925            49,577            14,707
     Cardiac                                                  201              233               642               856
                                                  ---------------  ---------------   ---------------   ---------------
                                                           24,300            6,158            50,219            15,563
                                                  ---------------  ---------------   ---------------   ---------------
Costs and expenses:
     Cost of services and general
     and administrative expense
          Lithotripsy                                       6,278            1,236            12,956             3,552
          Cardiac                                             162              734               487             1,414
          Corporate                                         1,363              643             3,324             1,789
                                                  ---------------  ---------------   ---------------   ---------------
                                                            7,803            2,613            16,767             6,755

     Depreciation and amortization                          2,286              705             5,286             2,032
                                                  ---------------  ---------------   ---------------   ---------------
                                                           10,089            3,318            22,053             8,787
                                                  ---------------  ---------------   ---------------   ---------------

Operating income                                           14,211            2,840            28,166             6,776

Other income (deductions):
     Interest and dividends                                    35               33                86               113
     Interest expense                                      (1,922)            (265)           (4,211)             (776)
     Loan fees and stock offering costs                       --               --             (3,535)              --
     Other, net                                               200              339               398               378
                                                  ---------------  ---------------   ---------------   ---------------
                                                           (1,687)             107            (7,262)             (285)
                                                  ---------------  ---------------   ---------------   ---------------
Income before provision for income taxes
     and minority interest                                 12,524            2,947            20,904             6,491

Minority interest in consolidated income                    7,716              430            13,958               892

Provision for income taxes                                    791              252             1,376               454
                                                  ---------------  ---------------   ---------------   ---------------

Net income                                        $         4,017  $         2,265   $         5,570   $         5,145
                                                  ===============  ===============   ===============   ===============

Primary earnings per share:
     Net income                                   $          0.21  $          0.15   $          0.31   $          0.34
                                                  ===============  ===============   ===============   ===============

     Weighted average shares outstanding                   19,515           15,195            18,120            15,013
                                                  ===============  ===============   ===============   ===============

Fully diluted earnings per share:
     Net income                                   $          0.21  $          0.15   $          0.31   $          0.34
                                                  ===============  ===============   ===============   ===============

     Weighted average shares outstanding                   19,515           15,308            18,478            15,177
                                                  ===============  ===============   ===============   ===============

</TABLE>


                 See notes to consolidated financial statements.
                                       -3-



<PAGE>




                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


($ in thousands)


                                            September 30,     December 31,
                                                1996              1995
                                           --------------    --------------

ASSETS

Current assets:
     Cash                                  $       10,456    $        4,692
     Notes receivable                                  10               181
     Accounts receivable, less allowance
       for doubtful accounts of $332 in
       1996 and $232 in 1995                       17,887             4,109
     Other receivables                              1,853               183
     Deferred income taxes                            803               770
     Prepaid expenses and
       other current assets                           833             1,003
                                           --------------    --------------

         Total current assets                      31,842            10,938

Property and equipment:
     Equipment, furniture and fixtures             20,876             7,867
     Leasehold improvements                           113               113
                                           --------------    --------------

                                                   20,989             7,980

Less accumulated depreciation and
     amortization                                  (6,135)           (3,272)
                                           --------------    --------------

         Property and equipment, net               14,854             4,708


Equity investments                                  7,151             7,623
Goodwill, at cost, net of amortization            132,941            52,679
Other noncurrent assets                             1,822             1,679
                                           --------------    --------------

                                           $      188,610    $       77,627
                                           ==============    ==============










          See accompanying notes to consolidated financial statements.
                                       -4-


<PAGE>



                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (continued)


($ in thousands)

                                            September 30,     December 31,
                                                1996              1995
                                           --------------    --------------

LIABILITIES:

Current Liabilities:

     Current portion of long-term debt     $       10,578    $        3,043
     Accounts payable                               3,554             4,814
     Accrued expenses                               5,158             2,862
                                           --------------    --------------

         Total current liabilities                 19,290            10,719

Long-term debt, net of current portion             71,509            22,323
Deferred income taxes                               5,368             1,212
                                           --------------    --------------

         Total liabilities                         96,167            34,254

Minority interest                                  18,588               623

STOCKHOLDERS' EQUITY:

Preferred stock, $.01 par value,
     1,000,000 shares authorized;
     none outstanding                                --                --
Common stock, $.01 par value,
     40,000,000 shares authorized;
     19,070,600 issued in 1996 and
     14,729,663 issued in 1995                        191               147
Capital in excess of par value                     84,090            58,700
Accumulated deficit                               (10,426)          (15,996)
Treasury stock, at cost,
     30,000 shares at December 31,1995                --               (101)
                                           --------------    --------------

         Total stockholders' equity                73,855            42,750
                                           --------------    --------------

                                           $      188,610    $       77,627
                                           ==============    ==============












          See accompanying notes to consolidated financial statements.
                                       -5-




<PAGE>



                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

($ in thousands)


