<PAGE>   1
                                  FORM 10-Q

                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

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


                For the quarterly period ended March 31, 1998
                                     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.
                     (formerly HealthCare COMPARE Corp.)
           (Exact name of registrant as specified in its charter)


          Delaware                                   36-3307583
          --------                                   ----------
(State or other jurisdiction of         (I.R.S. Employer Identification Number)
incorporation or organization)

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

                               (630) 241-7900
                               --------------
              (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 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 May
11, 1998 was 31,537,191.




<PAGE>   2



                  First Health Group Corp. and Subsidiaries

                                      INDEX

<TABLE>
<CAPTION>

Part I.  Financial Information                                       Page Number
                                                                    -----------
         <S>                                                            <C>
         Item 1. Financial Statements

         Consolidated Balance Sheets - Assets at  March 31, 1998
           and December 31, 1997 ...................................      3

         Consolidated Balance Sheets - Liabilities and Stockholders'
           Equity at March 31, 1998 and December 31, 1997 ..........      4

         Consolidated Statements of Operations for the three months
           ended March 31, 1998 and 1997 ...........................      5

         Consolidated Statements of Cash Flows for the three months
           ended March 31, 1998 and 1997 ...........................     6-7

         Notes to Consolidated Financial Statements ................     8-11

         Item 2. Management's Discussion and Analysis of Financial
                 Condition and Results of Operations ...............    12-17

         Item 3. Quantitative and Qualitative Disclosures About
                 Market Risk .......................................     17


Part II. Other Information

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


Signatures .........................................................     19

Exhibit 11 .........................................................    20-21
</TABLE>


<PAGE>   3


PART 1. FINANCIAL INFORMATION
FIRST HEALTH GROUP CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>


ASSETS                                       March 31, 1998   December 31, 1997
                                             --------------   ----------------
<S>                                          <C>                <C>
Current Assets:
  Cash and cash equivalents................  $  51,142,000      $  77,836,000
  Short-term investments...................      5,344,000          5,999,000
  Accounts receivable, less allowances for
    doubtful accounts of $9,966,000
    and $10,064,000, respectively..........     76,015,000         65,979,000
  Reinsurance recoverable..................     85,326,000        142,553,000
  Deferred income taxes....................     21,700,000         21,700,000
  Other current assets.....................     17,448,000         11,790,000
                                              ------------       ------------
  Total current assets.....................    256,975,000        325,857,000


Long-Term Investments:
  Marketable securities....................    201,055,000        175,938,000
  Other....................................     26,555,000         26,394,000
                                              ------------       ------------
                                               227,610,000        202,332,000

Property and Equipment:
  Buildings and improvements...............     52,719,000         51,914,000
  Computer equipment and software..........     74,593,000         61,542,000
  Office furniture and equipment...........     23,682,000         23,131,000
                                              ------------       ------------
                                               150,994,000        136,587,000

  Less accumulated depreciation and
    amortization...........................    (68,546,000)       (63,567,000)
                                              ------------       ------------

  Net property and equipment...............     82,448,000         73,020,000

Goodwill...................................    104,175,000        104,729,000

Other Assets...............................      3,176,000          1,940,000
                                              ------------       ------------
                                              $674,384,000       $707,878,000
                                              ============       ============
</TABLE>


                                      3


<PAGE>   4



FIRST HEALTH GROUP CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

LIABILITIES AND STOCKHOLDERS' EQUITY

                                             March 31, 1998   December 31, 1997
                                             --------------   ----------------
<S>                                          <C>                <C>
Current Liabilities:
  Accounts payable.........................  $  63,733,000      $  49,342,000
  Accrued expenses.........................     45,948,000         45,474,000
  Claims reserves..........................     95,534,000        150,517,000
  Income taxes payable.....................     11,819,000                 --
                                             -------------      -------------
  Total current liabilities                    217,034,000        245,333,000

Long-Term Debt.............................    200,000,000        200,000,000
Other Non-Current Liabilities..............      2,846,000          2,938,000
                                             -------------      -------------
  Total liabilities........................    419,880,000        448,271,000
Commitments and Contingencies..............             --                 --

