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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-K


              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                  For the fiscal year ended December 31, 1996

                         Commission file number 0-24986


                              EMCARE HOLDINGS INC.
             (Exact Name of Registrant as Specified in Its Charter)


                DELAWARE                                          13-3645287
     (State or Other Jurisdiction of                           (I.R.S. Employer
     Incorporation or Organization)                          Identification No.)

      1717 MAIN STREET, SUITE 5200, DALLAS, TEXAS                   75201
        (Address of Principal Executive Offices)                  (Zip Code)

Registrant's telephone number, including area code:              (214) 712-2000

Securities registered pursuant to Section 12(b) of the Act:  NONE

Securities registered pursuant to Section 12(g) of the Act:  COMMON STOCK,
                                                             PAR VALUE $.01
                                                             PER SHARE (THE
                                                             "COMMON STOCK")



        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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|

        As of March 21, 1997, the aggregate market value of voting  stock held
by non-affiliates was $191,147,817.

        As of March 21, 1997, there were shares 8,168,797 of Common Stock
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

    The Proxy Statement for the 1997 Annual Meeting is incorporated into Part
III of this Form 10-K by reference.


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                                    INDEX TO
                           ANNUAL REPORT ON FORM 10-K

<TABLE>
<CAPTION>
                                                                           Page
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         <S>      <C>                                                       <C>
PART I
         ITEM 1.  BUSINESS..............................................     3
         ITEM 2.  PROPERTIES............................................    13
         ITEM 3.  LEGAL PROCEEDINGS.....................................    14
         ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF
                  SECURITY HOLDERS......................................    14

PART II
         ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND
                  RELATED STOCKHOLDER MATTERS...........................    15
         ITEM 6.  SELECTED FINANCIAL DATA...............................    16
         ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS
                  OF FINANCIAL CONDITION AND RESULTS
                  OF OPERATIONS.........................................    17
         ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY
                  DATA..................................................    24
         ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH
                  ACCOUNTANTS ON ACCOUNTING AND
                  FINANCIAL DISCLOSURE..................................    41

PART III
         ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
                  REGISTRANT............................................     *
         ITEM 11. EXECUTIVE COMPENSATION................................     *
         ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                  OWNERS AND MANAGEMENT.................................     *
         ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
                  TRANSACTIONS..........................................     *

PART IV
         ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
                  REPORTS ON FORM 8-K...................................    42
SIGNATURES        ......................................................    47
</TABLE>


*    Incorporated by reference to the Company's Proxy Statement for its 1997
     Annual Meeting, which the Company anticipates filing with the Securities
     and Exchange Commission on or before April 30, 1997.


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                                     PART I

ITEM 1.  BUSINESS.

                  EmCare Holdings Inc. ("Holdings," together with its
subsidiaries and affiliates the "Company") provides physician practice
management in hospital emergency departments ("EDs") and other practice
settings. The Company has managed emergency physician practices for more than
20 years primarily in hospitals with higher volume EDs. The Company recruits
physicians, evaluates their credentials, and arranges contracts and schedules
for their services. The Company also assists in such operational areas as staff
coordination, quality assurance, departmental accreditation, billing,
recordkeeping, third party payment, and other administrative services.

                  The Company markets its services primarily to hospitals with
EDs that have more than 12,000 patient visits per year and multi-site systems
(collectively referred to as "hospitals"). At December 31, 1996, the Company
had management contracts relating to 139 EDs in 19 states with approximately
2.5 million patient visits per year. In addition to the Company's higher volume
emergency physician services management, the Company provides physician
services management for lower volume emergency medicine practices and
in-patient physician group practices. The Company also provides billing
services for emergency physician services management contracts and provides
physician placement services, primarily on a locum tenens (temporary) basis,
across a broad range of practice specialties.

                  The Company is a Delaware corporation, incorporated in
January 1992 for the purpose of effecting a recapitalization in which it became
the parent company of its predecessor, EmCare, Inc. The Company completed its
initial public offering of securities in December 1994. The Company's services
are provided through its corporate and other subsidiaries and under agreements
with certain professional associations and corporations. References to the
"Company" are to the Company or to the Company along with its predecessors,
subsidiaries, and such professional associations and corporations, as the
context indicates.

                  The principal executive office of the Company is located at
1717 Main Street, Suite 5200, Dallas, Texas 75201. The Company's telephone
number at this office is (214) 712-2000.

                  This Form 10-K contains both disclosures concerning
historical matters and forward looking statements. For purposes of the Private
Securities Litigation Reform Act of 1995, the reader should consider any
statements not solely addressing historical matters to be forward looking
statements subject to the protection of the act. Such forward looking
statements involve risks and uncertainties that could cause the Company's
actual results to differ significantly from such statements. These risks and
uncertainties include the constantly changing health care environment, the pace
of new business and acquisition activity, the payment rates and coverage for
health care services, and the transition of the Company's billing activities
from outside vendors to a subsidiary of the Company.


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MARKET OVERVIEW

                  Hospitals have been greatly affected by changes in the United
States health care industry during the last several years, including the
increasing use of capitation and other fixed payment systems that shift
financial risk from payors to providers. The evolving managed care environment
requires hospitals to be more cost effective in all aspects of their
operations, including the recruiting, scheduling, retaining, and managing of
physicians, and billing and collecting for their services. As a result, many
hospitals have turned to outside management organizations like the Company for
physician practice management services.

                  There are approximately 5,200 hospitals in the United States
that operate EDs. Approximately 80% of these hospitals use outsourced
physicians to staff their EDs. The groups to which ED services are outsourced
are either national groups, regional groups, or small local groups. The
national groups serve approximately 20% of the market. Approximately 40% of EDs
use local physician groups that manage only one or two EDs. The Company
believes that these groups are encountering increasing difficulty in
controlling costs and satisfying recordkeeping and other administrative
requirements as demanded in today's evolving health care industry. As a result,
the Company believes that there are significant consolidation opportunities
within the emergency physician practice management industry.

                  EDs are typically the hospital's most visible operation to
the public and generate approximately 40% of inpatient admissions. The Company
believes that EDs will continue to be essential to serve the health care needs
of the public in cases of unpredictable, acute, and serious trauma and illness.

                  Emergency physicians act as primary care physicians both to
patients requiring emergency services and to patients who are less seriously
ill or injured and who do not otherwise have access to a physician. Using the
ED to treat less seriously ill or injured patients is perceived to be
inefficient. Health care organizations such as the Company, however, are
developing express care units within or contiguous to the ED so that physicians
can treat these patients in a more cost effective setting while maximizing the
ED's resources. The Company believes that with proper procedures, staffing, and
configuration, EDs can provide cost effective primary care while maintaining
their essential emergency care function.

                  In addition to hospitals, the market for physician practice
management includes integrated health care delivery and financing systems.
These systems, which include health maintenance organizations ("HMOs") and
other third party payors, large employers, and hospitals in various
combinations, must address the same issues of recruiting, scheduling, and
managing physicians that hospitals face in managing their EDs. The Company
believes that these systems will increasingly turn to outside organizations,
either on an outsource or joint venture basis, to arrange and manage the
professional component of their services.

                  Changes in the United States health care industry are also
eroding the traditional relationship between physicians and their patients.
Increasing practice complexity and costs, declining per patient revenues
resulting from new types of payments, and declining patient volume resulting
from steerage of patients to HMOs and other groups have led many physicians to
affiliate themselves with organizations that can provide the capital resources,
information, and practice management expertise that physicians need in today's
environment.


