================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended March 31, 2000

                         Commission file number 1-12055

                        PARACELSUS HEALTHCARE CORPORATION
             (Exact name of registrant as specified in its charter)

     California                                                 95-3565943
(State or other jurisdiction of                               (IRS Employer
incorporation or organization)                              Identification No.)

                  515 W. Greens Road, Suite 500, Houston, Texas
                    (Address of principal executive offices)

      77067                                                (281) 774-5100
   (Zip Code)                                    (Registrant's telephone number,
                                                       including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, no stated value                          New York Stock Exchange
-----------------------------                          -----------------------
   (Title of Class)                                   (Name of each exchange on
                                                           which registered)


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[ ]

As of May 15, 2000, there were outstanding 58,967,721 shares of the Registrant's
Common Stock, no stated value.

================================================================================



<PAGE> 1






                        PARACELSUS HEALTHCARE CORPORATION

                                    FORM 10-Q

                         FOR THE QUARTERLY PERIOD ENDED

                                 MARCH 31, 2000

                                      INDEX
<TABLE>
<CAPTION>

<S>                                                                                              <C>


                                                                                                 Page Reference

                                                                                                   Form 10-Q

Forward-Looking Statements                                                                             3
--------------------------

PART I.                  FINANCIAL INFORMATION
------

       Item 1.           Financial Statements-- (Unaudited)

                         Condensed Consolidated Balance Sheets--
                           March 31, 2000 and December 31, 1999                                        4

                         Consolidated Statements of Operations--
                           Three Months Ended March 31, 2000 and 1999                                  5

                         Condensed Consolidated Statements of Cash Flows--
                           Three Months Ended March 31, 2000 and 1999                                  6

                         Notes to Interim Condensed Consolidated
                           Financial Statements                                                        7

       Item 2.           Management's Discussion and Analysis of Financial
                           Condition and Results of Operations                                         11

       Item 3.           Quantitative and Qualitative Disclosures about Market                         15
                           Risks

PART II.                 OTHER INFORMATION                                                             15
-------

SIGNATURE                                                                                              18

</TABLE>




<PAGE> 2






















Forward-Looking Statements

         Certain statements in this Form 10-K are  "forward-looking  statements"
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform  Act of 1995.  Forward-looking  statements  involve a number of risks and
uncertainties.  All statements regarding the Company's expected future financial
position,  results  of  operations,  cash  flows,  liquidity,  financing  plans,
business   strategy,   budgets,   projected  costs  and  capital   expenditures,
competitive position,  growth opportunities,  plans and objectives of management
for  future  operations  and  words  such as  "anticipate,"  "believe,"  "plan,"
"estimate,"   "expect,"  "intend,"  "may"  and  other  similar  expressions  are
forward-looking  statements.  Such  forward-looking  statements  are  inherently
uncertain,  and  stockholders  must  recognize  that  actual  results may differ
materially from the Company's  expectations as a result of a variety of factors,
including, without limitation, those discussed below.

         Factors which may cause the Company's  actual results in future periods
to differ materially from forecast results include, but are not limited to:

o Competition and general economic,  demographic and business conditions, both
  nationally and in the regions in which the Company operates;
o Existing   government   regulations  and  changes  in  legislative proposals
  for healthcare reform, including changes in Medicare and Medicaid
  reimbursement levels;
o The ability to enter into managed care  provider  arrangements  on  acceptable
  terms;
o Liabilities and other claims asserted  against the Company;
o The loss of  any  significant  customer,  including  but  not  limited  to
  managed  care contracts;
o The ability to attract and retain qualified  personnel,  including
  physicians;
o The continued  listing of the  Company's  common stock on the New
  York Stock Exchange;
o The Company's  ability to develop and consummate an acceptable and
  sustainable  alternative  financial  structure,   considering  the
  Company's liquidity and limited financial resources;
o The Company's  ability to consummate acceptable financial arrangements,
  under reasonable terms, to replace its existing interim credit facility
  and off-balance-sheet receivable financing arrangement;
o The  possibility  that  the  Company  may be  forced  to file  for
  protection under Chapter 11 of the Federal Bankruptcy Code or that
  its creditors could file an involuntary  petition seeking to place
  the Company in bankruptcy.

         The Company is generally  not required to, and does not  undertake  to,
update or revise its forward-looking statements.


<PAGE> 3


















PART I.             FINANCIAL INFORMATION

ITEM 1.             FINANCIAL STATEMENTS

                        PARACELSUS HEALTHCARE CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                  ($ in 000's)

<TABLE>
<CAPTION>
<S>                                                                             <C>                  <C>
                                                                                   March 31,            December 31,
                                                                                      2000                  1999
                                                                                ----------------     --------------------
                                                                                (Unaudited)              (Note 1)
Assets
Current assets:

    Cash and cash equivalents..............................................     $     13,650         $    22,723
    Restricted cash........................................................           14,010               12,991
    Accounts receivable, net...............................................           32,194               30,796
    Supplies...............................................................            8,836                8,655
    Income taxes receivable................................................            6,867                6,152
    Other current assets...................................................           17,492               14,212
                                                                                  ----------           ----------
        Total current assets...............................................           93,049               95,529