Stockholders' Equity:
  Common stock.............................        381,000            376,000
  Additional paid-in capital...............    180,072,000        157,173,000
  Retained earnings........................    319,243,000        296,140,000
  Unrealized holding gain on marketable
    securities.............................      2,489,000          3,223,000
  Treasury stock, at cost..................   (247,681,000)      (197,305,000)
                                             -------------      -------------
  Total stockholders' equity...............    254,504,000        259,607,000
                                             -------------      -------------
                                             $ 674,384,000      $ 707,878,000
                                             =============      =============
</TABLE>


                                      4




<PAGE>   5



FIRST HEALTH GROUP CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                               Three Months Ended March 31,
                                             --------------------------------
                                                 1998                1997
                                             -------------      -------------
<S>                                          <C>                <C>
Revenues...................................  $ 127,758,000      $  64,921,000
                                             -------------      -------------
Operating expenses:                             
  Cost of services.........................     56,813,000         18,543,000
  Selling and marketing....................     12,837,000          7,209,000
  General and administrative...............     11,120,000          3,658,000
  Healthcare benefits......................      4,093,000          2,092,000
  Depreciation and amortization............      5,926,000          3,088,000
                                             -------------      -------------
                                                90,789,000         34,590,000
                                             -------------      -------------
                                                
Income from operations.....................     36,969,000         30,331,000
Other (income) expense:
  Interest expense.........................      3,184,000                 --
  Interest income..........................     (5,261,000)        (3,491,000)
                                             -------------      -------------

Income before income taxes.................     39,046,000         33,822,000

Income taxes...............................    (15,943,000)       (12,988,000)
                                             -------------      -------------
                                             
Net income.................................  $  23,103,000      $  20,834,000
                                             =============      =============

Weighted average shares outstanding - basic     31,855,000         33,526,000
                                             =============      =============
Net income per common share - basic........  $         .73      $         .62
                                             =============      =============

Weighted average shares 
  outstanding - diluted....................     32,442,000         34,157,000
                                             =============      =============
Net income per common share - diluted......  $         .71      $         .61
                                             =============      =============

</TABLE>

                                      5



<PAGE>   6


FIRST HEALTH GROUP CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                               Three Months Ended March 31,
                                             --------------------------------
                                                 1998                1997
                                             -------------      -------------
<S>                                          <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Cash received from customers ............  $ 121,307,000      $  61,921,000
  Cash paid to suppliers and employees ....    (73,544,000)       (28,783,000)
  Healthcare benefits paid ................     (1,521,000)          (973,000)
  Interest income received ................      3,637,000          3,325,000
  Interest expense paid ...................     (2,287,000)                --
  Income taxes paid, net ..................     (2,927,000)          (465,000)
                                             -------------      -------------
  Net cash provided by 
    operating activities ..................     44,665,000         35,025,000
                                             -------------      -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of investments ................   (109,366,000)       (38,246,000)
  Sales of investments ....................     85,017,000         32,346,000
  Purchase of property and equipment ......    (14,382,000)       (17,075,000)
                                             -------------      -------------
  Net cash used in investing activities ...    (38,731,000)       (22,975,000)
                                             -------------      -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Purchase of treasury stock ..............    (50,376,000)       (23,053,000)
  Proceeds from issuance of common stock ..     17,748,000          1,585,000
  Proceeds from sale of put options 
    on common stock........................             --          3,352,000
                                             -------------      -------------
  Net cash used in financing activities ...    (32,628,000)       (18,116,000)
                                             -------------      -------------

NET DECREASE IN CASH AND 
  CASH EQUIVALENTS ........................    (26,694,000)        (6,066,000)
CASH AND CASH EQUIVALENTS, 
  BEGINNING OF PERIOD .....................     77,836,000         77,439,000
                                             -------------      -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD ..  $  51,142,000      $  71,373,000
                                             =============      =============

NON-CASH FINANCING ACTIVITY:
  Treasury stock purchase payable..........  $          --      $  10,055,000
                                             =============      =============