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STRATEGY

                  The Company's  objective is to continue to grow as a high
quality, cost effective provider of emergency physician practice management
services in an increasingly competitive managed care environment. The Company's
strategies to achieve this objective are as follows.

                  GROWTH THROUGH ACQUISITIONS. The Company intends to continue
to pursue the growth of its physician practice management business by acquiring
local and regional groups. These groups are faced with increasing pressure to
provide systems and services requiring the resources and management expertise
of a larger organization specializing in ED practice management. Since January
1995 the Company has added 74 EDs and seven other practice settings through
acquisitions.

                  GROWTH THROUGH MARKETING. Through marketing efforts, the
Company intends to obtain new ED contracts both by replacing existing
management companies and by contracting with hospitals that have not previously
outsourced ED practice management. The Company markets its services primarily
to hospitals with higher volume EDs and multi-site systems. Since January 1995
the Company has added 12 EDs through its marketing efforts.

                  EXPAND SERVICES OF EDS. The Company intends to expand the use
of the facilities and systems of its higher volume EDs to provide cost
effective care to patients who require less urgent services and who do not
otherwise have access to a physician. The Company will therefore continue to
assist its hospital clients in establishing "express care units" within or in
conjunction with their EDs to permit more cost effective treatment of lower
acuity ED patients. In addition, the Company has continuing discussions with
HMOs and other managed care organizations concerning the use of EDs to provide
medical services to their participants. These efforts are designed to expand ED
capabilities and increase patient volume.

                  ASSIST PHYSICIANS IN A MANAGED CARE ENVIRONMENT. The Company
intends to provide to physicians certain resources necessary to compete in
today's managed care environment, including access to patients, capital
resources, information systems, and expertise in third party payment programs
and practice management. These advantages enhance the Company's ability to
retain high quality physicians.

                  ASSIST CLIENTS TO CONTROL COSTS. The Company intends to use
its experience in physician practice management to help its hospital clients
control costs while providing consistent high quality care. In addition to the
economic advantages from expanding the uses of ED facilities, these efforts
include assisting clients in developing standardized procedures and protocols
that reduce unnecessary diagnostic testing and aligning the economic interests
of the physicians with the productivity of the ED.

RECENT ACQUISITIONS

                  In 1996, the Company acquired six physician practice
management companies providing ED services to hospitals in Arkansas,
California, Illinois, Louisiana, Oklahoma, and Texas. The related physician
practices had 627,000 patient visits in 1996. The acquisitions established new
markets for the Company in California, Illinois,



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and Oklahoma. The Company acquired these companies for an aggregate of $39.9
million, which consisted of $29.3 million in cash, $9.1 million of obligations
payable over two to seven years, and 56,355 shares of Common Stock valued at an
average of $26.62 per share, or an aggregate of $1.5 million. One-third of the
shares will be issued and delivered to the respective sellers on each of the
next three anniversaries of the closing date of their transaction. The payment
schedule of the obligations depends upon certain criteria applicable to the
contracts that the respective companies held as of the closings. The sellers of
the acquired companies agreed not to compete against the Company for the three
years immediately after each respective acquisition. The Company allocated $2.0
million of the acquisition consideration to these non-competition agreements.

                  In 1995, the Company acquired three physician practice
management companies. Two of these companies provide ED services to hospitals
in Arkansas, Maryland, Pennsylvania, and Virginia. The related physician
practices had 237,000 patient visits in 1996. The third company provides
in-patient physician services to hospitals in Maryland. The acquisitions
established new markets for the Company in Arkansas and the mid-Atlantic region
of the United States. In 1995 the Company also acquired an emergency medicine
billing company in Pennsylvania that provides billing services to emergency
physician groups who supply professional services to EDs in eight states. The
Company acquired these companies for an aggregate of $26.9 million, which
consisted of $16.7 million in cash, $2.9 million of obligations payable over
two to seven years, and 433,333 shares of Common Stock valued at $16.88 per
share, or an aggregate of $7.3 million. The sellers of the acquired companies
agreed not to compete against the Company for the three years immediately after
each respective acquisition. The Company allocated $1.3 million of the
acquisition consideration to these non-competition agreements.

EMERGENCY PHYSICIAN PRACTICE MANAGEMENT

                  The Company's principal activity is providing physician
practice management to EDs. The Company generally is responsible for
recruiting, evaluating credentials, and scheduling qualified emergency
physicians to staff the EDs. The ED coverage provided by the Company generally
includes scheduling a group of physicians to be on duty on a 24-hour, 365-day
basis. The Company also provides administrative support for the hospital and
the physicians. As of December 31, 1996, the Company had contracts to provide
physician practice management in 139 EDs.

                  During the year ended December 31, 1996, approximately 90% of
the Company's net revenue was attributable to the emergency physician practice
management business. The Company usually experiences a slight increase in net
revenue above its otherwise normal levels in the months of January and
December. This increase is due to the cold and flu season, which increases the
patient volumes in the EDs.

                  RECRUITING AND CREDENTIALING. Recruiting and evaluating the
credentials of physicians are essential services provided by the Company to its
hospital clients. The Company recruits physicians by: (i) contacting physicians
who reside in or near the location involved or who have expressed an interest
in relocating there, and (ii) mailing opportunity bulletins to a larger group
of physicians residing in adjacent areas. The Company prescreens responses to
determine which candidates satisfy the qualifications established by the
hospital. The Company also verifies the licensing, training, and professional
references of the final candidates. After this qualification



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process, the Company arranges interviews for the physicians with hospital
personnel and coordinates their visits to the community to ensure professional
and personal compatibility. The Company then supervises all arrangements
relating to the commencement of the selected physicians' services, including
their relocation if necessary.

                  MEDICAL DIRECTORS. The Company generally has a physician
under contract at each ED to be the on-site medical director. This physician
coordinates the delivery of the Company's services and integrates them with the
hospital's operations. The medical director also works with the hospital's
medical staff and administration in such areas as quality assurance, risk
management, and departmental accreditation.

                  Through the medical director, the Company assists the
hospital's development of clinical protocols to provide consistent diagnostic
and treatment methodologies for ED patients. An example of a protocol is the
laboratory tests routinely given for patients with specific symptoms. As the
Company must develop these protocols with each hospital's medical staff, the
protocols vary from hospital to hospital. The Company believes that its
experience, including its many years of case histories, enables it to provide
assistance in a broad array of clinical settings.

                  QUALITY ASSURANCE SYSTEM. The Company provides a computerized
quality assurance and improvement system that a number of its hospital clients
use to assist physicians in maintaining the consistency and improving the
quality of services to patients. This system, which allows the ED staff to
review and evaluate the type and quality of care provided, promotes
consistency, objectivity, and confidentiality, while reducing clerical time
spent generating forms or reports. This quality assurance software is revised
and upgraded on a regular basis. This system also facilitates compliance with
the requirements of accreditation agencies and the management of professional
liability exposure.

                  SUPPORT SERVICES. The Company provides a broad range of
support services and resources to hospitals and physicians. These services
include accounting, billing, recordkeeping, and other administrative services.
In addition, the Company assists its hospital clients in dealing with more
general concerns, including fiscal constraints, marketing the EDs, and using
the EDs as a source of primary medical care. The Company also assists its
hospital clients in negotiations with HMOs and other managed care organizations
when capitation or other risk shifting payment models are involved.

