FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549

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

              For the quarterly period ended September 30, 2003

                                      OR
        { } 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 0-15846

                           First Health Group Corp.
            (Exact name of registrant as specified in its charter)

             Delaware                                36-3307583
 -------------------------------         ------------------------------------
 (State or other jurisdiction of         (IRS Employer Identification Number)
  incorporation or organization)

              3200 Highland Avenue, Downers Grove, Illinois 60515
              ---------------------------------------------------
              (Address of principal executive offices, Zip Code)

                                (630) 737-7900
               ------------------------------------------------
               (Registrant's phone number, including area code)

                          __________________________
             (Former name, former address and former fiscal year,
                        if changed since last report)

 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 by check mark  whether the registrant is  an accelerated filer  (as
 defined in Rule 12b-2 of the Exchange Act).

           Yes      X                     No ________

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

 The number of shares of Common Stock, par value $.01 per share, outstanding
 on November 4, 2003, was 94,364,540.

<PAGE>

                  First Health Group Corp. and Subsidiaries

                                  INDEX


 Part I.  Financial Information
                                                                  Page Number
                                                                  -----------
       Item 1. Financial Statements (Unaudited)

       Consolidated Balance Sheets - Assets at September 30, 2003
         and December 31, 2002 ...................................     3

       Consolidated Balance Sheets - Liabilities and Stockholders'
         Equity at September 30, 2003 and December 31, 2002 ......     4

       Consolidated Statements of Operations for the three months
         ended September 30, 2003 and 2002 .......................     5

       Consolidated Statements of Operations for the nine months
         ended September 30, 2003 and 2002 .......................     6

       Consolidated Statements of Comprehensive Income for the
         three and nine months ended September 30, 2003 and 2002..     7

       Consolidated Statements of Cash Flows for the nine months
         ended September 30, 2003 and 2002 .......................    8-9

       Notes to Consolidated Financial Statements ................   10-14


       Item 2. Management's Discussion and Analysis of Financial
                 Condition and Results of Operations .............   15-22

       Item 3. Quantitative and Qualitative Disclosures About
                 Market Risk .....................................    23

       Item 4. Controls and Procedures ...........................    23


 Part II. Other Information

       Item 1. Legal Proceedings .................................    24

       Item 6. Exhibits and Reports on Form 8-K ..................    24

 Signatures.......................................................    25

<PAGE>

 PART I. Financial Information
 First Health Group Corp. and Subsidiaries
 CONSOLIDATED BALANCE SHEETS
 (in thousands) (Unaudited)
 ----------------------------------------------------------------------------

 ASSETS                                        September 30,   December 31,
                                                   2003            2002
                                                ----------      ----------
 Current Assets:
   Cash and cash equivalents ..............    $    24,996     $    20,852
   Short-term investments .................          3,607           1,304
   Accounts receivable, less allowances for
      doubtful accounts of $13,282
      and $14,782 respectively.............         87,827          69,981
   Deferred income taxes ..................         35,240          35,255
   Other current assets ...................         23,656          16,183
                                                ----------      ----------
   Total current assets ...................        175,326         143,575


 Long-Term Investments:
   Marketable securities ..................         66,762          67,880
   Other ..................................         66,498          62,676
                                                ----------      ----------
                                                   133,260         130,556
                                                ----------      ----------
 Property and Equipment:
   Land, buildings and improvements........        102,185          97,826
   Computer equipment and software.........        271,245         222,796
   Office furniture and equipment..........         36,889          34,518
                                                ----------      ----------
                                                   410,319         355,140
   Less accumulated depreciation and
      amortization.........................       (192,062)       (149,637)
                                                ----------      ----------
   Net property and equipment .............        218,257         205,503
                                                ----------      ----------

 Goodwill..................................        281,084         279,447

 Intangible assets, less accumulated
   amortization of $7,687 and $4,541
   respectively............................         50,940          54,086

 Reinsurance recoverable...................         24,791          26,185

 Other Assets..............................          3,788           4,009
                                                ----------      ----------
                                               $   887,446     $   843,361
                                                ==========      ==========

                See Notes to Consolidated Financial Statements

<PAGE>

 First Health Group Corp. and Subsidiaries
 CONSOLIDATED BALANCE SHEETS
 (in thousands) (Unaudited)
 ----------------------------------------------------------------------------

 LIABILITIES AND STOCKHOLDERS' EQUITY
                                               September 30,   December 31,
                                                   2003            2002
                                                ----------      ----------
 Current Liabilities:
   Accounts payable ......................     $    67,212     $    50,841
   Accrued expenses ......................          43,765          53,535
   Claims reserves .......................          15,816          14,235
   Income taxes payable ..................          37,702          23,765
                                                ----------      ----------
   Total current liabilities .............         164,495         142,376

 Long-Term Debt...........................         155,000         120,000
 Claims Reserves - Non-Current............          24,791          26,185
 Deferred Taxes...........................         114,811         114,692
 Other Non-Current Liabilities............          24,567          25,962
                                                ----------      ----------
   Total liabilities .....................         483,664         429,215
                                                ----------      ----------
 Commitments and Contingencies............              --              --

 Stockholders' Equity:
   Common stock ..........................           1,363           1,344
   Additional paid-in capital ............         332,946         304,663
   Retained earnings .....................         633,915         519,247
   Stock option loan receivable ..........              --            (287)
   Accumulated other comprehensive income.             908             764
   Treasury stock, at cost................        (565,350)       (411,585)
                                                ----------      ----------
   Total stockholders' equity ............         403,782         414,146
                                                ----------      ----------
                                               $   887,446       $ 843,361
                                                ==========      ==========

                See Notes to Consolidated Financial Statements

<PAGE>

 First Health Group Corp. and Subsidiaries
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands except per share amounts) (Unaudited)
 ----------------------------------------------------------------------------

                                             Three Months Ended September 30,
                                             --------------------------------
                                                    2003            2002
                                                ----------      ----------
 Revenues.............................         $   219,736     $   204,928
                                                ----------      ----------
 Operating expenses:
   Cost of services ..................              98,642          93,481
   Selling and marketing .............              23,188          21,438
   General and administrative ........              15,994          15,805
   Healthcare benefits ...............               4,478           3,883
   Depreciation and amortization .....              15,654          14,821
                                                ----------      ----------
                                                   157,956         149,428
                                                ----------      ----------

 Income from operations...............              61,780          55,500

 Other (income) expense:
   Interest expense ..................               1,182           1,411
   Interest income ...................              (1,515)         (1,917)
                                                ----------      ----------
 Income before income taxes...........              62,113          56,006

 Income taxes.........................             (21,457)        (22,263)
                                                ----------      ----------
 Net income...........................         $    40,656     $    33,743
                                                ==========      ==========

 Weighted average shares
   outstanding - basic................              94,680         101,526
                                                ==========      ==========
 Net income per common share - basic..         $       .43     $       .33
                                                ==========      ==========
 Weighted average shares
   outstanding - diluted..............              97,051         104,972
                                                ==========      ==========
 Net income per common share - diluted         $       .42     $       .32
                                                ==========      ==========

                See Notes to Consolidated Financial Statements

<PAGE>

 First Health Group Corp. and Subsidiaries
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands except per share amounts) (Unaudited)
 ----------------------------------------------------------------------------