</TABLE>


                                      6



<PAGE>   7



FIRST HEALTH GROUP CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                               Three Months Ended March 31,
                                             --------------------------------
                                                 1998                1997
                                             -------------      -------------
<S>                                          <C>                <C>
RECONCILIATION OF NET INCOME TO NET CASH 
  PROVIDED BY OPERATING ACTIVITIES:

NET INCOME.................................  $  23,103,000      $  20,834,000
                                             -------------      -------------

ADJUSTMENTS TO RECONCILE NET INCOME TO NET 
  CASH PROVIDED BY OPERATING ACTIVITIES:
    Depreciation and amortization..........      5,926,000          3,088,000
    Change in provision for 
      uncollectible receivables............        (98,000)            (6,000)
    Amortization of bond premiums..........        115,000            442,000
    Tax benefit from stock.................
      options exercised....................      5,156,000            277,000
    Unrealized holding gain on 
      marketable securities................        388,000            446,000
    Other, net.............................     (1,552,000)          (109,000)

    Changes in Assets and Liabilities:
    Accounts receivable....................     (9,938,000)        (2,217,000)
    Other current assets...................     (5,658,000)         1,857,000
    Reinsurance recoverable................     57,227,000                 --
    Accounts payable and accrued expenses..     14,865,000         (1,091,000)
    Claims reserves........................    (54,983,000)          (267,000)
    Income taxes payable...................     11,819,000         12,311,000
    Goodwill, net of amortization..........       (377,000)                --
    Non-current assets and liabilities.....     (1,328,000)          (540,000)
                                             -------------      -------------

  TOTAL ADJUSTMENTS........................     21,562,000         14,191,000
                                             -------------      -------------

  NET CASH PROVIDED BY OPERATING ACTIVITIES  $  44,665,000      $  35,025,000
                                             =============      =============

</TABLE>


                                      7



<PAGE>   8



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, 1997.
     Accordingly, footnote disclosures which would substantially duplicate the
     disclosures contained in the December 31, 1997 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 generally accepted
     accounting principles have been condensed or omitted pursuant to such
     rules and regulations.  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 July 1, 1997, the Company acquired all the outstanding shares of
     capital stock of First Health Strategies, Inc. ("Strategies") and First
     Health Services Corporation ("Services") (collectively, "FHC") excluding
     the stock of Viable Information Processing Systems, Inc., a wholly-owned
     subsidiary of Services, from First Financial Management Corporation and
     First Data Corporation for a purchase price of $202 million in cash
     subject to adjustment provisions for the change in net working capital.
     As a result of the change in net working capital, the purchase price was
     adjusted to approximately $196 million.  Strategies, based in Salt Lake
     City, Utah, and Services, based in Richmond, Virginia, provide independent
     health care administration services such as claims administration and
     associated health care management services to the self-insured corporate
     and government markets.  The acquisition was financed with a $200 million
     credit agreement underwritten by the Company's bank group.  The
     acquisition was effected pursuant to the terms of a stock purchase
     agreement dated May 22, 1997.

     Based on the terms of the acquisition, the transaction was accounted       
     for as a purchase of FHC by the Company for financial reporting and
     accounting purposes.  Accordingly, the consolidated statements of
     operations include FHC's results since the date of acquisition.   The
     Company revalued the basis of FHC's acquired assets and assumed liabilities
     to fair value at the date of purchase.  The purchase price of FHC was
     calculated as the net cash paid plus the Company's transaction costs.  The
     difference between the purchase price and the fair value of the
     identifiable tangible and intangible assets acquired, the amount allocated
     to in-process research and development, and the liabilities assumed and
     incurred was recorded as goodwill and will be amortized over a period of 30
     years.  The allocation of the purchase price was as follows:

<TABLE>
          <S>                                                      <C>
          Purchase price                                           $196,430,000
          Transaction costs                                           3,000,000
                                                                   ------------
          Total purchase price                                     $199,430,000
                                                                   ============

</TABLE>


                                      8



<PAGE>   9




<TABLE>
          <S>                                                      <C>
          Purchase price was allocated as follows:
                Fair value of assets acquired                      $ 87,214,000
                Goodwill                                             98,291,000
                In-process research and development                  80,000,000
                Liabilities assumed                                 (40,039,000)
                Liability for restructuring and integration costs   (26,036,000)
                                                                   ------------
                                                                   $199,430,000
                                                                   ============