                  EXPRESS CARE UNITS. In conjunction with its emergency
physician practice management activities, the Company seeks to generate
additional sources of revenue for its hospital clients by utilizing each ED's
existing facilities and systems. The Company has worked with several of its
hospital clients to develop "express care units" in which less serious cases
can be treated on a separate schedule rather than competing for priority with
emergency cases, allowing efficient treatment of additional patients.




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INFORMATION SYSTEMS

                  The Company recently entered into a contractual agreement
with a software firm for the purchase, training, and maintenance of a
customized Emergency Department Information System ("EDIS"). This system will
enhance the Company's existing internal proprietary Clinical Information System
Repository. As a result, the Company will be able to improve its analysis of
physician practice patterns, develop physician profiles, identify costs and
resource utilization by diagnosis and physician, and use such information to
assist physicians in identifying the most cost efficient patterns of quality
practice. In addition, this system will provide the Company with specific
clinical payment and other data to use in managed care negotiations. The
Company spent $241,000 in 1996 and expects to spend $1.1 million in 1997 in the
rollout of this initiative to 60 identified client sites.

                  The Company maintains several computer databases. For
physician recruiting, the Company has an extensive proprietary database of
emergency and other physicians. The Company maintains and updates this database
through licensed databases, personal contacts, professional journal
advertising, mail solicitation, and telemarketing. The Company's other online
databases contain hospital, risk management, payment program, financial, and
marketing information that it acquires on a daily basis. The Company believes
that the availability of timely information is essential to its business,
particularly in the rapidly changing medical market of the United States. The
Company intends to continue to invest in technology to develop and enhance its
information systems.

OTHER SERVICES

                  In addition to its emergency physician practice management
for both higher and lower volume EDs, the Company provides billing services,
locum tenens (temporary) and permanent physician staffing services across a
broad range of medical specialties, and physician practice management in areas
other than emergency medicine. During the year ended December 31, 1996,
approximately 10% of the Company's net revenue was attributable to these
ancillary businesses.

                  BILLING SUBSIDIARY. In September 1995, the Company acquired
Reimbursement Technologies, Inc. ("RTI"), a billing company. As of January 1,
1996, the Company began to perform internally the billing on some of its
independent billing contracts. Previously the Company engaged third party
billing companies to perform this function. As of December 31, 1996, the
Company had transferred to RTI the billing responsibilities on 37 of the
Company's 59 independent billing contracts previously performed by third party
billing companies. The Company plans to continue transferring to RTI all
remaining third party independent billing contracts as well as newly acquired
independent billing contracts. RTI also performs billing services for 18
outside clients.

                  PHYSICIAN PLACEMENT SERVICES. The Company provides locum
tenens (temporary) and permanent physician staffing services across a broad
range of specialties, including anesthesia, emergency medicine, family
practice, internal medicine, obstetrics/gynecology, pathology, radiology, and
surgery. Hospitals, clinics, individual physicians, managed care plans, and
other health care organizations require temporary staffing to meet short-term
staffing needs resulting from vacations, continuing medical education, seasonal
shifts in patient volume, and other factors. Temporary physician staffing also
complements the Company's physician practice management. These staffing
services permit the Company to satisfy the staffing needs

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at the EDs, particularly during the start-up stage of managing an ED. The
Company also provides permanent placement for a fixed fee. Physician placement
is largely conducted by the Company in Texas, its contiguous states, and
Florida.

                  NONEMERGENCY PHYSICIAN PRACTICE MANAGEMENT. The Company uses
the skills that it has developed in its ED activities to support other hospital
based clinical specialties, such as inpatient intensive care. Similar to
emergency medicine, such specialties involve overall responsibility for
hospital patients, and require high quality care and coordination with the
hospital's medical staff and attending physicians.

MARKETING

                  The Company's marketing efforts are centrally directed and
involve the active participation of the Company's executive officers as well as
a marketing staff of three persons at its Dallas headquarters. In marketing its
emergency physician practice management services, the Company advertises its
services in hospital and health care trade journals, attends various hospital
and physician trade conferences, and organizes meetings for hospital
administrators and medical staff to increase awareness of its services. These
activities also serve as a means of gathering information about potential
clients and obtaining feedback about hospital needs. Marketing leads concerning
new hospital clients generally result from referrals by hospital
administrators, information provided by physicians, and requests for proposals
received directly from hospitals.

                  The Company's proposal to a prospective hospital client is
based on its analysis of information received from the hospital, including
numbers and acuity levels of patients visiting the ED, payor mix, payment
program rates and likely changes to such rates, desired staffing levels, and
on-site evaluation visits to the ED. A proposal generally includes an overview
of the hospital's current staffing program, an evaluation of the strengths and
weaknesses of the ED, and an analysis of current versus projected revenue and
costs following commencement of the Company's management services.

CONTRACTUAL ARRANGEMENTS

                  The Company structures its contractual arrangements for
physician practice management in one of two ways. In certain states the Company
provides its services in conjunction with professional associations and
corporations owned by Leonard M. Riggs, Jr., M.D., the Company's Chairman of
the Board and Chief Executive Officer, or another officer of the Company who is
a physician (the "PAs"). The Company uses this structure (the "PA Structure")
to avoid uncertainty as to the scope of laws regulating the corporate practice
of medicine, for regulatory convenience, or because the Company acquired
contracts structured in that manner. Under the PA Structure, a PA enters into a
management agreement with the hospital client and contracts with physicians,
generally on an independent contractor basis, to provide the necessary medical
practice coverage. The Company provides the non-medical portion of the service
under the PA Structure pursuant to a long-term management agreement with the PA
(a "PA Management Agreement"). In other jurisdictions, a wholly owned
subsidiary of the Company contracts directly with both the hospital and the
physicians (the "EmCare Structure"). Under either structure, all decisions
regarding patient care are made exclusively by the physicians.


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                  HOSPITAL AND BILLING ARRANGEMENTS. Under either the PA
Structure or the EmCare Structure, the management agreement with the hospital
client grants the Company the exclusive right and responsibility to contract
with physicians to provide services at the hospitals. These management
agreements typically have terms of one to three years and renew automatically
for additional one year terms if neither party terminates the agreement at
least 90 days before the end of the then current term. Some of these agreements
require the Company to indemnify the hospital for certain losses that the
hospital may suffer, including losses resulting from a contracted physician's
malpractice.

                  Services performed by physicians employed by or under
contract with the Company are generally charged on a fee for service basis. The
Company's revenue is based upon such fees. These fees are either: (i) billed
and collected by the related hospital, which remits monthly to the Company a
negotiated amount (a "hospital-based billing contract"), or (ii) billed and
collected separately by the Company (an "independent billing contract"). Under
independent billing contracts, the Company assumes the financial risks related
to collection, including potential uncollectability and delays attendant to
third party payment programs. The trend is for hospitals to move toward
independent billing contracts. At December 31, 1996, approximately 47% of the
Company's hospital contracts provided for independent billing, compared with
approximately 31% at December 31, 1990. In addition, certain hospital contracts
require the hospital to pay specified amounts to supplement the Company's
revenue based upon physician fees.