                                              Nine Months Ended September 30,
                                              -------------------------------
                                                    2003            2002
                                                ----------      ----------
 Revenues.............................         $   652,140     $   550,212
                                                ----------      ----------
 Operating expenses:
   Cost of services ..................             294,967         241,522
   Selling and marketing .............              65,580          56,271
   General and administrative ........              46,648          39,162
   Healthcare benefits ...............              14,029          11,567
   Depreciation and amortization .....              46,334          41,149
                                                ----------      ----------
                                                   467,558         389,671
                                                ----------      ----------

 Income from operations...............             184,582         160,541

 Other (income) expense:
   Interest expense ..................               3,870           4,230
   Interest income ...................              (4,242)         (5,089)
                                                ----------      ----------
 Income before income taxes...........             184,954         161,400

 Income taxes.........................             (70,286)        (64,159)
                                                ----------      ----------
 Net income...........................         $   114,668     $    97,241
                                                ==========      ==========

 Weighted average shares
   outstanding - basic................              95,710         100,972
                                                ==========      ==========
 Net income per common share - basic..         $      1.20     $       .96
                                                ==========      ==========
 Weighted average shares
   outstanding - diluted..............              98,178         104,693
                                                ==========      ==========
 Net income per common share - diluted         $      1.17     $       .93
                                                ==========      ==========

                See Notes to Consolidated Financial Statements

<PAGE>

 First Health Group Corp. and Subsidiaries
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 (in thousands) (Unaudited)
 ----------------------------------------------------------------------------

                                             Three Months Ended September 30,
                                             --------------------------------
                                                    2003            2002
                                                ----------      ----------
 Net income..................................  $    40,656     $    33,743
                                                ----------      ----------
 Unrealized gains (losses) on securities,
   before tax................................         (677)          1,129

 Income tax (expense) benefit related to
   items of other comprehensive income.......          222            (399)
                                                ----------      ----------
 Other comprehensive income (loss)...........         (455)            730
                                                ----------      ----------
 Comprehensive income........................  $    40,201     $    34,473
                                                ==========      ==========




                                              Nine Months Ended September 30,
                                              -------------------------------
                                                    2003            2002
                                                ----------      ----------
 Net income..................................  $   114,668     $    97,241
                                                ----------      ----------

 Unrealized gains on securities, before tax..          296             417

 Income tax expense related to items of other
   comprehensive income......................         (152)           (150)
                                                ----------      ----------
 Other comprehensive income..................          144             267
                                                ----------      ----------
 Comprehensive income........................  $   114,812     $    97,508
                                                ==========      ==========


                See Notes to Consolidated Financial Statements

<PAGE>

 First Health Group Corp. and Subsidiaries
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands) (Unaudited)
 ----------------------------------------------------------------------------

                                              Nine Months Ended September 30,
                                              -------------------------------
                                                    2003            2002
                                                ----------      ----------
 Cash flows from operating activities:
   Net Income ..............................   $   114,668     $    97,241
                                                ----------      ----------
 Adjustments to Reconcile Net Income to Net
   Cash Provided by Operating Activities:
     Depreciation and amortization .........        46,334          41,149
     Change in allowance for uncollectible
       receivables .........................        (1,500)          3,335
     Provision for deferred income taxes ...           (18)           (113)
     Tax benefits from stock options
       exercised............................         8,032          14,780
     Income from limited partnership .......        (2,094)         (2,311)
     Other, net ............................           140           1,074

 Changes in Assets and Liabilities
   (net of effects of acquired businesses):
     Accounts receivable ...................       (16,838)          4,631
     Other current assets ..................        (7,473)         (2,644)
     Reinsurance recoverable ...............         1,394             939
     Accounts payable and accrued expenses..         5,029           7,386
     Claims reserves .......................           187             185
     Income taxes payable ..................        13,937          29,659
     Non-current assets and liabilities ....        (1,174)          2,395
                                                ----------      ----------
   Net cash provided by operating activities       160,624         197,706
                                                ----------      ----------
 Cash flows from investing activities:
   Purchases of investments ................       (37,046)        (62,860)
   Sales of investments ....................        34,401          57,103
   Acquisition of business, net of cash
     acquired...............................        (3,007)        (42,959)
   Assets held for sale ....................            --             923
   Purchase of property and equipment ......       (55,988)        (42,768)
                                                ----------      ----------
   Net cash used in investing activities....       (61,640)        (90,561)
                                                ----------      ----------
 Cash flows from financing activities:
   Purchase of treasury stock ..............      (149,831)        (33,992)
   Proceeds from issuance of long-term debt.       145,000         185,000
   Repayment of long-term debt .............      (110,000)       (278,500)
   Proceeds from issuance of common stock...        19,704          27,498
   Stock option loans to employees .........            --          (2,272)
   Stock option loan repayments ............           287           2,360
   Sales of put options on common stock ....            --             375
                                                ----------      ----------
   Net cash used in financing activities....       (94,840)        (99,531)
                                                ----------      ----------

 Net increase in cash and cash equivalents..         4,144           7,614
 Cash and cash equivalents,
   beginning of period......................        20,852          14,001
                                                ----------      ----------
 Cash and cash equivalents, end of period...   $    24,996     $    21,615
                                                ==========      ==========

<PAGE>

 First Health Group Corp. and Subsidiaries
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands) (Unaudited)
 ----------------------------------------------------------------------------

                                              Nine Months Ended September 30,
                                              -------------------------------
                                                    2003            2002
                                                ----------      ----------
 Supplemental cash flow data:
 Stock options exercised in exchange
   for common stock.........................   $       500     $        66
 Health care benefits paid..................       (12,377)        (11,244)
 Interest paid..............................        (3,469)         (3,978)
 Interest income received...................         2,184           2,402
 Income taxes paid, net.....................       (48,316)        (12,106)

 Acquisition of businesses:
   Fair value of assets acquired,
     net of cash acquired...................   $      (492)    $    10,686
   Goodwill ................................         3,784          28,042
   Intangible Assets .......................            --          14,813
   Fair value of liabilities assumed .......          (285)         (7,513)
   Future payments on acquisition ..........            --          (3,069)
                                                ----------      ----------
                                               $     3,007     $    42,959
                                                ==========      ==========

                See Notes to Consolidated Financial Statements

<PAGE>

 First Health Group Corp. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 ----------------------------------------------------------------------------

 1.  The unaudited  financial statements  herein have  been  prepared by  the
     Company pursuant  to the  rules and  regulations of  the Securities  and
     Exchange Commission. The accompanying interim financial  statements have
     been prepared under the presumption that users  of the interim financial
     information have  either read or  have access  to the audited  financial
     statements  for  the  latest  fiscal  year  ended   December  31,  2002.
     Accordingly, footnote  disclosures which  would substantially  duplicate
     the disclosures  contained in  the December 31,  2002 audited  financial
     statements have  been omitted from  these interim financial  statements.
     Certain  information  and  footnote  disclosures  normally  included  in
     financial statements prepared  in accordance with accounting  principles
     generally accepted in the  United States of America have  been condensed
     or omitted pursuant to  such rules and regulations. In our  opinion, the
     accompanying  unaudited consolidated  financial statements  contain  all
     adjustments  necessary for  a fair  presentation. Although  the  Company
     believes  that the  disclosures are  adequate  to make  the  information
     presented not misleading, it  is suggested that these  interim financial
     statements be read in conjunction with the  financial statements and the
     notes thereto  included in the  Company's latest  Annual Report on  Form
     10-K.