</TABLE>


     In-process research and development represents projects related to the 
     next generation of FHC's claims processing system.  These projects
     represented FHC's research and development efforts prior to the
     acquisition, which had not yet reached the stage of technological
     feasibility and had no alternative future use; therefore, the ultimate
     revenue generating capability of these projects was uncertain.  The
     purchased research and development was valued by an independent appraiser
     using a discounted, risk-adjusted future income approach taking into
     account risks related to existing and future markets and an assessment of
     the life expectancy of the technology.  The consolidated statement of
     operations for the third quarter of 1997 included a charge for the
     purchased research and development which was not deductible for income tax
     purposes.  The Company will incur approximately $10 million in additional
     development expenditures to make the purchased research and development
     commercially viable.  Such modifications are expected to be completed
     within 2 to 3 years, with a substantial portion of the expenditures being
     incurred within the next 12 to 24 months.

     The following unaudited pro forma information reflects the results of      
     the Company's operations as if the acquisition had occurred at the
     beginning of 1997 adjusted for (i) the effect of recurring charges related
     to the acquisition, primarily the amortization of goodwill, recording of
     interest expense on the borrowings to finance the acquisition and a
     reduction of depreciation expense due to the write-down to fair value of
     fixed assets, (ii) the removal of revenues and related cost of services and
     expenses for acquired businesses held for sale, and (iii) the exclusion of
     the effects of the non-recurring charge of $80 million for purchased
     in-process research and development recorded by the Company in fiscal 1997
     following consummation of the acquisition.

<TABLE>
<CAPTION>
                                                    Three Months Ended
                                                      March 31, 1997
                                                    ------------------
          <S>                                          <C>
          Pro forma:
             Revenue                                   $125,059,000
             Net income                                  19,949,000
             Net income per common share - basic                .60
             Net income per common share - diluted              .58
</TABLE>


     These pro forma results have been prepared for comparative purposes        
     only and do not purport to be indicative of what operating results would
     have been had the acquisition actually taken place at the beginning of
     1997, nor do they purport to represent results of future operations of the
     merged companies.

3.   The Company's investments in marketable securities which are classified
     as available for sale had a net unrealized loss in market value of
     $734,000, net of deferred income taxes, for the three months ended March
     31, 1998.  The net unrealized gain at March 31, 1998, included as a
     component of stockholders' equity, was $2,489,000 net of deferred income
     taxes.  The Company's $12,561,000 



                                      9


<PAGE>   10



     investment in a limited partnership is carried at cost.  The current
     value of the Company's interest in the limited partnership at March 31,
     1998, as reported by the partnership, was $16,218,000.  In the third
     quarter of 1995, the Company invested in another limited partnership which
     invests in equipment which is leased to third parties.  This investment is
     accounted for on the equity method since the Company owns a 20% interest in
     a particular tranche of the limited partnership.  The Company's
     proportionate share of the partnership's income was $150,000 and $115,000
     for the three months ended March 31, 1998 and 1997, respectively, and is
     included in interest income. In the second quarter of 1997, the Company
     made an additional investment of $4.2 million in this limited partnership
     for a 25% interest in a particular tranche of new equipment.  The
     additional investment is also accounted for on the equity method.  The
     Company's proportionate share of the partnership's income attributable to
     this tranche for the three months ended March 31, 1998 was $75,000 and is
     included in interest income.

4.   The Company's Board of Directors has approved the repurchase of up to 7.5
     million shares of the Company's outstanding common stock.  Purchases may
     be made from time to time, depending on market conditions and other
     relevant factors.  During the first three months of 1998, the Company
     repurchased 745,000 shares for a total cost of approximately $37 million
     or an average price of $49.33 per share.  Such shares are recorded as
     treasury shares, at cost, and can be used for general corporate purposes.
     The Company has approximately 4,052,000 shares available for repurchase
     under its repurchase authorizations as of March 31, 1998.  In connection
     with the exercise of options to purchase 425,000 shares of common stock
     during the first quarater of 1997, a certain employee paid the exercise
     price by delivering to the Company approximately 247,000 of previously
     owned common stock.  These shares were also recorded as treasury shares at
     cost.