Property and equipment.....................................................          341,043              339,528
Less: Accumulated depreciation and amortization............................         (118,320)            (113,052)
                                                                                  ----------           ----------
                                                                                     222,723              226,476

Goodwill...................................................................           86,799               87,684
Other assets...............................................................           26,756               27,369
                                                                                  ----------           ----------
        Total assets.......................................................     $    429,327         $    437,058
                                                                                  ==========           ==========

Liabilities and Stockholders' Equity (Deficit)
Current liabilities:

    Accounts payable.......................................................     $     33,078         $     35,563
    Accrued interest payable...............................................           20,697               12,598
    Accrued liabilities and other..........................................           17,093               20,426
    Long-term debt in default classified as current (Note 2)...............          335,445              335,445
    Long-term debt due within one year.....................................              306                  654
                                                                                  ----------           ----------
        Total current liabilities..........................................          406,619              404,686

Long-term debt.............................................................            3,634                3,685
Other long-term liabilities................................................           22,380               23,490
Stockholders' equity (deficit):
    Common stock...........................................................          216,045              215,761
    Additional paid-in capital.............................................           11,821               12,105
    Accumulated deficit....................................................         (231,172)            (222,669)
                                                                                  ----------           ----------
        Total stockholders' equity (deficit)...............................           (3,306)               5,197
                                                                                  ----------           ----------
Total Liabilities and Stockholders' Equity (Deficit).......................     $    429,327         $    437,058
                                                                                  ========             ==========

                                                                           See accompanying notes.
</TABLE>
<PAGE> 4
















                        PARACELSUS HEALTHCARE CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                       ($ in 000's, except per share data)
                                   (Unaudited)
<TABLE>
<CAPTION>
<S>                                                                           <C>


                                                                                       Three Months Ended
                                                                                            March 31,
                                                                              ----------------- -- ------------------
                                                                                    2000                 1999
                                                                              -----------------    ------------------

Net revenue................................................................   $    95,084          $  150,944

Costs and expenses:
  Salaries and benefits....................................................        40,700               58,965
  Other operating expenses.................................................        36,159               58,085
  Provision for bad debts..................................................         6,958               12,398
  Interest.................................................................         9,010               13,104
  Depreciation and amortization............................................         8,213                9,815
  Restructuring costs (Note 3).............................................         2,547                    -
  Unusual charges..........................................................                              1,123
                                                                              -----------           ----------
        Total costs and expenses...........................................       103,587              153,490
                                                                              -----------           ----------
Loss before minority interest and income taxes.............................        (8,503)              (2,546)
Minority interests.........................................................             -                   63
                                                                              ------------          ----------
Loss before income taxes...................................................        (8,503)              (2,483)
Income tax benefit (Note 4)................................................             -                 (897)
                                                                              ------------          ----------
Net loss...................................................................   $    (8,503)         $    (1,586)
                                                                              ===========           ==========
Net loss per share - basic and assuming dilution...........................   $     (0.15)         $     (0.03)
                                                                              ===========           ==========

                                                                           See accompanying notes.

</TABLE>




<PAGE> 5






























                        PARACELSUS HEALTHCARE CORPORATION

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  ($ in 000's)
                                  (Unaudited)

<TABLE>
<CAPTION>
<S>                                                                   <C>

                                                                                Three Months Ended
                                                                                       March 31,
                                                                      --------------------------------------
                                                                            2000                1999
                                                                      ------------------  ------------------

 Cash Flows from Operating Activities:
 Net loss........................................................     $    (8,503)        $    (1,586)
 Non-cash expenses and changes in operating assets
    and liabilities...............................................          2,791              (3,824)
                                                                       ----------          ----------
 Net cash used in operating activities............................         (5,712)             (5,410)
                                                                       ----------          ----------
 Cash Flows from Investing Activities:
 Additions to property and equipment, net.........................         (1,733)             (5,610)
 Increase in other assets, net....................................           (591)             (2,644)
                                                                       ----------          ----------
 Net cash used in investing activities............................         (2,324)             (8,254)
                                                                       ----------          ----------
 Cash Flows from Financing Activities:
 Borrowings under credit facilities ..............................              -              10,000
 Repayments under credit facilities...............................              -              (1,100)
 Repayments of debt, net.........................................            (399)             (1,535)
 Deferred financing costs.........................................           (638)                  -
                                                                       ----------          ----------
 Net cash provided by (used in) financing activities..............         (1,037)              7,365
                                                                       ----------          ----------
 Decrease in cash and cash equivalents............................         (9,073)             (6,299)
 Cash and cash equivalents at beginning of period.................         22,723              11,944
                                                                       ----------          ----------
 Cash and cash equivalents at end of period.......................    $    13,650         $     5,645
                                                                       ==========          ==========
 Supplemental Cash Flow Information:
    Interest paid.................................................    $       911         $    20,461
    Income taxes paid.............................................    $       715         $         -

 Noncash Investing Activities:
    Notes receivable from sale of hospital........................    $             -     $     2,269

                             See accompanying notes.
</TABLE>


<PAGE> 6


























                        PARACELSUS HEALTHCARE CORPORATION

          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)

                                 March 31, 2000

NOTE 1.    ORGANIZATION AND BASIS OF PRESENTATION

Organization - Paracelsus  Healthcare  Corporation  ("PHC") was  incorporated in
November 1980 for the principal  purpose of owning and operating  acute care and
related healthcare businesses in selected markets. PHC and its subsidiaries (the
"Company") presently operate 10 acute care hospitals with 1,287 licensed beds in
seven states, of which eight are owned and two are leased.