 2.  On October  31, 2003, the  Company completed the  acquisition of all  of
     the  outstanding  shares  of  capital  stock  of   Health  Net  Employer
     Services, Inc. from Health Net, Inc. for  approximately $80 million. The
     purchase also includes Health  Net Plus Managed Care Services,  Inc. and
     Health Net  CompAmerica, Inc. Health  Net Employer  Services, Inc. is  a
     workers' compensation  managed care  company based  in  Irvine, Ca.  The
     acquisition  was financed  with borrowings  under the  Company's  credit
     facility.

 3.  In conjunction with  the acquisition of CCN  Managed Care, Inc.  ("CCN")
     in  2001,   the  Company   recorded  reserves   for  restructuring   and
     integration costs.  The specific actions  included in the  restructuring
     plan were  substantially complete  by December 31,  2002. Components  of
     the purchase reserve as of September 30, 2003 are as follows:

                                      Accrual
       (in thousands)         Total   Balance    Amount             Balance
                             Charges  12/31/02    Paid   Reclass    9/30/03
                              ------    -----    ------    ----      ------
     Severance and related   $13,712   $1,536   $  (625)  $(304)    $   607
     Facilities integration   10,370    1,117      (470)   (326)        321
     Contract losses          10,000      296       180    (226)        250
     Other reserves            7,031    1,031       (89)    856       1,798
                              ------    -----    ------    ----      ------
                             $41,113   $3,980   $(1,004)  $  --     $ 2,976
                              ======    =====    ======    ====      ======

     The Company  charged $1.0  million to  the purchase  reserve during  the
     nine  months  ended  September  30,  2003.  The  severance  and  related
     benefits payments  were $0.6  million for  headcount reductions  already
     incurred.  Facilities integration  charges  were  $0.4 million  and  the
     Company was  reimbursed $0.2  million related  to  contract losses.  The
     Company reclassed  $0.9 million  between the various  components of  the
     purchase reserve during  the quarter ended September  30, 2003 to  cover
     various  pre-acquisition  legal  contingencies.  The  majority   of  the
     remaining $3.0 million  of the purchase reserve  is expected to be  paid
     out by December 31, 2003.

 4.  Acquired Intangible Assets

                          As of September 30, 2003
                                                   Gross
                                                 Carrying   Accumulated
                  (in thousands)                  Amount    Amortization
                  --------------                  ------    ------------

      Amortized intangible assets
       Customer contracts and relationships      $48,700      $ 6,913
       Provider Contracts                          9,927          774
                                                  ------       ------
       Total                                     $58,627      $ 7,687
                                                  ======       ======

     Customer contracts and relationships represent  the value  of  long-term
     contracts and  long-term business  relationships  existing  at the  time
     of  acquisition.  Provider  contracts  represent additions to  the First
     Health[R]  Network  that  the  Company  has   acquired.   The  aggregate
     amortization  expense  recorded during  the nine  months ended September
     30, 2003 was $3.1  million. The estimated amortization  expense for each
     of the years ending December 31, 2003 through 2007 is $4.2 million.

     The changes  in the  carrying amount  of goodwill  for  the nine  months
     ended September 30, 2003 are as follows (in thousands):

                                                 Amount
                                                 -------
              Balance, January 1, 2003          $279,447
              Goodwill acquired                       --
              Other changes                        1,637
                                                 -------
              Balance, September 30, 2003       $281,084
                                                 =======

     The  other goodwill  adjustments  represent  $3.5 million  in  financial
     performance payments  made related  to the  HealthCare Value  Management
     ("HCVM")  acquisition, $0.3  million related  to the  reconciliation  of
     HCVM assets and liabilities and a $2.2 million  reduction related to the
     reconciliation   of  Claims   Administration  Corporation   assets   and
     liabilities (the prior underwriter and claims administrator  of the Mail
     Handlers Benefit Plan).

 5.  Accounts  receivable  reserves  for  client-specific  items  were  $39.4
     million and  $41.2 million  as of September  30, 2003  and December  31,
     2002,  respectively.  Client-specific  reserves,  for  matters  such  as
     ineligible members and contractual  terms, are netted against  the gross
     accounts  receivable  balance   in  the  Consolidated  Balance   Sheets.
     Allowance for doubtful  accounts reserves were  $13.3 million and  $14.8
     million as of  September 30, 2003 and  December 31, 2002,  respectively.
     Client-specific reserves  and the  allowance for  doubtful accounts  are
     established   based   on   historical   experience,   current   economic
     circumstances  and contractual  arrangements  and are  adjusted  monthly
     based upon updated information.

 6.  The  Company's   investments  in   marketable   securities,  which   are
     classified as available  for sale, had a  net unrealized gain in  market
     value of $0.1 million, net of deferred income taxes,  for the nine month
     period  ended  September  30,  2003.  The  net  unrealized  gain  as  of
     September 30,  2003, included  as a component  of stockholders'  equity,
     was $0.9 million,  net of deferred income  taxes. The Company has  eight
     separate investments  in a  limited liability  company  that invests  in
     equipment that is  leased to third parties.  The total investment as  of
     September 30,  2003 and December  31, 2002 was  $59.8 million and  $54.0
     million, respectively,  and is  accounted for using  the equity  method.
     The Company's proportionate share  of the partnership's income  was $2.1
     million and $2.3  million for the nine  months ended September 30,  2003
     and   2002,  respectively,   and  is   included  in   interest   income.
     Approximately 90% of this  partnership is owned by parties related  to a
     former member of the Company's Board of Directors.

 7.  In 2002, the Board approved  a new authorization to repurchase up  to an
     additional 10  million shares  of common  stock. Purchases  may be  made
     from time  to time, depending  on market  conditions and other  relevant
     factors. During the  nine months ended September  30, 2003, the  Company
     repurchased approximately  6.2 million shares  (1.048 million shares  in
     the third quarter) on  the open market for approximately  $153.3 million
     ($27.8 million in the third  quarter). The actual cash paid (of  $ 149.8
     million) excludes $3.4 million  for trades dated in September  that were
     settled during the first 3 days of October.  The Company repurchased 1.3
     million shares during  the nine months ended  September 30, 2002. As  of
     September 30,  2003, approximately 4.4  million shares remain  available
     for repurchase under the Company's current repurchase authorization.

 8.  Weighted average shares  outstanding increased for diluted  earnings per
     share by 2.4 million and 2.5 million and by 3.4  million and 3.7 million
     respectively, for  the three and  nine months  ended September 30,  2003
     and 2002, respectively, due to the effect  of stock options outstanding.
     Diluted net income  per share was  $.01 less than  basic net income  per
     share for both  the three and nine  months ended September 30,  2003 and
     2002,  due to  the  effect of  stock  options outstanding.  Diluted  net
     income per share was $.03 less than basic net income  per share for both
     the three and nine months ended September 30, 2003 and  2002, due to the
     effect of stock options outstanding.