     In connection with its stock repurchase authorizations, the Company sold   
     put options which obligate the Company, at the election of the option
     holders, to repurchase up to 1,500,000 shares of Common Stock at prices
     ranging from $46.50 to $48.00 per share.  The outstanding put options
     expire on various dates between August 7, 1998 and March 17, 1999.  As of
     May 11, 1998, no shares have been put to the Company pursuant to these
     options.

5.   The Company adopted Statement of Financial Accounting Standards No. 128
     (SFAS No. 128), "Earnings Per Share" in 1997.  SFAS No. 128 specifies the
     computation, presentation and disclosure requirements for earnings per
     share and requires retroactive application to all prior periods presented.
     In calculating net income per common share, shares increased for diluted
     net income per common share by 587,000 and 631,000 for the three months
     ended March 31, 1998 and 1997, respectively, due to the effect of stock
     options.  Net income per common share decreased by $.02 and $.01 for these
     same periods of 1998 and 1997, respectively, due to the effect of stock
     options.

     Effective January 1, 1998, the Company adopted Statement of Financial      
     Accounting Standards No. 130, "Reporting Comprehensive Income."
     Comprehensive income is a measurement of all changes in stockholders'
     equity that result from transactions and other economic events other than
     transactions with stockholders.  For the Company, these changes consist of
     changes in unrealized gains and losses from its investment portfolio.  This
     amount, net of related taxes, is presented as other comprehensive income
     and is added to net income resulting in total comprehensive income.  Other
     comprehensive income was a loss of $734,000 and $709,000 for the three
     months ended March 31, 1998 and 1997, respectively, net of related taxes.
     Total comprehensive income amounted to $22,369,000 and $20,125,000 for the
     three months ended March 31, 1998 and 1997, respectively.



                                      10


<PAGE>   11




6.   On January 1, 1998, the Company changed its name from HealthCare COMPARE
     Corp. to First Health Group Corp.  The name change is expected to enhance
     the Company's marketing efforts by integrating its various operations and
     service offerings under one name that communicates the full depth and
     range of the Company's health care services.



                                      11




<PAGE>   12



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" 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 obligations 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; the
ability to expand the Company's workers' compensation and risk businesses;
shifts in customer demands; the timely completion of modifications to ensure
that the Company's systems are Year 2000 compliant; 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 at the terms necessary to support the Company's
future business.  In addition, if the Company does not successfully integrate
FHC (as defined below) into its existing business, the Company may not realize
the intended benefits of the acquisition.

RECENT DEVELOPMENTS

     On July 1, 1997, the Company acquired all of the outstanding shares of
capital stock of FIRST HEALTH Strategies, Inc. and FIRST HEALTH Services
Corporation (collectively "FHC"), excluding the stock of Viable Information
Processing Systems, Inc., a wholly-owned subsidiary of Services, from First
Financial Management Corporation and First Data Corporation for a purchase
price of $202 million in cash, subject to a working capital adjustment which
resulted in a reduction of the purchase price to approximately $196 million.
In connection with the acquisition, which was accounted for as a purchase, the
Company recorded a charge to earnings of $80 million for purchased in-process
research and development which is not deductible for income tax purposes.
In-process research and development relates to the next generation of FHC's
claims processing system software which had not yet reached the stage of
technological feasibility and had no alternative future use; therefore, the
ultimate revenue generating capability of these projects was uncertain.  The
research and development acquired will require additional development efforts,
estimated to cost $10 million, to become commercially viable.  Such
modifications are expected to be completed within 2 to 3 years, with a
substantial portion of the expenditures being incurred within the next 12 to 24
months.