Basis  of  Presentation  - The  accompanying  unaudited  condensed  consolidated
financial  statements  of the  Company  have been  prepared in  accordance  with
generally accepted accounting  principles for interim financial  information and
with the instructions to Form 10-Q. Accordingly,  they do not include all of the
information and notes required by generally accepted accounting principles for a
complete  set  of  financial  statements.  In the  opinion  of  management,  all
adjustments, consisting of normal recurring accruals, considered necessary for a
fair  presentation  have been  included.  The Company's  business is seasonal in
nature  and  subject  to  general   economic   conditions   and  other  factors.
Accordingly,  operating  results for the three months ended March 31, 2000,  are
not  necessarily  indicative  of the results  that may be expected  for the year
ending  December  31,  2000.  These  financial  statements  should  be  read  in
conjunction with the audited consolidated financial statements and notes thereto
for the year ended December 31, 1999, included in the Company's 1999 Form 10-K.

         The Company incurred  operating losses in the first quarter of 2000 and
the year ended December 31, 1999, and had a working capital deficit at March 31,
2000 and December 31, 1999. These matters and certain liquidity issues described
in Note 2 have raised  substantial doubt as to the Company's ability to continue
as a going concern. The accompanying  unaudited condensed consolidated financial
statements  have been  prepared  assuming the Company  will  continue as a going
concern  and  contemplate  the  realization  of  assets  and the  settlement  of
liabilities  and  commitments  in the normal  course of business.  The financial
statements do not include further  adjustments,  if any, reflecting the possible
future effects on the  recoverability and classification of assets or the amount
and   classification  of  liabilities  that  may  result  from  the  outcome  of
uncertainties discussed herein.

<PAGE> 7


























Earnings Per Share - The following table sets forth the computation of basic and
diluted net loss per share (dollars in thousands, except per share amounts).
<TABLE>
<CAPTION>
<S>                                                         <C>                        <C>

                                                              Three Months Ended         Three Months Ended
                                                                March 31, 2000             March 31, 1999

                                                            -----------------------    ------------------------
Numerator (a):
   Net loss.................................................       $ (8,503)                  $ (1,586)
                                                                     ======                     ======
Denominator:
  Weighted average shares used for basic
      earnings per share....................................         57,668                     55,118
  Effect of dilutive securities:
     Employee stock options.................................              -                          -
                                                                     ------                     ------
  Dilutive potential common shares..........................              -                          -
                                                                     ------                     ------
  Shares used for diluted earnings per share.................        57,668                     55,118
                                                                     ======                     ======
Net loss per share - basic assuming dilution.............        $    (0.15)                  $  (0.03)
                                                                     ======                     ======
</TABLE>


----------------------
(a) Amount is used for both basic and diluted  earnings  per share  computations
since there is no earnings effect related to the dilutive securities.

         Options to purchase 2.1 million shares of the Company's common stock at
a weighted  average  exercise  price of $4.05 per share and warrants to purchase
414,906  shares at a  weighted  average  exercise  price of $9.00 per share were
outstanding  during the quarter  ended March 31, 2000,  but were not included in
the  computation  of diluted EPS because the exercise price was greater than the
average market price of the common shares.

Comprehensive Loss - Comprehensive loss for the quarter ended March 31, 2000, of
$8.8 million  included  $284,000 of deferred  compensation  costs related to the
issuance of restricted stock grants under an employment agreement. Comprehensive
loss for the quarter ended March 31, 1999 equaled reported net loss.

Restricted  Cash - The Company had  restricted  cash of $14.0  million and $13.0
million at March 31, 2000 and December 31, 1999, respectively, as collateral for
outstanding  letters of credit and for payment of fees and  interest  related to
the commercial paper financing program and other commitments.

NOTE 2 . ISSUES AFFECTING LIQUIDITY

         As previously reported in the Company's 1999 Form 10-K, on February 15,
2000,  the  Company did not make the  interest  payment of  approximately  $16.3
million due on the Company's $325.0 million 10% Senior  Subordinated  Notes (the
"Notes") due 2006,  which upon the  expiration of a 30-day grace period on March
16, 2000, constituted an event of default under the Note indenture.

<PAGE> 8
















         The Company has retained an  investment  banking firm and legal counsel
to review its strategic  alternatives  and is in discussion  with the holders of
the majority of the Notes.  Few holders hold the majority of the Notes,  and the
Company believes the concentration  will facilitate the  restructuring  process.
Considering the Company's limited financial resources, there can be no assurance
that the Company and the Note holders will succeed in  formulating an acceptable
alternative capital structure,  in which case the Note holders are entitled,  at
their  discretion,  to  accelerate  all principal and interest due on the Notes.
Either as a result of  successful  negotiations  with the Note holders or as the
result  of the  failure  of  such  negotiations,  the  Company  could  file  for
protection under Chapter 11 of the Bankruptcy Code (the "Bankruptcy Code") or be
subject to an involuntary  petition.  A reorganization  would likely result in a
significant  dilution of the ownership  interest of the existing  holders of the
Company's common stock.  There can be no assurance that a bankruptcy  proceeding
would result in a reorganization of the Company rather than a liquidation.  If a
liquidation or a protracted reorganization were to occur, there is a substantial
risk  that  there  would  be  insufficient   cash  or  property   available  for
distribution  to the  Company's  creditors  and/or the holders of the  Company's
common stock.