                  PHYSICIAN RELATIONSHIPS. The Company contracts with or
employs emergency physicians to provide the medical services necessary to
fulfill the obligations to its hospital clients. The agreements with the
emergency physicians generally have one year terms and are renewable from year
to year. The emergency physicians under contract with the Company are
compensated based upon departmental performance and their individual
contribution to such performance, subject to a guaranteed minimum fixed income.
Each physician assigns to the Company all rights to fees and payments for
medical services that he or she renders. Physicians are required to hold a
currently valid license to practice in the appropriate state and to apply for
and be granted medical staff privileges at the hospital client. Such staff
privileges automatically terminate upon termination of the physician's contract
with the Company.

                  Hospital clients with higher volume EDs generally demand
board certified emergency physicians. While there is currently a shortage of
board certified emergency physicians, to date the Company has not been
adversely affected by such shortage. Such shortage could adversely affect the
Company in the future.

                  Physicians that the Company places on a locum tenens basis
generally enter into contracts with the Company that are terminable upon 30
days notice. The contracts with these physicians typically provide that they
will provide temporary services for a minimum number of weeks during a one year
period. These physicians are compensated on a per day or hour basis and
reimbursed for their travel expenses. Under the agreement with the clients, the
Company also receives payment on a per day or hour basis.

                  The Company considers most of the physicians under contract
with it to be independent contractors, as opposed to employees. Accordingly,
the Company does not: (i) withhold federal or state income or other employment
related taxes from the compensation paid to these independent contractor
physicians, (ii) make federal or



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state unemployment tax or Federal Insurance Contributions Act payments on their
behalf, except as described below, or (iii) provide workers' compensation
insurance to them. The Company considers these items to be the responsibility
of the physicians. No federal or state governmental agency has officially
challenged or accepted the Company's classification of these physicians as
independent contractors except the State of New York's Department of Labor. As
a result of a challenge by the State of New York's Department of Labor, the
Company pays unemployment taxes with respect to New York based physicians under
contract with it. The classification of physicians as independent contractors
depends upon the facts and circumstances of the relationship. If the Company's
classification of the physicians as independent contractors is incorrect, the
Company may be subject to retroactive taxes and penalties, which could be
material.

                  Under current federal tax law, a "safe harbor" from
reclassification exists if the Company's current treatment is consistent with a
long-standing practice of a significant segment of the Company's industry and
the Company satisfies certain other requirements. No assurance exists that the
Company would prevail in demonstrating the applicability of the safe harbor to
its operations if the physicians would otherwise be classified as employees. In
addition, included in recent national health care reform proposals are
provisions that could provide greater leeway to the federal government to
classify independent contractors as employees, including through elimination of
the safe harbor.

                  PA MANAGEMENT AGREEMENTS. Under the PA Management Agreements,
the PAs delegate to the Company the administrative, management, and support
functions (but not any functions constituting the practice of medicine) that
the PAs have agreed to provide to the hospital client. In consideration for
these services, the PAs pay the Company a monthly fee, which may be adjusted
from time to time to reflect industry practice, business conditions, and actual
expenses for administrative costs and uncollectible accounts. These fees
approximate the excess of the PAs' revenue over their expenses.

                  Each PA Management Agreement has a rolling ten year term.
Accordingly, on each anniversary of the PA Management Agreement the term
automatically extends for an additional year unless either party gives notice
to the contrary at least 60 days before such anniversary. The Company also may
terminate each PA Management Agreement as of any such anniversary.
Notwithstanding such termination provisions, the Company and the PAs have
acknowledged that they intend that their arrangements are permanent, subject to
the Company's right to terminate them.

GOVERNMENT REGULATION

                  The Company's operations and relationships are subject to a
variety of governmental and regulatory requirements, including: (i) the
prohibition of the corporate practice of medicine, and (ii) the requirements of
the Medicare and Medicaid programs. The Company believes that its arrangements
with hospitals, physicians, and the PAs comply in all material respects with
these requirements. No assurance exists, however, that regulatory authorities
will not challenge the Company's compliance with them. Such a challenge could
have a material adverse effect upon the Company.

                  PROHIBITION OF THE CORPORATE PRACTICE OF MEDICINE. Business
corporations such as the Company are generally prohibited under state law from
practicing medicine, exercising control over the medical decisions of
physicians, or


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engaging in certain practices with physicians, such as fee-splitting. The
Company believes that it has complied with these laws because it only performs
non-medical administrative services, does not represent that it offers medical
services, and does not exercise influence or control over the practice of
medicine by the physicians under contract with it. The Company nevertheless
uses the PA Structure in California, Illinois, Maryland, Mississippi, New
Mexico, New York, Pennsylvania, and Texas because of expansive judicial or
governmental interpretation of the corporate practice of medicine doctrine in
those states or other reasons.

                  MEDICARE AND MEDICAID. Payments from Medicare, Medicaid, and
other government sponsored health care programs cover a substantial portion of
the patients treated by the physicians under contract with the Company. Any
change in the policies or practices that limit payments under these programs
could adversely affect the Company.

                  Funds received under the Medicare and Medicaid programs are
subject to audit. Accordingly, retroactive revenue adjustments from these
programs could occur. In addition, a payment program based upon "Resource Based
Relative Value Scale" ("RBRVS") adjusts medical payments among medical
specialties. The RBRVS system became effective on January 1, 1992, with full
implementation in December 31, 1996. The RBRVS system creates a uniform payment
structure for hospital costs and physician charges independent from the
hospitals and physicians. Under the RBRVS system, the aggregate fee payments
from Medicare for certain ED procedures could decrease, which would adversely
affect the Company. If such a decrease occurred, third party payors could
follow this practice and reduce their payment practices.

                  Finally, federal anti-kickback and self-referral rules
prohibit: (i) the offer, payment, solicitation, or receipt of any form of
remuneration in return for the referral of Medicare or Medicaid beneficiaries
or patient care opportunities, and (ii) the purchase, lease, or order of items
or services that are covered by the Medicare or Medicaid programs in return for
such referrals. In addition, a physician may not refer Medicare or Medicaid
beneficiaries to an entity for laboratory and certain other health services if
the physician has a financial relationship with such entity. A violation of
these rules can result in substantial penalties and exclusion from the Medicare
and Medicaid programs. The Company believes that its operations do not violate
these rules.

COMPETITION

                  The health care industry is highly competitive. Emergency
physician practice management is subject to especially vigorous competition.
The Company provides emergency physician practice management in Alabama,
Arizona, Arkansas, California, Florida, Georgia, Illinois, Louisiana, Maryland,
Massachusetts, Mississippi, New Mexico, New York, Ohio, Oklahoma, Pennsylvania,
Texas, Virginia, and West Virginia. The Company also provides physician
placement services in Texas, the states contiguous to Texas, and Florida.
Competition in these and other geographic markets for such services is
generally based upon cost, the ability to make available physicians capable of
providing high quality care, and the reputation of the emergency physician
practice management company among hospitals and physicians. In emergency
physician practice management, competition also is based upon the ability to
increase the use of the ED, integrate the ED with the other hospital
departments, and provide value added services.