                                      12



<PAGE>   13



     On August 30, 1997 the Company acquired Loyalty Life Insurance Company
("Loyalty"), which is licensed to conduct health insurance business in 49
states for a purchase price of approximately $12 million.  On October 1, 1996,
in anticipation of the acquisition, Loyalty entered into a reinsurance
agreement with a former affiliate, National Farmers Union Life Insurance
Company ("National Farmers").   Under the terms of the reinsurance agreement,
all premiums and deposits received by Loyalty are transferred to National
Farmers.  Premiums and policy benefits, which are not material in amount, are
ceded to National Farmers and shown net of such cessions in the consolidated
statements of operations.  Reinsurance recoverable and the related claim
reserves are reported separately in the Consolidated Balance Sheets.  Loyalty
continues to have primary liability as a direct insurer for risks reinsured.
Loyalty is currently seeking approvals from insurance regulators and policy
holders, as necessary, which would permit the legal replacement of Loyalty by
National Farmers.  Such approvals would release Loyalty from future liability
under its existing insurance policies and result in the removal of policy
liabilities from the Company's Consolidated Balance Sheets.  The Company
anticipates receiving the remainder of the approvals in 1998, but there can be
no assurance that such approvals will be obtained.

RESULTS OF OPERATIONS

     Revenues for the three months ended March 31, 1998 increased 97% or
$62,837,000 from the comparable period of 1997.  The Company's revenues consist
primarily of fees for cost management and administrative  services provided
under contracts on a percentage of savings basis (PPO and fee schedule
services) or on a predetermined contractual basis.  The Company also derives
revenues based on a fixed monthly charge for each participant, excluding
covered dependents, in a client-sponsored health care plan or on a
per-transaction basis.  As a result of the Company's insurance company
acquisitions, revenues also include an immaterial amount of premium revenue.

     The following table sets forth information with respect to the sources of
the Company's revenues for the three months ended March 31, 1998 and 1997:

<TABLE>
<CAPTION>

                                          SOURCES OF REVENUE
                                           ($ in thousands)

                                      Three Months Ended March 31,
                                      -----------------------------

                                        1998     %     1997     %
                                      --------  ----  -------  ----
             <S>                      <C>       <C>   <C>      <C>
             Service:
              PPO Services             $56,655    44% $50,896    78%
              Claims Admin & Related    47,244    37       --    --
              Clinical Management
               Services                 11,200     9    4,780     7
              Fee Schedule Services      7,366     6    6,299    10
                                      --------  ----  -------  ----
             Total Service             122,465    96   61,975    95
                                      --------  ----  -------  ----

             Risk:
              Premiums, Net              4,560     4    2,946     5
              Service                      733    --       --    --
                                      --------  ----  -------  ----
             Total Risk                  5,293     4    2,946     5
                                      --------  ----  -------  ----
             Grand Total              $127,758   100% $64,921   100%
                                      ========  ====  =======  ====
</TABLE>



                                      13



<PAGE>   14



     The growth in revenue during the three months ended March 31, 1998 from
the comparable period of 1997 is primarily attributable to the acquisition of
FHC. PPO revenue increased $5,759,000 (11%) from the same period of 1997. This
growth is primarily the result of additional revenue from FHC clients and
increased utilization of the PPO network by existing clients.  Claims
administration and related represents the majority of FHC revenue earned from
processing claims in client-sponsored health care plans.  Revenue from clinical
cost management services increased $6,420,000 (134%) for the three months ended
March 31, 1998 from the comparable period in 1997 due primarily to the purchase
of FHC.  Revenue from fee schedule services increased $1,067,000 (17%) from the
comparable period in 1997 due primarily to expanded contract activity with
several existing clients.  Premium revenue increased $1,614,000 (55%) for the
three months ended March 31, 1998 from the comparable period in 1997 due
primarily to new client additions.

     On a sequentially quarterly basis, revenue has declined from the fourth
quarter of 1997 and the Company anticipates revenue will decline as well from
the first quarter to the second quarter of 1998 (see FHC Acquisition Status)
and (The Company's Traditional Business).

     Cost of services increased $38,270,000 (206%) for the three months ended
March 31, 1998 from the comparable period of 1997.  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.  These
costs have increased significantly as a percent of revenue due to the nature of
FHC's business.  Claims administration is a labor-intensive, high-volume,
low-margin business.  Cost of services may continue to increase as the Company
integrates the FHC business with its traditional cost management operations.