         Relating  to  the  matters  discussed  above,  on  March  15,  2000,  a
wholly-owned,  second-tier  subsidiary  of  PHC,  PHC  Finance,  Inc.,  filed  a
voluntary  petition for  reorganization  under Chapter 11 of the Bankruptcy Code
with the U.S.  Bankruptcy  Court for the Southern  District of Texas in Houston.
The  subsidiary,  whose principal  assets are several medical office  buildings,
does not own or operate any hospital facilities,  and neither PHC nor any of the
Company's hospital operating  subsidiaries is a guarantor for any obligations of
PHC Finance, Inc.

         Given  the  Company's   default  on  the  Notes  and  the   uncertainty
surrounding the ultimate resolution of the Company's  negotiations with its Note
holders,  the principal  amount of the Notes and certain other debt  obligations
have  been  presented  as  current   liabilities  in  the  Company's   condensed
consolidated  balance  sheet at March 31, 2000,  which has resulted in a working
capital deficit of $313.6 million.

         As the result of the  default  of  interest  payment on the Notes,  the
Company was also in default under its interim credit  facility,  under which the
Company had $11.6 million in  outstanding  letters of credit,  all of which were
fully  secured  by  cash  collateral  held  by the  lender,  and no  outstanding
borrowings.

         Additionally, the Company was in default with certain provisions of its
off-balance sheet commercial paper financing program, under which a wholly-owned
subsidiary of the Company had sold $32.3 million of eligible  receivables  as of
March 31, 2000.  As a result of this default,  the  subsidiary is unable to sell
additional  receivables  under the commercial  paper program.  The lender of the
Company's  commercial paper financing program has extended the program until May
17, 2000.

         As of May 15, 2000, the Company has substantially finalized
negotiations of and expects to shortly enter into a new credit  agreement with a
lending group,  which will provide for a $62.0 million revolving credit and
letter of credit guaranty facility (the "Credit  Facility"),  expiring May 15,
2003.  The Credit  Facility will be used primarily to fund normal working
capital and certain capital expenditures of the Company's hospitals. The Credit
Facility will be an obligation of certain of the Company's  subsidiaries and
will be secured by all patient  accounts  receivable and certain other assets of
the  Company's hospitals and a first lien on two of its hospitals. Accordingly,
the Credit Facility will not be not an obligation of PHC. The Credit  Facility
will replace the letters of credit  outstanding  under the interim facility and
the Company's commercial paper financing program.  The outstanding  letters of
credit under the Credit Facility will be secured by cash collateral held by the
lenders. Borrowings under the Credit Facility will bear interest at prime plus
1.5% or LIBOR plus 3.75% per annum and will be limited to hospitals' eligible
receivables and certain operating measurements,  as defined.  The Company
recorded  deferred  financing  costs of $638,000 in connection with the
Credit Facility as of March 31, 2000.

<PAGE> 9



         The Company is in a highly leveraged  financial  position.  The lending
group's  commitment  to enter into the Credit  Facility  expires  May 16,  2000.
Should the lending group's  commitment  expire prior to the  consummation of the
Credit  Facility,  the Company  would be required to seek an  extension  of such
commitment from the lending group. The Company expects it will be able to obtain
such an  extension;  however,  there can be no assurance  that the lending group
would grant such an  extension.  Should the Company fail to receive an extension
of the  commitment  for the Credit  Facility  from the lending  group or fail to
consummate the Credit Facility, the Company would have no available credit lines
and  therefore  would be  required  to finance  its cash needs from  operations.
Additionally, the Company would be required to seek an extension from its lender
under its commercial paper program, which expires May 16, 2000. In the event the
commercial paper program is not extended beyond May 16, 2000, a wind down of the
program may commence with the Company's  current lender  retaining a significant
portion of the  Company's  operating  cash flows until all  amounts  outstanding
under the  commercial  paper  program are repaid in full. In the event of a wind
down,  operating cash flows would likely be  insufficient  to meet the Company's
operational and capital expenditure needs.



NOTE  3 . RESTRUCTURING COSTS AND UNUSUAL CHARGES

         In the three  months ended March 31, 2000,  the Company  recorded  $2.5
million of restructuring costs for professional fees incurred in connection with
its efforts to restructure  the Notes. In the three months ended March 31, 1999,
the  Company  recorded  a net  unusual  charge  of $1.1  million  related  to an
executive agreement with certain of its former senior executives.

NOTE 4 . INCOME TAXES

         During the fourth quarter of 1999, the Company  recorded a deferred tax
valuation allowance  aggregating $26.8 million to reserve the full amount of the
Company's net deferred tax assets at December 31, 1999, due to issues  affecting
liquidity and related  uncertainties  discussed in Note 2, which, if unfavorably
resolved,  would adversely affect the Company's future  operations.  The Company
recorded  no income tax benefit in the first  quarter of 2000,  as the result of
recording an additional  valuation  allowance of $3.2 million to reserve all net
deferred  tax assets  generated  during the current  quarter.  The  deferred tax
valuation allowance as of March 31, 2000 totaled $78.3 million.