 9.  At September  30, 2003,  the Company  has  various stock-based  employee
     compensation plans  that are  described more  fully in  Note  10 to  the
     Consolidated Financial  Statements (in  the 2002 Annual  Report on  Form
     10-K). The Company  accounts for these plans  under the recognition  and
     measurement principles  of APB  Opinion No.  25,  "Accounting for  Stock
     Issued  to  Employees"  and  related  Interpretations.   No  stock-based
     employee  compensation cost  is  reflected  in net  income  (other  than
     compensation cost for consultants),  as all options granted  under these
     plans had an exercise  price at least equal  to the market value  of the
     underlying  common stock  on  the date  of  grant. The  following  table
     illustrates the  effect on  net income  and earnings  per  share if  the
     Company  had applied  the  fair  value recognition  provisions  of  FASB
     Statement No.  123, "Accounting  for Stock-Based  Compensation," to  all
     outstanding and  unvested awards  in each  period  (in thousands  except
     EPS):

                       Nine Months Ended September 30,
                       -------------------------------
                                                            2003       2002
                                                           -------    -------
      Net Income, as reported                             $114,668   $ 97,241

           Add: Stock-based employee compensation expense       65         --
                included in reported net income, net of
                related tax effects.

        Deduct: Total stock-based employee compensation
                expense determined under fair value
                based method for all awards, net of
                related tax effects                        (10,280)   (11,615)
                                                           -------    -------
        Pro forma net income                              $104,453   $ 85,626
                                                           =======    =======
        Earnings per share:
                Basic, as reported                        $   1.20   $    .96
                Basic, pro forma                          $   1.09   $    .85

                Diluted, as reported                      $   1.17   $    .93
                Diluted, pro forma                        $   1.06   $    .82


 10. Effective  January 1,  2003, the  Company adopted  SFAS  No. 146  ("SFAS
     146"),  "Accounting   for  Costs  Associated   with  Exit  or   Disposal
     Activities",  which requires  companies  to recognize  costs  associated
     with exit or disposal  activities when they are incurred rather  than at
     the date of a commitment to an exit or disposal  plan. Examples of costs
     covered by  the standard  include lease  termination  costs and  certain
     employee  severance costs  that  are  associated with  a  restructuring,
     discontinued  operation,  or  other  exit  or  disposal   activity.  The
     adoption of SFAS 146 had no impact on  the Company's financial position,
     results of operations or cash flows.

     Effective January 1,  2003, the Company  adopted Interpretation No.  45,
     ("FIN 45")  "Guarantees, Including  Indirect Guarantees of  Indebtedness
     to  Others", which  expands previously  issued accounting  guidance  and
     disclosure  requirements for  certain guarantees.  FIN 45  requires  the
     Company  to  recognize  an  initial  liability  for  fair  value  of  an
     obligation assumed by  issuing a guarantee. The  adoption of FIN 45  had
     no impact on the Company's financial position,  results of operations or
     cash flows.

     Effective July 1, 2003,  the Company adopted  SFAS No. 150 ("SFAS 150"),
     "Accounting  for  Certain  Financial Instruments with Characteristics of
     Both Liabilities and Equity",  which  establishes  standards  for how an
     issuer  classifies  and  measures  certain  financial  instruments  with
     characteristics of both liabilities  and  equity.  The adoption  of SFAS
     150  had  no  impact  on the Company's financial position,  results  of
     operations or cash flows.


 11. The Company and its  subsidiaries are subject to various  claims arising
     in the  ordinary course  of business and  are parties  to various  legal
     proceedings that  constitute litigation  incidental to  the business  of
     the Company and its subsidiaries. The Company does  not believe that the
     outcome of  such matters will  have a material  effect on the  Company's
     financial position or results of operations.

     The  Company's largest  client (Mail  Handlers Benefit  Plan)  generated
     revenue of approximately  $160 million in 2002  (21% of total  revenues)
     and $169 million  (26% of total revenues)  during the nine months  ended
     September  30, 2003.  Revenues  from the  Plan  are  recorded net  of  a
     reserve established by  the Company for  various issues associated  with
     the potential disallowance of  certain expenses charged to the  Plan. In
     addition, the provisions  of the contract with  the Plan's sponsor,  the
     National Postal Mail Handlers  Union, require that the Company  fund any
     deficits  in  the  Plan  after  the  Plan's  reserves  have  been  fully
     utilized. As  of September  30, 2003,  the Plan  has approximately  $358
     million in reserves to cover Plan expenses that  may exceed the premiums
     charged and collected  from the Plan participants  by the Plan  sponsor.
     Management believes that these  reserves are adequate to cover  any Plan
     deficits as of September 30,  2003. There are no known Plan  deficits as
     of September 30, 2003.

     FIN 45 requires  the Company to  disclose certain guarantees,  including
     contractual  indemnifications, it  has  assumed. The  Company  generally
     declines  to  provide  indemnification  to  its  customers.  In  limited
     circumstances,  to  secure long-term  customer  contracts  at  favorable
     rates,  the  Company  may  negotiate  risk  allocation   through  mutual
     indemnification   provisions   that,   in   the    Company's   judgment,
     appropriately  allocate risk  relative to  the  value of  the  customer.
     Management  believes  that any  liability  under  these  indemnification
     provisions would not be material.

<PAGE>

 First Health Group Corp. and Subsidiaries

 Item 2.

 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS
 (Unaudited)
 ----------------------------------------------------------------------------

 Forward-Looking Information
 ---------------------------
   This  Management's Discussion  and  Analysis  of Financial  Condition  and
 Results of Operations may include certain forward-looking statements, within
 the meaning of Section  27A of the Securities  Act of 1933, as  amended, and
 Section 21E of the  Securities Exchange Act of  1934, as amended,  including
 (without limitation) statements with respect to anticipated future operating
 and financial performance,  growth and  acquisition opportunities and  other
 similar forecasts and  statements of expectation.  Words such as  "expects",
 "anticipates", "intends", "plans", "believes", "seeks", "estimates", "could"
 and "should"  and variations  of these  words and  similar expressions,  are
 intended  to  identify  these  forward-looking  statements.  Forward-looking
 statements made by the  Company and its management  are based on  estimates,
 projections, beliefs  and assumptions  of management  at  the time  of  such
 statements and  are  not  guarantees  of  future  performance.  The  Company
 disclaims any obligation to  update or revise any  forward-looking statement
 based on the occurrence of future events, the receipt of new  information or
 otherwise.

   Actual  future performance,  outcomes and  results  may differ  materially
 from those expressed in forward-looking  statements made by the  Company and
 its management  as  a  result  of  a  number  of  risks,  uncertainties  and
 assumptions. Representative  examples  of  these  factors  include  (without
 limitation) general industry and economic conditions; interest  rate trends;
 cost of capital  and capital  requirements; competition  from other  managed
 care companies;  customer  contract  cancellations; the  ability  to  expand
 certain areas of the Company's business; shifts in customer demands; changes
 in operating  expenses,  including  employee  wages,  benefits  and  medical
 inflation;  governmental  and  public  policy  changes  and   the  continued
 availability of  financing in  the amounts  and on  the  terms necessary  to
 support the Company's future business. In addition, if the Company  does not
 continue to successfully  implement new contracts  and programs and  control
 healthcare benefit  expenses,  or  if  the  Company  does  not  successfully
 integrate the Mail  Handlers Benefit  Plan administrative assets  (discussed
 below), then  the Company  may not  achieve its  anticipated 2003  financial
 results.

