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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                FORM 10-Q/A NO. 2

(Mark One)

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

                For the Quarterly Period Ended September 30, 1996

                                       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: 0-17969


                                NEXTHEALTH, INC.
             (Exact Name of Registrant as Specified in its Charter)


           Delaware                                        86-0589712
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)


16600 N. Lago Del Oro Parkway, Tucson, Arizona               85739
(Address of Principal Executive Offices)                   (Zip Code)


                                 (520) 792-5800
              (Registrant's Telephone Number, including Area Code)


                                       N/A
   (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. [X] YES [ ] NO

On March 14, 1997, there were 8,554,938 shares of the registrant's Common Stock
outstanding.

Reference is made to the listing beginning on page 2 of all exhibits filed as a
part of this report.

                           PART II - OTHER INFORMATION

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ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

             (a)  Exhibits

         4.2      Certificate of Designation, Preferences and Rights of the
                  Convertible Preferred Stock, Series A and Cumulative Preferred
                  Stock, Series B of NextHealth, Inc.

         10.80    Term Note A between NextHealth, Inc. and AP LOM, LLC

         10.81    Term Note B between NextHealth, Inc. and AP LOM, LLC

         10.82    Warrant for 500,000 shares of Common Stock

         10.83    Deed of Trust for the use and benefit of AP LOM, LLC

         10.84    Guaranty made by NextHealth's subsidiaries

         10.85    General Security Agreement among NextHealth's subsidiaries and
                  AP LOM, LLC

             (b) Reports on Form 8-K

                  NONE

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                                   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.

                                   NextHealth, Inc.
                                   Registrant

DATE:   March 26, 1997         BY: /s/ William T O'Donnell, Jr
                                   --------------------------------------
                                   William T O'Donnell, Jr
                                   President and Chief Executive Officer



DATE:   March 26, 1997         BY: /s/ Loree Thompson
                                   --------------------------------------
                                   LOREE THOMPSON
                                   Chief Financial Officer


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