NOTE 5 . OPERATING SEGMENTS

         There has been no material change in the Company's  reportable segments
as previously  reported in the Company's 1999 Form 10-K. "Same  Hospitals," as a
reportable segment, consist of acute care hospitals currently owned and operated
by the Company. "All Other" is comprised of closed/sold  facilities and overhead
costs.  Selected  segment  information for the quarters ended March 31, 2000 and
1999, were as follows:
<TABLE>
<CAPTION>
<S>                                                     <C>
                                                                  Three Months ended
                                                                    March 31, 2000
                                                        ---------------------------------------
                                                           Same
                                                         Hospitals    All Other      Total
                                                        ----------   ----------    ---------
          Net revenue.................................   $ 94,157    $      927    $  95,084
          Adjusted EBITDA (a)..........................  $ 13,818    $   (2,551)   $  11,267

</TABLE>
<TABLE>
<CAPTION>
<S>                                                     <C>
                                                                  Three Months ended
                                                                    March 31, 1999
                                                        ---------------------------------------
                                                           Same
                                                         Hospitals    All Other      Total
                                                        ----------   ----------    ---------
          Net revenue..................................  $ 95,904    $  55,040     $ 150,944
          Adjusted EBITDA (a)..........................  $ 17,013    $   4,546     $  21,559
-------------------------------------
</TABLE>
<PAGE> 10



(a)  Earnings  before  extraordinary  charge,  interest,  taxes,   depreciation,
     amortization,  restructuring  costs and unusual charges ("Adjusted EBITDA")
     has  been  included  because  it is a widely  used  measure  of  internally
     generated  cash  flow and is  frequently  used in  evaluating  a  company's
     performance.  Adjusted  EBITDA is not an  acceptable  measure of liquidity,
     cash  flow  or  operating  income  under  generally   accepted   accounting
     principles and may not be comparable to similarly  titled measures of other
     companies.

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

          The Company incurred operating losses in the first quarter of 2000 and
the year ended December 31, 1999, and had a working capital deficit at March 31,
2000 and December 31, 1999. These matters and certain liquidity issues described
below have raised substantial doubt as to the Company's ability to continue as a
going concern.  The  accompanying  unaudited  condensed  consolidated  financial
statements  have been  prepared  assuming the Company  will  continue as a going
concern  and  contemplate  the  realization  of  assets  and the  settlement  of
liabilities  and  commitments  in the normal  course of business.  The financial
statements do not include further  adjustments,  if any, reflecting the possible
future effects on the  recoverability and classification of assets or the amount
and   classification  of  liabilities  that  may  result  from  the  outcome  of
uncertainties discussed herein.

ISSUES AFFECTING LIQUIDITY

         As previously reported in the Company's 1999 Form 10-K, on February 15,
2000,  the  Company did not make the  interest  payment of  approximately  $16.3
million due on the Notes,  which upon the expiration of a 30-day grace period on
March 16, 2000, constituted an event of default under the Note indenture.

         The Company has retained an  investment  banking firm and legal counsel
to review its strategic  alternatives  and is in discussion  with the holders of
the majority of the Notes.  Few holders hold the majority of the Notes,  and the
Company believes the concentration  will facilitate the  restructuring  process.
Considering the Company's limited financial resources, there can be no assurance
that the Company and the Note holders will succeed in  formulating an acceptable
alternative capital structure,  in which case the Note holders are entitled,  at
their  discretion,  to  accelerate  all principal and interest due on the Notes.
Either as a result of  successful  negotiations  with the Note holders or as the
result  of the  failure  of  such  negotiations,  the  Company  could  file  for
protection  under  Chapter  11  of  the  Bankruptcy  Code  or be  subject  to an
involuntary  petition.  A  reorganization  would likely  result in a significant
dilution of the  ownership  interest of the  existing  holders of the  Company's
common  stock.  There can be no  assurance  that a bankruptcy  proceeding  would
result in a  reorganization  of the  Company  rather  than a  liquidation.  If a
liquidation or a protracted reorganization were to occur, there is a substantial
risk  that  there  would  be  insufficient   cash  or  property   available  for
distribution  to the  Company's  creditors  and/or the holders of the  Company's
common stock.

         Relating  to  the  matters  discussed  above,  on  March  15,  2000,  a
wholly-owned,  second-tier  subsidiary  of  PHC,  PHC  Finance,  Inc.,  filed  a
voluntary  petition for  reorganization  under Chapter 11 of the Bankruptcy Code
with the U.S.  Bankruptcy  Court for the Southern  District of Texas in Houston.
The  subsidiary,  whose principal  assets are several medical office  buildings,
does not own or operate any hospital facilities,  and neither PHC nor any of the
Company's hospital operating  subsidiaries is a guarantor for any obligations of
PHC Finance, Inc.

         Given  the  Company's   default  on  the  Notes  and  the   uncertainty
surrounding the ultimate resolution of the Company's  negotiations with its Note
holders,  the principal  amount of the Notes and certain other debt  obligations
have  been  presented  as  current   liabilities  in  the  Company's   condensed
consolidated  balance  sheet at March 31, 2000,  which has resulted in a working
capital deficit of $313.6 million.