 Significant Developments
 ------------------------

 Overview
 --------
   The following information concerning significant business  developments is
 important to understanding the comparability of the 2003 and  2002 financial
 results.

 Mail Handlers Benefit Plan
 --------------------------
   The Company  assumed the responsibility for  supporting the Mail  Handlers
 Benefit Plan (the  "Plan"), including  claims administration  for the  Plan,
 effective July 1, 2002.  Consequently, 2003 results  include nine months  of
 PPO plus  Administration Service  business while  2002  results include  six
 months  of  PPO  service  only  business  and  three  months  of   PPO  plus
 Administration Service business. The Plan is the Company's  largest customer
 with revenues earned of approximately $169 million ($63 million in the third
 quarter), or 26%  of total  Company revenue,  during the  nine months  ended
 September 30, 2003 compared with $103 million in revenues earned  during the
 nine months ended September 30, 2002 (or 19% of total revenue).

 Revenues from the  Plan are  recorded net of  a reserve  established by  the
 Company for various  issues associated  with the  potential disallowance  of
 certain expenses charged  to the Plan.  In addition,  the provisions of  the
 contract with the Plan's sponsor,  the National Postal Mail  Handlers Union,
 require that the  Company fund  any deficits in  the Plan  after the  Plan's
 reserves have been fully  utilized. As of September  30, 2003, the Plan  has
 approximately $358  million in  reserves to  cover  Plan expenses  that  may
 exceed the premiums charged and collected from the Plan participants  by the
 Plan sponsor. Management believes that these reserves are adequate  to cover
 any Plan deficits as of September 30, 2003. There are no known Plan deficits
 as of September 30, 2003.

 Acquisition
 -----------
   On October 31, 2003, the  Company completed the acquisition of all  of the
 outstanding shares of capital  stock of Health  Net Employer Services,  Inc.
 from Health  Net, Inc.  for approximately  $80  million. The  purchase  also
 includes Health  Net  Plus  Managed  Care  Services,  Inc.  and  Health  Net
 CompAmerica,  Inc.  Health  Net  Employer  Services,  Inc.  is   a  workers'
 compensation managed care company based  in Irvine, Ca. The  acquisition was
 financed with borrowings under the Company's credit facility.

 Results of Operations
 ---------------------
      The Company's revenues  consist primarily of  fees for cost  management
 services provided under contracts on  a percentage-of-savings basis or  on a
 predetermined contractual basis. Revenues also include premium  revenue from
 the Company's insurance company operations.

      Effective January 1, 2003,  the Company is now  reporting revenue in  a
 new format which  includes, Group Health  and Workers' Compensation  revenue
 (which together make up the Commercial Business) and Public  Sector revenue.
 The Commercial business is further broken  down into PPO Services,  PPO plus
 Administration Services and Premium  revenue on the  Group Health side.  The
 Workers' Compensation business is further broken down into PPO  Services and
 PPO plus Administration Services (there is no premium revenue).  PPO Service
 is where the Company  provides its national PPO  network to clients  without
 any other services.  PPO plus  Administration Service is  where the  Company
 provides PPO plus other services such as claims administration,  health plan
 administration, fee schedule,  front end, first  report of injury,  pharmacy
 benefit management and/or disease management.

      The following table sets forth information with respect to  the sources
 of the Company's revenues for the three and nine months ended  September 30,
 2003 and 2002, respectively:

  Sources of Revenue
                                       ($ in thousands)
                               Three Months Ended September 30,
                                  ---------------------------      % Change
                                    2003     %     2002     %    2002 to 2003
                                   -------  ---   -------  ---   ------------
  Commercial Revenue:
    Group Health:
      PPO plus Administration
        Services                  $ 97,063   44% $ 84,998   41%       14%
      PPO                           36,406   17    42,035   21       (13)
      Premiums                       4,417    2     3,833    2        15
                                   -------  ---   -------  ---       ---
      Total Group Health           137,886   63   130,866   64         5
                                   -------  ---   -------  ---       ---
    Workers' Compensation:
      PPO plus Administration
        Services                    23,132   11    27,132   13       (15)
      PPO                           15,994    7    13,706    7        17
                                   -------  ---   -------  ---       ---
      Total Workers' Compensation   39,126   18    40,838   20        (4)
                                   -------  ---   -------  ---       ---
  Total Commercial Revenue         177,012   81   171,704   84         3
                                   -------  ---   -------  ---       ---
  Public Sector Revenue             42,724   19    33,224   16        29
                                   -------  ---   -------  ---       ---
  Total Revenue                   $219,736  100% $204,928  100%        7%
                                   =======  ===   =======  ===       ===

                                       ($ in thousands)
                                Nine Months Ended September 30,
                                  ---------------------------      % Change
                                    2003     %     2002     %    2002 to 2003
                                   -------  ---   -------  ---   ------------
  Commercial Revenue:
    Group Health:
      PPO plus Administration
        Services                  $277,091   43% $151,502   28        83%
      PPO                          116,201   18   170,455   31       (32)
      Premiums                      12,774    2    11,653    2        10
                                   -------  ---   -------  ---       ---
      Total Group Health           406,066   63   333,610   61        22
                                   -------  ---   -------  ---       ---
    Workers' Compensation:
      PPO plus Administration
        Services                    73,291   11    80,421   15        (9)
      PPO                           46,278    7    41,486    7        12
                                   -------  ---   -------  ---       ---
      Total Workers' Compensation  119,569   18   121,907   22        (2)
                                   -------  ---   -------  ---       ---
  Total Commercial Revenue         525,635   81   455,517   83        15
                                   -------  ---   -------  ---       ---
  Public Sector Revenue            126,505   19    94,695   17        34
                                   -------  ---   -------  ---       ---
  Total Revenue                   $652,140  100% $550,212  100%       19%
                                   =======  ===   =======  ===       ===

      Total revenue for the  three and nine months  ended September 30,  2003
 increased $14.8 million (7%)  and $101.9 million  (19%) from the  comparable
 periods of 2002. The  components of the Company's  quarterly revenue are  as
 follows:

      Group Health revenue of $137.9 million and $406.1 million for the three
 and nine months  ended September 30,  2003 increased  $7.0 million (5%)  and
 $72.5 million  (22%)  from the  comparable  periods  of 2002.  Group  Health
 revenue represents revenue  from the corporate,  FEHBP, small group  carrier
 and third  party  administrator  payors. PPO  plus  Administration  Services
 revenue for the  three and nine  months ended  September 30, 2003  increased
 $12.1 million (14%)  and $125.6 million  (83%) due  to numerous new  clients
 that have been added this year and existing clients utilizing more services,
 principally Mail Handlers. PPO  plus Administration Services revenue  in the
 third quarter of 2003 increased $6.0 million (7%) from the second quarter of
 2003. This  increase  is  also  due  to new  clients  and  existing  clients
 utilizing more services. Group  Health PPO services for  the three and  nine
 months ended  September 30,  2003 decreased  $5.6  million (13%)  and  $54.3
 million (32%) from  the comparable  periods of 2002  as clients,  especially
 Mail Handlers, are taking advantage of  most of the Company's  services. PPO
 service revenue in  the third quarter  of 2003  decreased $2.5 million  (6%)
 from the second quarter of 2003.  This decrease is due primarily  to clients
 utilizing additional  administration  services.  As these  clients  purchase
 additional services,  the  revenue  is  then reported  under  the  PPO  plus
 Administration Services  caption. Premium  revenue for  the  three and  nine
 months ended  September  30, 2003  increased  $0.6  million (15%)  and  $1.1
 million (10%) from the  comparable periods of  2002 as a  result of new  and
 existing clients that purchased the Company's stop-loss insurance.