                                             Nine Months Ended September 30,
                                                 1996              1995
                                           --------------    --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
     Fee and other revenue collected       $       49,276    $       14,297
     Cash paid to employees, suppliers
        of goods and others                       (20,069)           (4,604)
     Interest received                                 86               116
     Interest paid                                 (3,296)             (922)
     Income taxes paid                               (702)             (232)
                                           --------------    --------------
          Net cash provided by
          operating activities                     25,295             8,655
                                           --------------    --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of lithotripter operations          (63,884)           (7,087)
     Deferred payments on
        lithotripter entities                      (3,387)             --
     Purchase of equipment and
        leasehold improvements                     (1,071)             (436)
     Proceeds from sales of equipment                --                  17
     Distributions from investments                 1,751               679
     Sale of investment in American
          Physicians Service Group,  Inc.            --               2,050
     Other                                           (172)             (138)
                                           --------------    --------------
          Net cash (used in)
          investing activities                    (66,763)           (4,915)
                                           --------------    --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Payments on notes payable,
        exclusive of interest                     (12,696)           (8,346)
     Borrowings on notes payable                   72,000             3,500
     Distributions to minority interest           (12,409)             (714)
     Exercise of stock options                        337                39
                                           --------------    --------------
          Net cash provided by (used in)
          financing activities                     47,232            (5,521)
                                           --------------    --------------

NET INCREASE (DECREASE) IN CASH, CASH
     EQUIVALENTS AND CASH, PLEDGED                  5,764            (1,781)

Cash, cash equivalents and cash
     pledged, beginning of period                   4,692             2,912
                                           --------------    --------------

Cash, cash equivalents and cash
     pledged, end of period                $       10,456    $        1,131
                                           ==============    ==============







                 See notes to consolidated financial statements
                                       -6-


<PAGE>



                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

($ in thousands)


                                             Nine Months Ended September 30,
                                                1996              1995
                                           --------------    --------------
Reconciliation of net income to
  cash provided by operating activities
     Net income                            $        5,570    $        5,145

Adjustments to reconcile  net  income
  to  cash provided  by
  operating activities:
     Depreciation and amortization                  5,286             2,032
     Provision for uncollectible accounts             290               754
     Equity in earnings of affiliates              (1,253)             (896)
     Minority interest in consolidated income      13,957               892
     Writeoff loan fees                               696              --
     Provision for deferred income taxes              633              --
     Other                                           --                (264)

Changes  in  operating  assets  and  
  liabilities,  net  of  effect  
  of  purchase transactions:
     Notes receivable                                 179             1,311
     Accounts receivable                             (228)             (566)
     Other receivables                                163               419
     Other current assets                             700                39
     Accounts payable                                (485)             (277)
     Accrued expenses                                (213)               66
                                           --------------    --------------

          Total adjustments                        19,725             3,510
                                           --------------    --------------

          Net cash provided by
          operating activities             $       25,295    $        8,655
                                           ==============    ==============

















                 See notes to consolidated financial statements
                                       -7-


<PAGE>



                          PRIME MEDICAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996
                                   (Unaudited)

1.       General
         ------- 
The accompanying  unaudited consolidated financial statements have been prepared
in conformity  with the accounting  principles  stated in the audited  financial
statements  for the year ended  December  31, 1995 and  reflect all  adjustments
which are, in the opinion of  management,  necessary for a fair statement of the
financial  position as of September 30, 1996 and the results of  operations  for
the periods presented. These statements have not been audited or reviewed by the
Company's  independent  certified public accountants.  The operating results for
the  interim  periods  are not  necessarily  indicative  of results for the full
fiscal year.

The notes to consolidated financial statements appearing in the Company's Annual
Report  on Form  10-K  for the year  ended  December  31,  1995  filed  with the
Securities Exchange Commission should be read in conjunction with this Quarterly
Report on Form 10-Q.  There have been no significant  changes in the information
reported  in those  notes  other than from  normal  business  activities  of the
Company.


2.       Subsequent Events:
         ------------------
In October,  1996, the Company filed with the Securities and Exchange Commission
to register 2,265,240 shares of common stock held by certain shareholders.  None
of these  shareholders  are  affiliates  of the Company and the Company will not
receive any of the proceeds from the sale of these shares. The Company will bear
the expenses of the registration.

































                                       -8-


<PAGE>



                      Management's Discussion and Analysis
                           of Financial Condition and
                              Results of Operations





Results of Operations
---------------------
Revenues
---------
For  the  nine  months  ended  September  30,  1996,  total  revenues  increased
$34,656,000  (223%)  as  compared  to the same  period  in 1995.  Revenues  from
lithotripter   operations   increased  by  $34,870,000   primarily  due  to  the
acquisition  of (1) one  lithotripter  entity  that owned or managed  thirty-one
lithotripters  throughout  the U.S.  (2) one  lithotripter  entity that owned or
managed eight  lithotripters,  and (3) 70% interest in a lithotripter  operation
that operated one  lithotripter,  as of July 1, 1995.  In addition,  the Company
acquired  a  32.5%  interest  in a  lithotripter  operation  that  operated  one
lithotripter,  in June 1995.  Revenues from cardiac centers  decreased  $214,000
primarily due to four discontinued/sold cardiac centers.