<PAGE> 11

         As the result of the  default  of  interest  payment on the Notes,  the
Company was also in default under its interim credit  facility,  under which the
Company had $11.6 million in  outstanding  letters of credit,  all of which were
fully  secured  by  cash  collateral  held  by the  lender,  and no  outstanding
borrowings.

         Additionally, the Company was in default with certain provisions of its
off-balance sheet commercial paper financing program, under which a wholly-owned
subsidiary of the Company had sold $32.3 million of eligible  receivables  as of
March 31, 2000.  As a result of this default,  the  subsidiary is unable to sell
additional  receivables  under the commercial  paper program.  The lender of the
Company's  commercial paper financing program has extended the program until May
17, 2000.

         As of May 15, 2000, the Company  has substantially finalized
negotiations of and expects to shortly enter into a new credit  agreement with a
lending group,  which will provide for a $62.0 million  revolving  credit and
letter of credit  guaranty facility, expiring May 15, 2003. The Credit Facility
will be used primarily to fund normal working capital and certain capital
expenditures of the Company's hospitals. The Credit  Facility will be an
obligation of certain of the Company's  subsidiaries and will be secured by all
patient accounts  receivable and certain other assets of  the  Company's
hospitals  and  a  first  lien  on two  of  its  hospitals. Accordingly,  the
Credit  Facility  will not be not an obligation  of PHC.  The Credit Facility
will replace the letters of credit outstanding under the interim facility and
the Company's  commercial paper financing program.  The outstanding letters of
credit under the Credit  Facility will be secured by cash  collateral held by
the lenders.  Borrowings under the Credit  Facility will bear interest at prime
plus 1.5% or LIBOR plus 3.75% per annum and will be limited to hospitals'
eligible  receivables and certain operating measurements,  as defined. The
Company recorded  deferred  financing costs of $638,000 in  connection  with the
Credit Facility  as of March 31, 2000.

         The Company is in a highly leveraged  financial  position.  The lending
group's  commitment  to enter into the Credit  Facility  expires  May 16,  2000.
Should the lending group's  commitment  expire prior to the  consummation of the
Credit  Facility,  the Company  would be required to seek an  extension  of such
commitment from the lending group. The Company expects it will be able to obtain
such an  extension;  however,  there can be no assurance  that the lending group
would grant such an  extension.  Should the Company fail to receive an extension
of the  commitment  for the Credit  Facility  from the lending  group or fail to
consummate the Credit Facility, the Company would have no available credit lines
and  therefore  would be  required  to finance  its cash needs from  operations.
Additionally, the Company would be required to seek an extension from its lender
under its commercial paper program, which expires May 16, 2000. In the event the
commercial paper program is not extended beyond May 16, 2000, a wind down of the
program may commence with the Company's  current lender  retaining a significant
portion of the  Company's  operating  cash flows until all  amounts  outstanding
under the  commercial  paper  program are repaid in full. In the event of a wind
down,  operating cash flows would likely be  insufficient  to meet the Company's
operational and capital expenditure needs.



RESULTS OF OPERATIONS

         The comparison of operating  results to prior years is difficult  given
the number of  divestitures in 1999.  "Same  Hospitals" as used in the following
discussion, where appropriate,  consist of acute care hospitals owned throughout
both periods for which comparative operating results are presented.

Results of Operations - Quarter ended March 31, 2000
compared with Quarter ended March 31, 1999

         Net revenue for the quarter ended March 31, 2000, was $95.1 million,  a
decrease of $55.8 million,  or 37.0%, from $150.9 million for the same period in
1999. Net revenue  declined by $54.0 million due to the sale of ten hospitals in
1999.  The  remaining  decline in net revenue  occurred at the  Company's  "Same
Hospitals," as discussed below.

<PAGE> 12








         Net revenue at "Same  Hospitals"  for the quarter  ended March 31, 2000
was $94.2 million compared to $95.9 million in 1999, a decrease of $1.7 million,
or 1.8%.  The  decline in net revenue was due in part to a shift in payor mix
from the traditional Medicare, Medicaid and indemnity plans to managed care,
from which the Company  generally  receives lower  reimbursements, and to a
decline in admissions and patient days at certain hospitals as more fully
discussed below.

         The Company's "Same Hospitals" experienced a 1.1% decrease in inpatient
admissions  from  10,305 in the  quarter  ended  March 31, 1999 to 10,195 in the
comparable period in 2000. Same hospital patient days decreased 4.4% from 52,824
in 1999 to 50,509 in 2000.  Excluding  home  health  visits,  outpatient  visits
increased 3.6% from 76,846 in 1999 to 79,585 in 2000. The decrease in admissions
and  patient  days was driven  largely by the  departure  of  physicians  at the
Richmond,  Virginia  facility  as the  result  of a  revision  to the  licensure
standards of the hospital's  medical staff.  Home health visits  decreased 14.4%
from  74,352 in 1999 to 63,645 in 2000  primarily  due to the  closure of a home
health  office and the  cancellation  of certain  home health  contracts  at the
Richmond  facility  and  a general  slow down of home health  operations  in
other markets.  Excluding the Richmond  facility,  admissions  and  outpatient
visits (excluding home health) increased 0.4% and 6.9%,  respectively,  and home
health visits declined by 2.1%, compared to prior year quarter.