      Workers' Compensation revenue of  $39.1 million and $119.6  million for
 the three and nine  months ended September 30,  2003 decreased $1.7  million
 (4%) and  $2.3  million  (2%) from  the  comparable  periods of  2002.  This
 decrease is due  primarily to  some historic  workers' compensation  clients
 that have exited various markets. Workers' Compensation revenue in the third
 quarter of 2003 decreased $1.2 million (3%) from the second quarter  of 2003
 also due  to  this loss  of  historic business.  This  loss of  business  is
 consistent with prior quarters  as clients are  exiting various markets  and
 more stringent underwriting standards have taken effect.

      Public Sector revenue of $42.7 million and $126.5 million for the three
 and nine months ended  September 30, 2003 increased  $9.5 million (29%)  and
 $31.8 million (34%)  from the same  periods of  2002. Public Sector  revenue
 represents fees associated  with pharmacy  benefit management, fiscal  agent
 services and healthcare  management from clients  within the public  sector.
 This increase in revenue is due primarily to new clients, such as  the State
 of Nevada, one-time HIPAA  support implementations and fees  associated with
 pharmacy programs. Approximately $9.0  million and $30.0 million  in revenue
 was due to non-recurring items for the three and nine months ended September
 30, 2003  compared to  $1.2  million and  $5.2  million for  the  comparable
 periods of  2002.  Public  Sector  revenue  in the  third  quarter  of  2003
 decreased $1.5 million (3%) from the second quarter of 2003 as  expected due
 to lower non-recurring items in the quarter compared to second quarter. This
 revenue is expected to rise in the fourth quarter of 2003.

   Cost of services increased  $5.2 million (6%) and $53.4 million  (22%) for
 the three  and nine  months ended  September 30,  2003  from the  comparable
 periods in  2002  due  primarily  to operating  costs  associated  with  the
 increased Public Sector revenue  and the inclusion of  nine months of  costs
 associated with the  administration of the  Plan in  2003 compared to  three
 months in 2002. Cost of services in the third quarter of 2003 decreased $1.5
 million (2%) from the  second quarter of 2003  due primarily to the  drop in
 Public Sector business  (related primarily  to non-recurring revenue  items)
 and operating  efficiencies the  Company has  achieved  (principally in  the
 Commercial business). Cost  of services consists  primarily of salaries  and
 related  costs  for  personnel   involved  in  claims  administration,   PPO
 administration, development and expansion, utilization  management programs,
 fee schedule and other  cost management and administrative  services offered
 by the Company.  To a  lesser extent,  cost of  services includes  telephone
 expenses,  facility  expenses  and   information  processing  costs.  As   a
 percentage of revenue, cost  of services was 44.9%  and 45.2% for the  three
 and nine months ended September 30, 2003, respectively, from 45.6% and 43.9%
 in the  comparable  periods  last  year.  The  year-to-date  increase  as  a
 percentage of revenue is due primarily  to the addition of  costs associated
 with the administration of the Plan.

   Selling and marketing costs for the three and  nine months ended September
 30, 2003  increased  $1.8  million (8%)  and  $9.3  million (17%)  from  the
 comparable periods in 2002  primarily as a result  of the addition of  costs
 associated with the administration  of the Plan  and to increased  marketing
 efforts to increase  the enrollment  in the Plan.  To a  lesser extent,  the
 increase in selling and marketing costs is due to the addition of  new sales
 personnel. Selling  and  marketing  costs  during  the  three  months  ended
 September 30, 2003 increased  $1.8 million (9%) from  the second quarter  of
 2003 due to the increased marketing efforts.

   General  and administrative  costs for  the three  and  nine months  ended
 September 30, 2003 increased $0.2 million  (1%) and $7.5 million  (19%) from
 the comparable  periods in  2002 due  primarily to  the  inclusion of  costs
 associated with  the administration  of the  Plan as  well  as increases  in
 professional liability insurance  and other  professional fees. General  and
 administration costs in  the third  quarter of 2003  increased $0.5  million
 (4%) from  the  second  quarter  of  2003 due  to  increased  insurance  and
 professional fees.

   Healthcare benefits represent  medical losses incurred by insureds  of the
 Company's insurance  entities. Healthcare  benefits increased  $0.6  million
 (15%) and $2.5 million (21%) for  the three and nine months  ended September
 30, 2003  from  the  comparable  periods  of 2002.  This  increase  was  due
 primarily to new client  activity and unusually high  medical claims in  the
 period. The loss ratio (healthcare benefits as a percent of premium revenue)
 was 101% and 110%  for the three  and nine months  ended September 30,  2003
 compared to 101%  and 99%  for the  comparable periods  of 2002.  Management
 continues to review  the book  of business in  detail to  minimize the  loss
 ratio. Stop-loss insurance is related  to the PPO and  claims administration
 businesses and is used as a way to attract additional PPO business, which is
 the Company's most profitable product.

   Income from operations was $61.8 million, $55.5 million, and $61.8 million
 in the  third  quarter of 2003,  third quarter of 2002,  and  second quarter
 of 2003, respectively. EBITDA (income from operations excluding depreciation
 and  amortization  of $15.7  million, $14.8  million, and $15.6  million), a
 non-GAAP financial measure,  was $77.4  million,  $70.3  million  and  $77.3
 million, in the third quarter 2003, third quarter  2002,  and second quarter
 2003,  respectively.  EBITDA  margin  (EBITDA  as a percent of revenue)  was
 35.2%, 34.3% and 35.4% in the third quarter 2003,  third quarter  2002,  and
 second quarter 2003, respectively.  The slight decline in the EBITDA  margin
 from  the  second  quarter  was due to the significant growth in  the  lower
 margin Public Sector business.  The EBITDA margin on the Commercial business
 was  41.3%  in the third quarter  of  2003  compared  to 39.0%  in the third
 quarter of 2002 and 41.2% in the second quarter of 2003. The slight increase
 from the  second quarter  is due  to operating efficiencies achieved  in the
 Company's Commercial  business.  The  EBITDA  margin  on  the  Public Sector
 business  was  10.1% in the  third quarter of 2003  compared to  9.9% in the
 third quarter of 2002 and  12.2% in the second quarter  of 2003.  The margin
 decline  from  the  second  quarter  was  due  primarily  to  consulting and
 outsourced system  usage costs  associated with major system implementations
 that went live during the third quarter.

   Depreciation and amortization expenses increased  $0.8  million  (6%)  and
 $5.2  million  (13%)  for  the  three and  nine months  ended  September 30,
 2003  from  the  comparable  periods  in  2002  due  primarily  to increased
 infrastructure investments made over the course of the past few years,  and,
 to  a  lesser extent, amortization  of  intangible  assets  related  to  the
 various  acquisitions  the  Company  has  made.  Depreciation  expense  will
 continue to grow primarily as a result of continuing investments the Company
 is making in its infrastructure.  Depreciation expenses in the third quarter
 of 2003 were consistent with the second quarter of 2003.