     Selling and marketing costs for the three months ended March 31, 1998
increased $5,628,000 (78%) from the comparable period of 1997 due primarily to
salaries and training of sales personnel primarily associated with the FHC
acquisition but these expenses, as a percentage of revenue, have declined since
the third quarter of 1997 as the Company has consolidated traditional FHC sales
activities.  To a lesser extent, the increase related to commissions paid to
agents and third-party administrators by the Company's insurance entities.

     General and administrative costs for the three months ended March 31, 1998
increased $7,462,000 (204%) from the comparable period of 1997.  This increase
is primarily attributable to the operations of FHC as well as growth in the
Company's insurance subsidiaries. To a lesser extent, the increase relates to
salaries and benefits incurred in the executive and administrative areas of the
Company.

     Healthcare benefits represent medical losses incurred by insureds of the
Company's insurance entities.  The loss ratio (losses as a percent of premiums)
was 90% for the three months ended March 31, 1998 compared to 71% for the
comparable period of 1997.  The increase relates to medical losses incurred for
the Company's stop loss insurance.  Due to the small size of this business,
this expense is expected to be volatile until the Company can fully integrate
its managed care services.

     Depreciation and amortization expenses increased $2,838,000 (92%) for the
three months ended March 31, 1998 from the comparable period of 1997 due
primarily to purchases of computer hardware and software as well as the
purchase of the Company's Scottsdale facility and amortization of goodwill
associated with the FHC and Loyalty acquisitions.  Depreciation expense as a
percent of revenue remained between 4% and 5%.


                                      14



<PAGE>   15




     Interest income for the three months ended March 31, 1998 increased
$1,770,000 (51%) for the same period in 1997 although the amount of cash
equivalents and investments has only increased 8% since March 31, 1997 due to
the repurchases of the Company's common stock.  The increase in interest income
is due primarily to the Company investing in longer term investments with
higher yields and gains associated with the sale of various investments.

     Interest expense represents interest paid on the revolving credit
agreement entered into on July 1, 1997.  The interest rate has been
approximately 6% since the initial funding under the credit agreement.

     Net income for the three months ended March 31, 1998, increased $2,269,000
(11%) from the comparable period of 1997.  This increase is due primarily to
the revenue growth achieved through the FHC acquisition.

     Diluted net income per common share for the three months ended March 31,
1998 increased 16%  to $.71 per share from the comparable period of 1997.  The
increase in net income per common share was favorably impacted by the
repurchase of approximately 745,000 shares of Company common stock during the
first three months of 1998.  For the three months ended March 31, 1998, there
were approximately 5% fewer weighted average common shares outstanding than
during the comparable period of 1997.

LIQUIDITY AND CAPITAL RESOURCES

     The Company had $39,941,000 in working capital at March 31, 1998 compared
with working capital of $80,524,000 at December 31, 1997.  The decrease is
primarily attributable to the repurchase of 745,000 shares of Company Common
Stock for a total cost of $36,751,000 during the first three months of 1998.
Through the first three months of the year, operating activities provided
$44,665,000 of cash.  Investment activities used $38,731,000 of cash
representing net purchases of investments of $24,349,000 and purchases of fixed
assets of $14,382,000.  Financing activities used $32,628,000 of cash
representing $50,376,000 in purchases of treasury stock (of which $36,751,000
was purchased on the open market) partially offset by $17,748,000 in proceeds
from issuance of common stock.

     On July 1, 1997, the Company entered into a $200 million revolving credit
agreement (the "Agreement") to facilitate the acquisition of FHC.  In August,
1997, the Agreement was amended to increase available borrowings to $350
million.  As of March 31, 1998, $200 million was outstanding under this
facility.

     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.

FHC ACQUISITION STATUS

     The Company currently estimates that the majority of the integration of
the acquisition will continue throughout 1998 in order to properly rationalize
the various components of FHC.  The Company is focusing First Health Strategies
on the niche of serving multi-sited employers of 1,000 or more employees.  As a
result of this focus, the Company has sold several hundred client contracts
that do not fit into this niche which represent approximately $20 million in
annual revenue.  The Company did not receive material consideration for this
sale.  Additionally, the Company expects to exit certain other service lines
that don't fit into this niche.  The Company has closed sales and claims
pricing locations throughout the country to centralize activities and fully
integrate duplicate support and administrative functions.