         Operating  expenses  decreased $45.6 million from $129.4 million in the
quarter ended March 31, 1999 to $83.8 million in 2000 primarily from closed/sold
facilities.   Excluding  sold/closed  facilities,  operating  expenses  at  Same
Hospitals  increased by approximately  $1.4 million from (i) an increase of $2.0
million in salaries  and  benefits  from  market  driven  increases  in wages at
several  facilities and increased  overtime and contract labor due to a shortage
of nurses at certain hospitals,  (ii) an increase of $700,000 in other operating
costs primarily from increased volume and patient acuity at certain facilities,
which resulted in higher supply costs, offset by (iii) a decrease in provision
for bad debt of  $1.3  million  due to  improved  collections  and  accounts
receivable management at selected hospitals and an increased emphasis on the
segregation of charity care from the bad debt provision.

         Operating expenses (salaries and benefits, other operating expenses and
provision  for bad debts),  expressed as a percentage  of net revenue were 88.2%
and 85.8% in 2000 and 1999, respectively. Operating expenses at "Same Hospitals"
increased  to 85.3% of net  revenue  in 2000 from 82.3% in 1999,  and  operating
margins  decreased  to 14.7% from  17.7%,  respectively.  The  deterioration  in
operating margins resulted from the aforementioned factors.

         Interest  expense  decreased  $4.1  million  from $13.1  million in the
quarter  ended  March 31,  1999 to $9.0  million in 2000,  primarily  due to the
repayment of amounts  outstanding  under the senior  credit  facility in October
1999.

         Depreciation and amortization  expense decreased $1.6 from $9.8 million
in the quarter  ended March 31, 1999 to $8.2 million for the same period in 2000
primarily  due to the sale of ten  hospitals  in 1999,  partially  offset  by an
increase from additions to property and equipment.

         Loss before  income taxes of $8.5  million for the quarter  ended March
31, 2000,  included  restructuring  costs of $2.5 million for professional  fees
incurred in connection with the Company's efforts to restructure the Notes. Loss
before  income  taxes of $2.5  million  for the quarter  ended  March 31,  1999,
included a net  unusual  charge of $1.1  million  resulting  from the  executive
agreement executed in November 1998.

         The Company  recorded no income tax benefit in the quarter  ended March
31, 2000 as the result of recording an additional valuation allowance to reserve
all net deferred tax assets  generated  during the current  quarter.  Income tax
benefit  of  $897,000  in  1999  differed   from  the  statutory   rate  due  to
nondeductible  goodwill  amortization  which was  offset by a  non-taxable  gain
related to an executive  agreement  with certain of the Company's  former senior
executives.

<PAGE> 13



         Net loss for the  quarter  ended March 31,  2000 was $8.5  million,  or
$0.15 per diluted share,  compared to $1.6 million,  or $0.03 per diluted share,
for the same  period of 1999.  Weighted  average  common and  common  equivalent
shares outstanding increased to 57.7 million in 2000 as compared to 55.1 million
as the result of the issuance of common shares in connection with the settlement
of litigation in September 1999.

LIQUIDITY AND CAPITAL RESOURCES

         The  introductory  information  to this  Item as set  forth in  "Issues
Affecting  Liquidity"  discusses  the important  issues  affecting the Company's
liquidity and capital resources.

         Net cash used in operating  activities  was $5.7 million in the quarter
ended March 31, 2000,  compared to $5.4 million for the same period of 1999, and
included  payments of $2.5  million for  professional  fees  related to the Note
restructuring activities, $1.0 million for the working capital settlement on the
Utah hospitals sold in 1999,  $1.0 million of cash  collateral on certain letter
of  credit  commitments,  and a federal  income  tax  payment.  Net cash used in
investing  activities decreased to $2.3 million during 2000, as compared to $8.3
million during 1999, and reflected a decrease in capital expenditures related to
the Year 2000  program and to  facility  expansion.  Net cash used in  financing
activities  during 2000 was $1.0 million,  which  reflected  payments on capital
lease obligations and deferred financing costs on the Credit Facility,  compared
to net cash provided by financing  activities of $7.4 million during 1999, which
resulted primarily from net borrowings under the senior credit facilities.

         In connection  with its efforts to restructure  the Notes,  the Company
paid $2.5 million of professional fees in the three months ended March 31, 2000.
The Company  expects  that future  restructuring  costs will be paid as incurred
from internally generated cash from operations and existing cash balances.

         The Company anticipates that internally generated cash from operations,
existing  cash  balances  and  borrowings  under  the  Credit  Facility  will be
sufficient  to fund the  hospitals'  routine  capital  expenditures  and working
capital requirements through 2000. Should the Company fail to consummate the
Credit  Facility,  the Company would have no available  credit  lines and there
can be no assurance  that the Company will have  sufficient  resources to
finance its capital  expenditure  program in 2000.


LITIGATION

         The  Company is subject to claims  and legal  actions by  patients  and
others in the ordinary  course of business.  The Company  believes that all such
claims and actions are either adequately covered by insurance or will not have a
material  adverse  effect  on the  Company's  financial  condition,  results  of
operations or liquidity.