   Interest income  for the three  and nine months  ended September 30,  2003
 decreased $0.4  million (21%)  and $0.8  million (17%)  from the  comparable
 periods of 2002. Interest income in the third quarter of 2003 increased $0.2
 million (11%) from the second quarter of 2003. Interest income has decreased
 from last year as the Company has  used much of its available cash  to repay
 debt and repurchase its common stock.

   Interest expense  for the three and  nine months ended September  30, 2003
 decreased $0.2  million (16%)  and $0.4  million  (9%) from  the  comparable
 periods in 2002.  Interest expense in  the third  quarter of 2003  decreased
 $0.2 million from the second quarter of 2003. Interest expense  has remained
 fairly constant as the average debt outstanding has remained fairly constant
 between the comparable periods. The effective interest rate on September 30,
 2003 was approximately 2.75% per annum  and the Company had $155  million of
 debt outstanding.

   Income tax expense for the three and nine months  ended September 30, 2003
 decreased $0.8  million  (4%) and  increased  $6.1  million (10%)  from  the
 comparable periods of  2002. The  Company lowered its  annual effective  tax
 rate to 38% from 39.75%  in 2002 due to  changes to its cost  of performance
 structure used for state tax calculations.  This rate reduction was  done in
 the third quarter as the full state tax effect was recently  determined with
 the filing of various state tax returns.

   Net  income  for the  three  and  nine months  ended  September  30,  2003
 increased $6.9 million  (20%) and  $17.4 million (18%)  from the  comparable
 periods of 2002. This increase is  due primarily to the increase  in revenue
 associated with  the  Mail  Handlers  Benefit  Plan,  the  decrease  in  the
 Company's effective tax rate  to 38% from  39.75% in 2002  and, to a  lesser
 extent, growth in the public sector business.

   Diluted net income  per common share for  the three and nine  months ended
 September 30, 2003  increased 31% to  $.42 per  share and  26% to $1.17  per
 share from the comparable periods of  2002. Net income per common  share was
 favorably increased by $.03 per share  due to the decrease in  the effective
 tax rate discussed above.  The increase in net  income per common share  was
 also favorably impacted by the repurchase  of 6.2 million shares  of Company
 common stock during the nine months ended September 30, 2003.  For the three
 and nine months ended September 30, 2003, diluted common  shares outstanding
 decreased 8% and 6% from the comparable periods of 2002.

 Liquidity and Capital Resources
 -------------------------------
   The Company  had $10.8 million  in working capital  on September 30,  2003
 compared with working capital of $1.2 million at December 31,  2002. Through
 the first  nine months  of the  year, operating  activities provided  $160.6
 million  of  cash.  Investment   activities  used  $61.6  million   of  cash
 representing  purchases  of  fixed  assets  of  $56.0  million,  acquisition
 payments of $3.0 million (related to the HCVM acquisition) and  $2.6 million
 in net purchases of investments. Financing activities used $94.8  million of
 cash representing $149.8 million in  purchases of Company common  stock (net
 of $3.4 million in  stock repurchases that have  not yet settled)  partially
 offset  by  $19.7  million  in  proceeds  from  issuance  of   common  stock
 (representing 1.7  million  shares), $35.0  million  in proceeds  from  debt
 issuance (net of $110.0 million in debt repayment) and $0.3 million in stock
 option loan repayments.

   The Company's  outstanding debt at  September 30,  2003 increased to  $155
 million from $120 million at December 31, 2002 as the Company borrowed funds
 against its credit facility to finance repurchases of its common  stock. The
 Company has no  off-balance sheet financing  arrangements or material  long-
 term purchase obligations.

 The following table summarizes  the contractual obligations the  Company has
 outstanding as of September 30, 2003:

          (in thousands)
          -----------------------------------------------------------
          Years Ending                     Revolving Line
          December 31,          Leases        of Credit       Total
          -----------------------------------------------------------

              2003             $  3,367      $     --       $   3,367
              2004               12,613            --          12,613
              2005               10,406            --          10,406
              2006                7,402            --           7,402
              2007                5,999       155,000         160,999
              Thereafter          9,485            --           9,485
          -----------------------------------------------------------
              Total            $ 49,272      $155,000       $ 204,272
          -----------------------------------------------------------

   The  Company believes  that its  working  capital, long-term  investments,
 credit facility and cash generated from future operations will be sufficient
 to fund the Company's anticipated operations and expansion plans.

 2004 Outlook
 ------------
   The Company recently concluded part of its budgeting  and planning process
 for 2004.  While overall revenue growth is expected to increase compared  to
 2003, EPS is  expected to  be comparable  to  2003.  There are  a number  of
 factors contributing to these expected results, including loss  of corporate
 accounts with  higher  margin  PPO-only  business;  continued  migration  of
 corporate  accounts  to  lower  margin  comprehensive  services;  fewer  new
 corporate  accounts   effective  in   2004  than   previously   anticipated;
 anticipated loss  of  federal  employee members  particularly  in  the  Mail
 Handlers Health  Benefit  Plan, due  to  a  significant increase  in  member
 contributions; anticipated loss of PPO revenue in the  workers' compensation
 area from  recently-enacted  legislation  in California  that  is  effective
 January 1, 2004; and slower implementation of new accounts for the Company's
 workers' compensation, insurance and state Medicaid services than previously
 expected.

 Critical Accounting Policies
 ----------------------------
     The consolidated financial  statements  are  prepared   with  accounting
 principles generally accepted in  the United States  of America and  include
 amounts based on management's prudent judgments and estimates. To the extent
 that the  estimates used  differ from  actual  results, adjustments  to  the
 statement of operations and  the balance sheet would  be necessary. Some  of
 the more significant estimates include the recognition of revenue, allowance
 for doubtful accounts  and insurance  claim reserves. The  Company uses  the
 following techniques to determine estimates:

     Revenue recognition -  The Company receives  revenues for PPO  services,
 claims  administration  services,  fee  schedule  services,   clinical  cost
 management and other services on a predetermined contractual basis  (such as
 a percentage of the  derived savings). Revenues on  a percentage of  savings
 basis for PPO services  are recognized based  upon client claims  processed.
 Additionally, the  Company  records revenues  based  upon  a fixed  fee  per
 covered participant, and the fee varies depending upon the programs selected
 or on a per-transaction basis. Within the Company's public  sector business,
 the Company has certain  contracts to develop  software for Medicaid  claims
 adjudication. The  Company's policy  is to  recognize  revenue for  services
 under these contracts as milestones  are met and customer  acknowledgment of
 such achievement  of  milestones  is  received.  In  accordance  with  Staff
 Accounting Bulletin No. 101, "Revenue Recognition in  Financial Statements,"
 revenue is recognized  when customer  acceptance has been  received for  the
 services performed.

     PPO revenue and, to  a lesser extent, claims administration  revenue are
 recognized net of estimated fees associated with claims that a client is not
 responsible for reimbursing  (such as claims  from ineligible members,  non-
 insured services and other insurance being the primary payor). In  a limited
 number  of   cases,  client   contracts  include   performance   guarantees.
 Adjustments to revenue related to guarantee amounts are recognized  as known
 and/or earned. In  other cases,  estimates are  made of  the annual  savings
 rates and  revenues  are  recognized in  accordance  with  these  estimates.
 Periodically, specific client-related accounts receivable issues  may impact
 revenue recognition including issues where a client disputes  specific items
 from the current year's monthly billings.