                                      12



<PAGE>   13

                  The Company's national competitors in emergency physician
practice management include Spectrum Emergency Care, Inc., Coastal Physician
Group, Inc., InPhyNet Medical Management Inc., National Emergency Services,
Sterling Healthcare Group, a subsidiary of FPA Medical Management. Certain of
these competitors have substantially greater financial or other resources than
the Company. In addition, many local and regional companies exist that
provide emergency physician practice management. Finally, the Company
competes against the traditional hospital structure of internally managing
the ED.

                  The Company believes that the evolution of the health care
industry will blur the traditional distinctions among industry segments. The
Company expects that other companies in other health care industry segments,
such as managers of other hospital based specialties or physician group
practices, may become competitors in the area of emergency physician practice
management.

INSURANCE COVERAGE

                  The Company's business entails an inherent risk that the
Company could be held liable for the medical malpractice of a physician under
contract with it. The Company maintains professional liability insurance in
amounts that it considers appropriate based upon its claims experience and the
nature of its business. No assurance exists, however, that a claim will not
exceed the limits of the Company's insurance coverage.

                  The Company also requires the physicians under contract with
it to obtain professional liability insurance coverage and makes such insurance
available to them. This insurance coverage would cover the Company if the
Company were held liable as a co-defendant in a lawsuit against a physician or
hospital, subject to the policy's coverage limits. Although the majority of the
physicians under contact with the Company have obtained professional liability
insurance in this manner, under certain emergency physician practice management
contracts the physicians have obtained professional liability insurance through
the hospital.

SERVICE MARK

                  The Company has registered the service mark "EmCare" with the
United States Patent and Trademark Office. The expiration date for this service
mark is January 29, 2005.

EMPLOYEES

                  As of December 31, 1996, the Company had approximately 583
full-time employees. In addition, as of that date approximately 1,061 full-time
and part-time emergency physicians were under contract with the Company,
primarily on an independent contractor basis.


ITEM 2.           PROPERTIES.

                  The Company leases its corporate headquarters office in
Dallas, Texas, pursuant to a lease expiring in 1999. The Company also leases
office space in

                                      13
<PAGE>   14

connection with its operations in California, Florida, Illinois, Maryland,
Pennsylvania, and Texas. The Company leases such office space for terms of one
to seven years, with options to renew for additional periods.

                  In April 1996, the Company entered into a lease for new
office space in Pennsylvania because RTI required more space. This new lease
expires in 2003. The Company subleases the prior RTI office space to a
subtenant under a lease expiring in 1998.

                  The Company considers the leasing arrangements for its
corporate headquarters and its regional operations to be adequate for its
current business needs.


ITEM 3.           LEGAL PROCEEDINGS.

                  The Company is involved in the following legal proceedings.

DOJ LAWSUIT

                  The  Company  has  reached  an  agreement  in  principle with
the Civil Division of the U.S. Department of Justice ("DOJ") to settle the
claims alleged against it in the civil lawsuit styled United States ex rel.
Theresa Semtner v. Emergency Physician Billing Services, Inc., et al. (Cause
No. 94-617(C)), in the United States District Court for the Western District of
Oklahoma (the "DOJ Lawsuit"). Emergency Physician Billing Services, Inc.
("EPBS") is an outside vendor that provided billing services on a contract
basis for the Company and others. The suit alleges improper coding of charges
for ED services reimbursed under the Medicare, Medicaid, CHAMPUS, and Federal
Employees Health Benefits programs.

                  Under the agreement in principle, the Company has agreed to
pay $7,750,000 to the United States and the various states for settlement of
the lawsuit. In return the DOJ Lawsuit will be dismissed with prejudice as to
the Company. An additional $250,000 in relator's attorneys' fees and $450,000
in other expenses is also expected to be incurred. The Company does not admit
any of the allegations of the DOJ Lawsuit or any related liability, and the
Company anticipates that the settlement will insure the Company's rights to
participate fully in the future in Medicare, Medicaid, CHAMPUS, and Federal
Employees Health Benefits programs. The agreement is subject to execution of a
definitive settlement agreement after final approval by the DOJ and the states.

OTHER LITIGATION

                  The Company also is a defendant in various other legal
proceedings arising in the ordinary course of business. Although the Company
cannot predict the results of such other litigation with certainty, the Company
believes that the outcome of such other litigation will not have a material
adverse effect on the Company.


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

                  None.


                                     14

<PAGE>   15

                                    PART II

ITEM 5.           MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS.

                  The Company completed its initial public offering in December
1994. At that time, the Common Stock began trading on the NASDAQ National
Market System under the symbol EMCR. The following table sets forth the high
and low sale prices for the Common Stock during the periods indicated.

<TABLE>
<CAPTION>
                                 Period                                 High                 Low

                  1995
<S>                                                                 <C>                <C>
                  First Quarter......................               $   20 5/8          $    13 1/8
                  Second Quarter.....................                   20 1/2               18 1/8
                  Third Quarter......................                   23 3/4               17 7/8
                  Fourth Quarter.....................                   26 7/8               19 3/8

                  1996

                  First Quarter......................               $   30 1/2          $    21 1/4
                  Second Quarter.....................                   37                   25 1/2
                  Third Quarter......................                   29 3/4               20 1/2
                  Fourth Quarter.....................                   30 3/4               17 1/4
</TABLE>

                  As of March 21, 1997, the closing price of the Common Stock
was $275/8. As of that date, the Common Stock was held by approximately 94
holders of record. In addition, the Company believes that on such date there
were approximately 4,200 beneficial holders of the Common Stock.

                  The Company has not paid any dividends since the initial
public offering and intends to retain future earnings for reinvestment in its
business. Accordingly, the Company does not anticipate paying any cash
dividends in the foreseeable future. In addition, the Company's revolving line
of credit prohibits the Company from paying dividends and under certain
circumstances restricts the Company's subsidiaries from paying dividends.




                                      15
<PAGE>   16
ITEM 6.  SELECTED FINANCIAL DATA.

                          FIVE YEAR FINANCIAL SUMMARY
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31,
                                          ------------------------------------------------------------
                                            1996         1995        1994         1993         1992
                                          ---------    ---------   ---------    ---------    ---------
<S>                                       <C>          <C>         <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:

Net revenue.............................  $ 196,257    $ 156,826   $ 118,250    $  95,793    $  71,166
Professional expenses...................    156,412      123,935      94,184       75,788       57,506
                                          ---------    ---------   ---------    ---------    ---------
Gross profit............................     39,845       32,891      24,066       20,005       13,660
General and administrative expenses.....     18,099       16,760      13,583       12,218        9,297
Department of Justice settlement(1).....      8,450         --          --           --           --
Depreciation and amortization(2)........      4,153        2,503       1,433        5,846        3,566
                                          ---------    ---------   ---------    ---------    ---------
Income from operations..................      9,143       13,628       9,050        1,941          797
Interest income (expense), net..........       (880)         281      (1,913)      (2,012)      (1,551)
                                          ---------    ---------   ---------    ---------    ---------
Income (loss) before income taxes.......
 and extraordinary charge...............      8,263       13,909       7,137          (71)        (754)
Income tax expense (benefit)............      2,838        5,216       2,568           28          (53)
                                          ---------    ---------   ---------    ---------    ---------
Income (loss) before extraordinary
 charge.................................      5,425        8,693       4,569          (99)        (701)
Extraordinary charge, net of taxes......       --           --           837         --           --
                                          ---------    ---------   ---------    ---------    ---------
Net income (loss).......................  $   5,425    $   8,693   $   3,732    $     (99)        (701)
                                          =========    =========   =========    =========    =========
Income (loss) per share before
 extraordinary charge (3)...............  $    0.64    $    1.05   $    0.89    $   (0.05)
                                          =========    =========   =========    =========