For the  three  months  ended  September  30,  1996,  total  revenues  increased
$18,142,000  (295%)  as  compared  to the same  period  in 1995.  Revenues  from
lithotripter   operations   increased  by  $18,174,000   primarily  due  to  the
acquisitions discussed above.

Expenses
---------
For the nine months ended September 30, 1996, costs and expenses  decreased from
43% to 33% of revenues,  but  increased  $10,012,000  (148%) in absolute  terms,
compared  to the  same  period  in  1995.  Costs  of  services  associated  with
lithotripter  operations  increased $9,404,000 (265%) in absolute terms and from
24% to 26% of lithotripter revenues primarily due to the acquisitions  discussed
above. Cost of services associated with cardiac centers decreased $927,000 (66%)
primarily due to four  discontinued/sold  cardiac  centers.  Corporate  expenses
decreased  from 11% to 7% of revenues  as the  Company was able to  successfully
grow without  proportionately  adding  overhead.  Corporate  expenses  increased
$1,535,000 (86%) primarily due to the additional  corporate expenses  associated
with the acquisition  discussed above and the management incentive plans tied to
the performance of the Company.

For the three months ended September 30, 1996, costs and expenses decreased from
42% to 32% of  revenues,  but  increased  $5,190,000  (199%) in absolute  terms,
compared  to the  same  period  in  1995.  Costs  of  services  associated  with
lithotripter  operations  increased $5,042,000 (408%) in absolute terms and from
21% to 26% of lithotripter  revenues for the reasons  described  above.  Cost of
services  associated with cardiac centers decreased $572,000 (78%) primarily due
to one discontinued/sold cardiac center.  Corporate expenses decreased from 10%
to 6% of revenues,  and increased  $720,000 (112%) in absolute terms, due to the
reasons discussed above.

Other Income (Deductions)
-------------------------
For the nine  months  ended  September  30,  1996,  other  deductions  increased
$6,977,000 primarily due to (1) the Company wrote off $2,735,000 in fees paid to
lenders to obtain  financing,  and  $800,000 in fees  associated  with the stock
offering that was cancelled in August,  1996 and (2) interest expense  increased
$3,435,000  due to  $72,000,000  in new  borrowings  in 1996  primarily  for the
acquisition of the lithotripter entity in April, 1996.

For the three  months  ended  September  30, 1996,  other  deductions  increased
$1,794,000 primarily due to the reasons discussed above.







                                       -9-



<PAGE>





Liquidity and Capital Resources
-------------------------------
Cash was $10,456,900 and $4,692,000 at September 30, 1996 and December 31, 1995,
respectively.  Cash provided by operations  for the nine months ended  September
30, 1996 was  $25,295,000  compared to cash provided by operations  for the nine
months ended September 30, 1995 in the amount of $8,655,000.

Cash used in investing  activities for the nine months ended  September 30, 1996
was  $66,763,000  compared  to cash used in  investing  activities  for the nine
months ended September 30, 1995 in the amount of $4,915,000.  This was primarily
due to the  acquisition  of a  lithotripter  entity,  that  owns or  manages  31
lithotripters,  which resulted in the net use of cash amounting to  $63,884,000.
In  addition,   the  Company  paid  out  $3,387,000  in  deferred   payments  on
lithotripter entities acquired previously. Cash provided by financing activities
for the nine months ended  September 30, 1996 was  $47,232,000,  which  included
$72.0 million in new borrowings for the acquisition  discussed above,  offset by
$12,409,000 in  distributions to minority  interest  partners and $12,696,000 in
payments on notes payable. Cash used in financing activities for the nine months
ended September 30, 1995 was $5,521,000,  which included  $8,346,000 in payments
on notes payable and $714,000 in distributions to minority interest partners.

The Company has utilized a  substantial  amount of cash for  acquisitions  since
1992.  Management  believes that its present cash position,  together with funds
generated from operations,  will provide  sufficient  resources to meet its cash
requirements  for  current   operations.   The  Company  expects  to  facilitate
additional  acquisitions  through  cash flow,  the  issuance  of seller debt and
outside debt financing.

































                                      -10-






<PAGE>














                                     PART II


                                OTHER INFORMATION









































                                      -11-


<PAGE>




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

(a)      Exhibits.

         11.      Statement regarding computation of per share earnings.

         27.      Financial Data Schedule

(b)      Current Reports on Form 8-K

         None.













































                                      -12-




<PAGE>



                                   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 thereunto duly authorized.

                                                  PRIME MEDICAL SERVICES, INC.




Date: October 31, 1996                            By: /s/ Cheryl Williams
                                                     ----------------------
                                                     Chief Financial Officer











































                                      -13-




<PAGE>