     Allowance for doubtful  accounts - The  allowance for doubtful  accounts
 is maintained at an amount  management considers appropriate in  relation to
 the outstanding receivable balance based on factors such as portfolio credit
 risk quality, historical loss experience and current economic circumstances.
 These factors require management judgment; different assumptions  or changes
 in economic  circumstances could  result in  changes  to the  allowance  for
 doubtful accounts.

     Insurance  claim reserves  -  Claims  reserves are  developed  based  on
 medical claims payment history  adjusted for specific benefit  plan elements
 (such as deductibles) and expected  savings generated by utilization  of The
 First Health[R] Network.  Based upon this  process, management believes that
 the insurance  claims  reserves  are  appropriate;  however,  actual  claims
 incurred and actual settlement values of claims may differ from the original
 estimates requiring adjustments to the reserves.

 New Accounting Pronouncements
 -----------------------------
     Effective  January 1,  2003, the  Company adopted  SFAS  No. 146  ("SFAS
 146"), "Accounting for Costs  Associated with Exit or  Disposal Activities",
 which requires companies to recognize costs associated with exit or disposal
 activities when they are incurred rather than at the date of a commitment to
 an exit or disposal plan. Examples of costs covered by the  standard include
 lease termination  costs  and  certain employee  severance  costs  that  are
 associated with a  restructuring, discontinued operation,  or other exit  or
 disposal activity. The adoption of SFAS  146 had no impact on  the Company's
 financial position, results of operations or cash flows.

     Effective January 1,  2003, the Company  adopted Interpretation No.  45,
 ("FIN 45")  "Guarantees, Including  Indirect Guarantees  of Indebtedness  to
 Others", which expands previously issued accounting guidance  and disclosure
 requirements for certain guarantees. FIN 45 requires the Company to disclose
 certain guarantees, including contractual indemnifications, it  has assumed.
 The Company generally declines to provide indemnification to  its customers.
 In  limited  circumstances,  to  secure  long-term  customer   contracts  at
 favorable rates, the  Company may negotiate  risk allocation through  mutual
 indemnification provisions that,  in the  Company's judgment,  appropriately
 allocate risk relative  to the  value of the  customer. Management  believes
 that  any liability  under these  indemnification  provisions would  not  be
 material.  The adoption of FIN 45  had no impact on the  Company's financial
 position, results of operations or cash flows.

     Effective July 1, 2003,  the Company adopted  SFAS No. 150 ("SFAS 150"),
 "Accounting for Certain Financial Instruments with  Characteristics  of Both
 Liabilities  and  Equity",  which  establishes  standards  for how an issuer
 classifies and  measures certain  financial instruments with characteristics
 of both liabilities and equity.  The  adoption  of  SFAS  150 had  no impact
 on the Company's financial position, results of operations or cash flows.


 Item 3.  Quantitative and Qualitative Disclosures About Market Risk
          ----------------------------------------------------------
      The Company's market risk exposure at September 30, 2003  is consistent
 with the types of market risk  and amount of exposure presented in  its 2001
 Annual Report on Form 10-K.


 Item 4.  Controls and Procedures
          -----------------------
      The Company  maintains  disclosure  controls and  procedures  that  are
 designed to  ensure  that  information  required  to  be  disclosed  in  the
 Company's Exchange  Act  reports  is  recorded,  processed,  summarized  and
 reported within the time  periods specified in  the Securities and  Exchange
 Commission's rules and forms  and that such  information is accumulated  and
 communicated to  the Company's  management,  including its  Chief  Executive
 Officer and Chief  Financial Officer,  as appropriate, to  allow for  timely
 decisions regarding  required disclosure.  In designing  and evaluating  the
 disclosure controls and procedures, management recognizes that  any controls
 and procedures, no matter how well  designed and operated, can  provide only
 reasonable assurance  of  achieving  the  desired  control  objectives,  and
 management is required to apply its judgment in evaluating  the cost-benefit
 relationship of possible controls and procedures.

      As of  September 30,  2003, the  end  of the  quarter covered  by  this
 report, the Company  carried out  an evaluation, under  the supervision  and
 with the participation of the Company's management, including  the Company's
 Chief Executive Officer and  the Company's Chief  Financial Officer, of  the
 effectiveness of  the  design  and operation  of  the  Company's  disclosure
 controls and  procedures.  Based  on  the  foregoing,  the  Company's  Chief
 Executive Officer and Chief  Financial Officer concluded that  the Company's
 disclosure  controls  and  procedures  were  effective  at   the  reasonable
 assurance level.

      There has  been  no change  in  the  Company's internal  controls  over
 financial reporting during the Company's most recent fiscal quarter that has
 materially affected,  or  is reasonably  likely  to materially  affect,  the
 Company's internal controls over financial reporting.


 PART II

 Item 1.   Legal Proceedings
           -----------------
           The Company and  its subsidiaries  are subject  to various  claims
           arising in  the ordinary  course of  business and  are parties  to
           various legal proceedings that constitute litigation incidental to
           the business of the Company and its subsidiaries. The Company does
           not believe that the outcome of such matters will have  a material
           effect  on  the  Company's   financial  position  or  results   of
           operations.


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

      (b)  Exhibit 11 -   Computation of Basic Earnings Per Common Share and
                          Diluted Earnings Per Common Share

      (c)  Exhibit 31.1 - Certification of Chief Executive Officer pursuant
                          to Rule 13a-14(a) and Rule 15d-14(a), promulgated
                          under the Securities Exchange Act of 1934, as
                          amended.

      (d)  Exhibit 31.2 - Certification of Chief Financial Officer pursuant
                          to Rule 13a-14(a) and Rule 15d-14(a), promulgated
                          under the Securities Exchange Act of 1934, as
                          amended.

      (e)  Exhibit 32.1 - Certification of Chief Executive Officer pursuant
                          to 18 U.S.C. Section 1350, as adopted pursuant to
                          Section 906 of the Sarbanes-Oxley Act of 2002.

      (f)  Exhibit 32.2 - Certification of Chief Financial Officer pursuant
                          to 18 U.S.C. Section 1350, as adopted pursuant to
                          Section 906 of the Sarbanes-Oxley Act of 2002.

      Reports on Form 8-K:

           The Company furnished  a report on  Form 8-K  dated July 28,  2003
           reporting under Item  12 the results  of operations and  financial
           condition for the three and six months ended June 30, 2003.

           The Company filed  a report on  Form 8-K  dated September 3,  2003
           reporting under Item 5 announcing it had entered into a definitive
           agreement to acquire  the stock of  Health Net Employer  Services,
           Inc.

<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.

                           First Health Group Corp.



      Dated:  November 12, 2003     /s/Edward L. Wristen
                                    ------------------------------------
                                    Edward L. Wristen
                                    President and Chief Executive Officer



      Dated:  November 12, 2003     /s/Joseph E. Whitters
                                    ------------------------------------
                                    Joseph E. Whitters
                                    Executive Vice President, Treasurer
                                    and Chief Financial Officer
                                    (Principal Financial Officer)