Net income (loss) per share (3).........  $    0.64    $    1.05   $    0.73    $   (0.05)
                                          =========    =========   =========    =========

Weighted average common and
 common equivalent shares outstanding...      8,531        8,251       5,138        1,856
</TABLE>

<TABLE>
<CAPTION>
                                          ------------------------------------------------------------------------------
                                                                              DECEMBER 31,
                                              1996            1995              1994             1993            1992
                                          -------------    ------------     ------------     -------------     ---------
BALANCE SHEET DATA:
<S>                                         <C>             <C>              <C>               <C>                <C>
Working capital........................     $    19,918     $   18,948       $   28,041        $  14,915          12,726
Intangible assets, net.................          72,906         36,543           11,296            6,285          10,189
Total assets...........................         138,063         80,743           55,214           41,233          38,548
Short-term debt........................           5,589          2,956            2,033            3,402           3,546
Long-term debt.........................          34,879          2,500            2,390           15,097          16,840
Mandatory redeemable convertible
 preferred stock.......................              --             --               --           14,500          14,500
Total stockholders' equity (deficit)...          61,728         52,730           34,499           (9,020)         (9,622)
</TABLE>



<TABLE>
<CAPTION>
                                         ------------------------------------------------------------------------------
                                                                       YEARS ENDED DECEMBER 31,
                                              1996            1995              1994            1993            1992
                                         -------------    ------------     ------------     -------------     ---------
OTHER FINANCIAL DATA:
<S>                                         <C>             <C>              <C>               <C>                     <C>
EBITDA
Net income (loss)......................     $     5,425     $   8,693        $   3,732         $    (99)           (701)
Extraordinary charge, net of taxes.....              --            --              837               --              --
Income tax expense (benefit)...........           2,838         5,216            2,568               28             (53)
Interest (income) expense, net.........             880          (281)           1,913            2,012           1,551
Depreciation and amortization..........           4,153         2,503            1,433            5,846           3,566
                                            -----------     ---------        ---------         --------        --------
EBITDA(4)..............................     $    13,296     $  16,131        $  10,483         $  7,787           4,363
                                            ===========     =========        =========         ========        ========

CASH FLOW DATA
Cash provided by (used in) operating
 activities............................     $     1,721     $   8,071        $   9,015         $  5,291        $ (2,229)
Cash provided by (used in) investing
 activities............................         (14,878)      (12,560)         (14,332)             727         (12,014)
Cash provided by (used in)
 financing activities..................          12,705        (1,288)           8,449             (590)         13,992
</TABLE>


(1)  Please see Note 14 to the Consolidated Financial Statements in Item 8
     for a discussion of the settlement of the DOJ Lawsuit.

(2)  For the year ended December 31, 1993, depreciation and amortization
     includes the write-off of the remaining assets related to officers'
     non-competition agreements of $2.0 million and scheduled amortization of
     such assets of $2.1 million.

(3)  Per share amounts for 1992 are not comparable to subsequent period amounts
     due to the recapitalization of the Company in February 1992 and are
     therefore excluded from this table.

                                      16
<PAGE>   17

(4)  EBITDA is earnings before interest, taxes, depreciation, amortization, and
     extraordinary charges. EBITDA does not represent cash flows from
     operations as measured under generally accepted accounting principles. The
     reader should not consider EBITDA as an indicator of the Company's cash
     flows, liquidity, or operating performance. The Company has calculated its
     EBITDA in the above table because certain securities analysts and
     investors may use EBITDA when evaluating the Company and comparing it to
     other physician practice management companies. Please be aware, however,
     that all companies may not calculate EBITDA in the same manner.
     Accordingly, the Company's EBITDA shown above may not be comparable to the
     EBITDA calculated by other companies.


ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS.

INTRODUCTION

                  The Company is a leading provider of physician practice
management services in hospital EDs and other practice settings. The Company
recruits and evaluates the credentials of physicians and arranges contracts and
schedules for their services. The Company has managed emergency physician
practices for more than 20 years primarily in larger hospitals with higher
volume EDs. At December 31, 1996, the Company had management contracts relating
to 139 EDs in 19 states with approximately 2.5 million patient visits per year.
In addition to the Company's higher volume emergency physician practice
management services, the Company provides physician management services for
in-patient care, lower volume emergency medicine practices, and a primary care
physician group practice. The Company also provides billing services for
emergency physician practice management contracts and physician placement
services, primarily on a locum tenens basis, across a broad range of practice
specialties.

                  The table below sets forth for the periods indicated the
percentage of net revenue contributed by emergency physician practice
management and other services.


<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,
                                                                           ------------------------------------
                                                                              1996         1995         1994
                                                                           -----------  -----------  ----------
<S>                                                                            <C>          <C>          <C>
    Emergency Physician Practice Management                                    90.3%        92.4%        92.8%
    Other Services                                                              9.7          7.6          7.2
                                                                           --------     --------     --------
                                                                              100.0%       100.0%       100.0%
                                                                           ========     ========     ========
</TABLE>

                  Management believes its emergency physician practice
management business should continue to realize steady internal growth. Although
the emergency physician practice management business is consolidating, the
market is still highly fragmented. Acquisitions have been a significant part of
the Company's growth in the past and the Company intends to continue to expand
its business through acquiring local and regional groups with high volume
contracts and favorable demographics.

                  Beginning in January 1994 and continuing through December
1996, the Company completed ten acquisitions involving companies providing
emergency physician practice management, thereby acquiring contracts to provide
services at 76 EDs in six new markets. The EDs associated with these contracts
accounted for net revenue of $86.9 million for the year ended December 31, 1996
(on a pro forma basis assuming the acquisitions in 1996 had been completed on
January 1, 1996). The aggregate consideration in connection with these
acquisitions was $62.1 million, which consisted of $39.2 million in cash, $14.1
million of obligations, and 489,688 shares of

                                       17
<PAGE>   18

Common Stock valued at $8.8 million. The Company allocated $3.6 million of the
consideration to non-competition agreements.

                  On September 7, 1995, the Company acquired RTI, an emergency
medicine billing company that provides billing services to emergency physician
groups in eight states who supply professional services to 18 EDs. The billing
company generated revenue of $5.5 million and billed 1.2 million patient visits
for the year ended December 31, 1996. The total consideration paid for this
acquisition was $9.5 million. During 1996, the Company transferred 37 of its
independent billing contracts previously performed by third party billing
companies to RTI. The Company plans to continue transferring to RTI all
remaining third-party independent billing contracts as well as newly acquired
independent billing contracts.

                  The following discussion provides an analysis of the
Company's results of operations and liquidity and capital resources and should
be read in conjunction with the Consolidated Financial Statements of the
Company and the related notes.