ITEM 3.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

         There were no  material  changes  to the  information  reported  in the
Company's 1999 Annual Report on Form 10-K.

PART II.            OTHER INFORMATION

ITEM 1.             LEGAL PROCEEDINGS

         There  have  been  no  other   material   developments   in  the  legal
proceedings.
<PAGE> 14










ITEM 2.             CHANGE IN SECURITIES

None.

ITEM 3.             DEFAULTS UPON SENIOR SECURITIES

         As previously reported in the Company's 1999 Form 10-K, on February 15,
2000,  the  Company did not make the  interest  payment of  approximately  $16.3
million due on the Company's  $325.0 million 10% Senior  Subordinated  Notes due
2006,  which upon the  expiration  of a 30-day  grace  period on March 16, 2000,
constituted  an event of  default  under  the Note  indenture.  The  Company  is
currently  engaged in  negotiations  with the  majority  of the Note  holders to
develop an alternative, sustainable capital structure for the Company.

         As the result of the  default  of  interest  payment on the Notes,  the
Company was also in default under its interim credit  facility,  under which the
Company had $11.6 million in  outstanding  letters of credit,  all of which were
fully  secured  by  cash  collateral  held  by the  lender,  and no  outstanding
borrowings.  Additionally, the Company was in default with certain provisions of
its  off-balance  sheet  commercial  paper  financing  program,  under  which  a
wholly-owned  subsidiary  of the  Company  had sold $32.3  million  of  eligible
receivables  as of March 31,  2000. As a result of this default, the subsidiary
is unable to sell additional  receivables  under the commercial paper program.
The lender under the  Company's  commercial  paper  financing  program  extended
the program until May 16, 2000.

         As of May 15, 2000, the Company has substantially  finalized
negotiations of and expects to shortly enter into a new credit  agreement with a
lending group,  which will provide for a $62.0 million  revolving  credit and
letter of credit  guaranty facility, expiring May 15, 2003.  The Credit
Facility  will replace the letters of credit outstanding  under the  interim
facility  and the  Company's commercial  paper financing program.

         The Company is in a highly leveraged  financial  position.  The lending
group's  commitment  to enter into the Credit  Facility  expires  May 16,  2000.
Should the lending group's  commitment  expire prior to the  consummation of the
Credit  Facility,  the Company  would be required to seek an  extension  of such
commitment from the lending group. The Company expects it will be able to obtain
such an  extension;  however,  there can be no assurance  that the lending group
would grant such an  extension.  Should the Company fail to receive an extension
of the  commitment  for the Credit  Facility  from the lending  group or fail to
consummate the Credit Facility, the Company would have no available credit lines
and  therefore  would be  required  to finance  its cash needs from  operations.
Additionally, the Company would be required to seek an extension from its lender
under its commercial paper program, which expires May 16, 2000. In the event the
commercial paper program is not extended beyond May 16, 2000, a wind down of the
program may commence with the Company's  current lender  retaining a significant
portion of the  Company's  operating  cash flows until all  amounts  outstanding
under the  commercial  paper  program are repaid in full. In the event of a wind
down,  operating cash flows would likely be  insufficient  to meet the Company's
operational and capital expenditure needs.


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

None.

ITEM 5.             OTHER INFORMATION

         The New York Stock Exchange ("NYSE") recently notified the Company that
it no longer meets the NYSE's minimum criteria for market  capitalization of not
less than $50 million and stockholders' equity of not less than $50 million. The
NYSE has given the Company  until June 2, 2000 to submit a plan for bringing the
Company back into  compliance  with these  requirements  over an  eighteen-month
period that  commenced on April 13, 2000.  The Company  intends to submit such a
plan and to work with the NYSE to continue the Company's listing.  The Company's
plan most likely will involve  pursuing  alternatives  that include  negotiating
with the Note holders to develop an alternative,  sustainable  capital structure
that may enable the Company to regain  compliance.  Although the Company expects
that the plan it will  submit will bring the Company  into  compliance  with the
NYSE's  criteria,  there  can be no  assurance  that the NYSE  will  accept  the
Company's plan.
<PAGE> 15





         The NYSE  previously  informed the Company  that it remained  below the
NYSE's  required  minimum share price of $1 over a 30  trading-day  period.  The
Company's  share price remains below the $1 level over a 30 trading-day  period.
The Company has until its next annual meeting of shareholders to raise its share
price above $1.

         There can be no assurance that the Company's common stock will continue
to be listed on a national securities exchange. If the Company's securities were
delisted,  the delisting  would have a material  adverse effect on the liquidity
and trading price of the Company's securities.

ITEM 6.             EXHIBIT AND REPORTS ON FORM 8-K

(a)                 Exhibit

10.83               Employment Agreement effective March 27, 2000 between
                    Robert L. Smith and Paracelsus Healthcare Corporation.

27                  Financial Data Schedule.

(b)                 Report on Form 8-K

None.


<PAGE> 16













































                                SIGNATURE

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.

                                            Paracelsus Healthcare Corporation
                                                     (Registrant)

                                              /s/ LAWRENCE A. HUMPHREY
Dated: May 15, 2000                    By:   ___________________________
                                                Lawrence A. Humphrey
                                              Executive Vice President &
                                               Chief Financial Officer




<PAGE> 17