                                      15




<PAGE>   16




     The Company is in the process of instituting meaningful price increases
for claims administration services and even larger increases for current
clients that are not utilizing the Company's managed care services.  The
Company currently anticipates that these actions may result in the potential
loss of a significant amount of business.  Additionally, the Company is
negotiating with current claims administration clients to sell them its PPO,
clinical management and pharmacy benefit management services plus the Company
is selling stop loss insurance where appropriate.  The biggest challenge the
Company will be facing in the foreseeable future will be to reduce expenses as
quickly as the planned reduction in revenue.  The Company's inability to
successfully execute on merger and integration plans may have a material
adverse impact on the Company's business.

THE COMPANY'S TRADITIONAL BUSINESS

     Throughout the first two quarters of 1998, the Company will be responding
to the loss of some group health business from current clients, especially in
the Federal Employee Health Benefit (FEHBA) area.  The Company anticipates
realizing a loss in business from clients that have not instituted more
aggressive managed care programs to better control escalating health care
costs.  However, the Company anticipates its workers' compensation and risk
areas will grow in excess of 20% in 1998.

YEAR 2000 MATTERS

     The Company has identified all significant applications that will require
modification to ensure Year 2000 compliance.  Internal and external resources
are being used to make the required modifications and test Year 2000
compliance.  The Company plans to complete the modifications and testing
process of all significant applications by mid 1999, prior to any anticipated
impact on its operating systems.  The total cost of the Year 2000 project is
estimated at $10,000,000 and is being funded through operating cash flows.  Of
the total project cost, approximately $3,500,000 is attributable to the
purchase of new hardware and software which will be capitalized.  The remaining
$6,500,000, which will be expensed as incurred, is not expected to have a
material effect on the results of operations.  The Company expects to receive
reimbursement of at least 10% of the costs directly from a number of its
clients due to the nature of the contractual arrangements with these entities.

     The costs of the project and the date on which the Company believes it
will complete the Year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources, third-party
modification plans and other factors.  However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially
from those anticipated.  Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes and other similar uncertainties.

     In addition, the Company has communicated with others with whom it does
significant business to determine Year 2000 compliance readiness and the extent
to which the Company is vulnerable to any third-party Year 2000 issues.  There
can be no assurance that the systems of other companies on which the Company's
systems rely will be converted in a timely manner, or that a failure to convert
by another company, or a conversion that is incompatible with the Company's
systems, would not have a material adverse effect on the Company.



                                      16




<PAGE>   17




NEW ACCOUNTING PRONOUNCEMENTS

     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 establishes
standards for reporting information about operating segments and related
disclosures about products and services, geographic areas and major customers.
This statement is effective for fiscal years beginning after December 15, 1997.
This standard expands or modifies current disclosures and, accordingly, will
have no impact on the Company's reported financial position, results of
operations and cash flows.  The Company is assessing the impact of SFAS No. 131
on its future reporting.

     In March 1998, the Accounting Standards Executive Committee of the AICPA
issued Statement of Position 98-1, ("SOP 98-1"), "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use."  The SOP provides
guidance on accounting for the costs of computer software developed or obtained
for internal use.  Specifically, certain external payroll and payroll related
costs should be capitalized during the application development state of a
project and depreciated over the computer software's useful life.  The Company
currently expenses these costs as incurred and is evaluating the effects of
this SOP on its accounting for internally developed software.  The SOP is
expected to be adopted in 1998.



Item 3.  Quantitative and Qualitative Disclosures About Market Risk

         Not applicable.


                                      17



<PAGE>   18



PART II

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

            (a)  Exhibit 11 - Computation of Basic Earnings Per Common Share

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

         Reports on Form 8-K:

            None



                                      18



<PAGE>   19


                                  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: May 11, 1998                /s/James C. Smith
                                   --------------------------------------------
                                   James C. Smith 
                                   President and Chief Executive Officer



Dated: May 11, 1998                /s/Joseph E. Whitters
                                   --------------------------------------------
                                   Joseph E. Whitters
                                   Chief Financial Officer
                                   (Principal Financial and Accounting Officer)


                                      19