RESULTS OF OPERATIONS

                  The following table sets forth, as a percentage of net
revenue, certain statement of income data for the periods indicated as well as
percentage changes from period to period in the data presented:

<TABLE>
<CAPTION>

                                                       YEAR ENDED DECEMBER 31,              1996           1995
                                                  -----------------------------------     COMPARED       COMPARED
                                                    1996        1995         1994         TO 1995         TO 1994
                                                  ---------   ----------   ----------   -------------   ------------
<S>                                                 <C>         <C>          <C>             <C>           <C>
   Net revenue                                      100.0%      100.0%       100.0%          25.1%         32.6%
   Professional expenses                             79.7        79.0         79.6           26.2          31.6
   Gross profit                                      20.3        21.0         20.4           21.1          36.7
   General and administrative expenses                9.2        10.7         11.5            8.0          23.4
   Department of Justice settlement                   4.3         -            -                *          N/A
   Depreciation and amortization                      2.1         1.6          1.2           65.9          74.7
   Income from operations                             4.7         8.7          7.7          (32.9)         50.6
   Income before income taxes and
     extraordinary charge                             4.2         8.9          6.0          (40.6)         94.9
   Income before extraordinary charge                 2.8         5.5          3.9          (37.6)         90.3

      * Not a meaningful figure.
</TABLE>

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

                  NET REVENUE. Net revenue increased $39.5 million, or 25.1%,
to $196.3 million for the year ended December 31, 1996 from $156.8 million for
the year ended December 31, 1995. Of this increase, $33.2 million was
attributable to increased revenue from the Company's ED contracts. Net revenue
from other services increased $6.3 million, contributing 4.0% of the 25.1%
total period-to-period increase. This consists of $4.2 million attributable to
the Company's billing companies and an increase of $2.1 million attributable to
other non-ED services.

                  Same ED contract revenue increased $3.6 million, or 3.2%, to
$114.9 million for the year ended December 31, 1996 from $111.3 million for the
year ended December 31, 1995, contributing 2.3% of the 25.1% total
period-to-period increase. "Same ED" revenue consists of revenue derived from
EDs under management from the beginning of the prior period through the end of
the subsequent period. New ED

                                      18
<PAGE>   19


contracts generated by the Company's marketing activities contributed $9.2
million of the increase in net revenue, or 5.9% of the 25.1% total
period-to-period increase. Acquisitions contributed $27.5 million of the
increase in net revenue, or 17.5% of the 25.1% total period-to-period increase.
Included in the period-to-period increase in net revenue is a negative impact
of $7.1 million, or 4.6% of the 25.1% total period-to-period increase, caused
by the loss of contracts.

                  PROFESSIONAL EXPENSES. Professional expenses primarily
consist of fees paid to physicians under contract with the Company, collection
fees relating to independent billing contracts billed by vendors, operating
expenses for the Company's billing subsidiaries, and professional liability
insurance premiums for physicians under contract. Professional expenses
increased by $32.5 million, or 26.2%, to $156.4 million for the year ended
December 31, 1996 from $123.9 million for the year ended December 31, 1995.
This increase was primarily attributable to the addition of 64 ED contracts in
1996. The increase in professional expenses also includes $5.6 million
attributable to other services of which $3.4 million is due to the Company's
billing subsidiaries. As a percentage of net revenue, professional expenses
increased to 79.7% in 1996 from 79.0% in 1995.

                  GENERAL AND ADMINISTRATIVE EXPENSES. General and
administrative expenses increased by $1.3 million, or 8.0%, to $18.1 million
for the year ended December 31, 1996 from $16.8 million for the year ended
December 31, 1995. As a percentage of net revenue, general and administrative
expenses decreased from 10.7% in 1995 to 9.2% in 1996. The Company in 1996 has
been able to add additional revenue growth with minimal increases in corporate
overhead. The one-time non-recurring charge of $8.45 million relates to the
Company's agreement in principle with the DOJ to settle the claims alleged
against it in the civil lawsuit styled United States ex rel. Theresa Semtner v.
Emergency Physician Billing Services, Inc., et al. (see Note 14 to the
Consolidated Financial Statements for a detailed discussion of this
settlement).

                  DEPRECIATION AND AMORTIZATION. Depreciation and amortization
consists principally of amortization of goodwill, contracts, and non-competition
agreements entered into in connection with business acquisitions. Depreciation
and amortization increased by $1.7 million, or 65.9%, to $4.2 million for the
year ended December 31, 1996 from $2.5 million for the year ended December 31,
1995, principally due to acquisitions.

                  INTEREST INCOME/EXPENSE. Interest expense increased by
$577,000, or 88.5%, to $1.2 million for the year ended December 31, 1996 from
$652,000 for the year ended December 31, 1995, principally due to interest on
the line of credit as a result of borrowings for acquisitions made in 1996.
Interest income decreased by $584,000, or 62.6%, to $349,000 for the year ended
December 31, 1996 from $933,000 for the year ended December 31, 1995, primarily
due to lower cash balances available for investment as a result of the
Company's acquisitions in 1996.

                  INCOME TAXES. The Company's effective tax rate decreased to
34.3% for the year ended December 31, 1996 from 37.5% for the year ended
December 31, 1995, due principally to the reversal of a tax valuation
allowance.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

                  NET REVENUE. Net revenue increased $38.5 million, or 32.6%,
to $156.8 million for the year ended December 31, 1995 from $118.3 million for
the year ended December 31, 1994. Of this increase, $35.2 million was
attributable to increased



                                       19
<PAGE>   20


revenue from the Company's ED contracts. Net revenue from other services
increased $3.3 million, contributing 2.8% of the 32.6% total period-to-period
increase. This consists of $2.0 million attributable to the Company's acquired
billing company, an increase of $1.5 million attributable to the Company's
management of primary care physician group practices, and a decrease of
$200,000 attributable to other non-ED services.

                  Same ED contract revenue increased $8.4 million, or 9.1%, to
$100.9 million for the year ended December 31, 1995 from $92.5 million for the
year ended December 31, 1994, contributing 7.1% of the 32.6% total
period-to-period increase. New ED contracts generated by the Company's
marketing activities contributed $15.3 million of the increase in net revenue,
or 12.9% of the 32.6% total period-to-period increase. Acquisitions contributed
$17.5 million of the increase in net revenue, or 14.8% of the 32.6% total
period-to-period increase. Included in the period-to-period increase in net
revenue is a negative impact of $6.0 million, or 5.1% of the 32.6% total
period-to-period increase, caused by the loss of contracts.

                  PROFESSIONAL EXPENSES. Professional expenses increased by
$29.7 million, or 31.6%, to $123.9 million for the year ended December 31, 1995
from $94.2 million for the year ended December 31, 1994. This increase was
primarily attributable to the addition of new ED contracts. Expenses relating
to other services increased by $3.6 million from period-to-period, including
$2.1 million related to the acquired billing company. As a percentage of net
revenue, professional expenses decreased to 79.0% in 1995 from 79.6% in 1994.

                  GENERAL AND ADMINISTRATIVE EXPENSES. General and
administrative expenses increased by $3.2 million, or 23.4%, to $16.8 million
for the year ended December 31, 1995 from $13.6 million for the year ended
December 31, 1994. This increase is primarily attributable to the incremental
administrative costs related to the new EDs under management. As a percentage
of net revenue, general and administrative expenses decreased from 11.5% in
1994 to 10.7% in 1995. The Company has been able to add additional revenue
growth with minimal increases to its corporate overhead.

                  DEPRECIATION AND AMORTIZATION. Depreciation and amortization
increased by $1.1 million, or 74.7%, to $2.5 million for the year ended
December 31, 1995 from $1.4 million for the year ended December 31, 1994,
principally due to the acquisitions.

                  INTEREST INCOME/EXPENSE. Interest expense decreased by $1.6
million, or 72.7%, to $652,000 for the year ended December 31, 1995 from $2.2
million for the year ended December 31, 1994, principally due to the repayment
of $14.5 million of subordinated debt in December 1994. Interest income
increased by $602,000, or 182%, to $933,000 for the year ended December 31,
1995 from $331,000 for the year ended December 31, 1994, primarily due to
higher cash balances available for investment as a result of the Company's
initial public offering in December 1994 and higher interest rates applicable
to invested cash.

                  INCOME TAXES. The Company's effective tax rate increased to
37.5% for the year ended December 31, 1995 from 36% for the year ended December
31, 1994, due principally to non-deductible amortization expense arising from
acquisitions.



                                      20
<PAGE>   21

QUARTERLY RESULTS

                  The following table presents certain quarterly financial
information for the eight quarters ended December 31, 1996. This information
has been prepared on the same basis as the audited Consolidated Financial
Statements of the Company appearing elsewhere in this Annual Report on Form
10-K and include, in the opinion of management, all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the quarterly results
when read in conjunction with the audited Consolidated Financial Statements of
the Company and the related notes.


<TABLE>
<CAPTION>
                                                                            1996 CALENDAR QUARTERS
                                                                 ----------------------------------------------
                                                                  FIRST      SECOND       THIRD       FOURTH
                                                                 ---------   ----------   ---------   ---------
                                                                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                               <C>          <C>         <C>        <C>
   Net revenue                                                    $44,235      $47,874     $48,198    $55,950
   Gross profit                                                     8,920        9,842       9,832     11,251
   Net income (loss)(1)                                             2,335        2,577       2,726     (2,213)
   Net income (loss) per share                                      $0.28        $0.30       $0.32     $(0.26)
   Weighted average common and common equivalent shares
      outstanding                                                   8,433        8,615       8,553      8,520

(1) The fourth quarter of 1996 has a one time charge of $8.45 million related to
    the DOJ settlement (see Note 14 in the Consolidated Financial Statements for
    a detailed discussion).

</TABLE>

<TABLE>
<CAPTION>
                                                                            1995 CALENDAR QUARTERS
                                                                 ----------------------------------------------
                                                                  FIRST      SECOND       THIRD       FOURTH
                                                                 ---------   ----------   ---------   ---------
                                                                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                               <C>          <C>         <C>         <C>
   Net revenue                                                    $34,540      $38,062     $40,480     $43,744
   Gross profit                                                     7,386        7,904       8,141       9,460
   Net income                                                       2,016        2,147       2,145       2,385
   Net income per share                                              0.25         0.26        0.26        0.28
   Weighted average common and common equivalent shares
      outstanding                                                   7,911        8,308       8,330       8,456
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

                  SOURCES OF LIQUIDITY. At December 31, 1996, the Company had
$19.9 million in working capital, an increase of $1.0 million from December 31,
1995. Working capital decreased $9.1 million in 1995. At December 31, 1996, the
Company's principal sources of liquidity consisted of: (i) cash and cash
equivalents aggregating $7.3 million, (ii) accounts receivable totaling $46.4
million, and (iii) $35.9 million in borrowing capacity under a revolving term
credit facility ("the Revolver") with a bank.

                  1996. For the year ended December 31, 1996, $1.7 million in
cash was provided by operations as revenue growth from new and existing EDs and
the accrual for the DOJ settlement more than offset the growth in accounts
receivable, the decrease of deferred income taxes, and the decrease in accrued
expenses. Cash of $14.9 million was used in investing activities for the year
ended December 31, 1996 as payments related to business acquisitions and
purchases of furniture and office equipment exceeded proceeds from the maturity
of marketable securities. Cash of $12.7 million was provided by financing
activities for the year ended December 31, 1996 as proceeds on long term debt
and the exercise of stock options exceeded payments on borrowings.

                  1995. In 1995, $8.1 million in cash was provided by
operations as revenue growth from new and existing EDs and increases in accrued
expenses more


                                      21
<PAGE>   22

than offset the growth in accounts receivable and the decrease of deferred
income taxes. Cash of $12.6 million was used in investing activities for the
year ended December 31, 1995 as payments related to business acquisitions
exceeded proceeds from the maturity of marketable securities. Cash of $1.3
million was used in financing activities for the year ended December 31, 1995
as payments on long-term debt exceeded proceeds from borrowings and the
exercise of stock options.

                  1994. In 1994, $9.0 million in cash was provided by
operations as revenue growth from new and existing EDs, increases in accrued
expenses, and decreases in prepaid expenses more than offset the growth in
accounts receivable. Cash of $14.3 million was used in investing activities for
the year ended December 31, 1994 primarily to acquire a business, upgrade the
Company's information systems, and acquire marketable securities. Cash of $8.4
million was provided by financing activities for the year ended December 31,
1994 primarily as a result of net proceeds of $25.3 million from the Company's
initial public offering, of which $14.5 million was used to retire the
subordinated notes.

                  ACCOUNTS RECEIVABLE. Accounts receivable are a key component
of the Company's working capital. Accounts receivable totaled $46.4 million at
December 31, 1996, an increase of $16.6 million over December 31, 1995. The
timing of payments on the Company's accounts receivable can vary significantly
depending on whether the related contract is a hospital-based or independent
billing contract. Independent billing receivables have a significantly longer
collection cycle than hospital-based billing receivables because of the process
of billing and collecting from third-party payor programs and private payors.
The number of days revenue in average receivables was 71 days for the year
ended December 31, 1996, compared to 59 days and 60 days for the years ended
December 31, 1995 and 1994, respectively. This increase is due to the build-up
of accounts receivable as a result of the transition of independent billing
contracts from third-party billing companies to the company's billing
subsidiary as well as accounts receivable acquired through acquisitions. In
connection with independent billing contracts, the Company incurs, and can
expect to incur in the future, negative cash flow during the start-up phase
(typically six months or more after the contract is initiated).

                  INCREASE IN REVOLVER. On March 7, 1997, the Company entered
into an agreement to increase the borrowing capacity under the Revolver from
$50 million to $100 million. Under the Revolver, a bank acts as the
administrative agent for a syndicate of lenders. The Revolver permits the
Company to borrow up to $100 million for working capital and acquisition
purposes. The Revolver matures on March 7, 2000. Borrowings under the Revolver
bear interest at variable rates based, at the Company's option, on the bank's
base rate or the Eurodollar rate. There was an outstanding balance of $31.6
million under the Revolver as of March 7, 1997.

                  PROFESSIONAL LIABILITY INSURANCE. The Company currently
procures and partially finances, and expects to continue to procure and
partially finance, professional liability insurance on behalf of most
physicians under contract with the Company. The current policy expires December
31, 1997.

                  CAPITAL EXPENDITURES. The Company's annual capital
expenditures have typically been for data processing equipment and leasehold
improvements at the Company's corporate offices. Capital expenditures of $2.2
million in 1996 are a result of the Company's commitment to enhance
significantly its information systems. In the foreseeable future, annual
capital expenditures are not expected to exceed $2.0 million per year.




                                      22
<PAGE>   23


                  WORKING CAPITAL REQUIREMENTS. The Company anticipates that
funds generated from operations, together with funds available under the
Revolver, will be sufficient to meet its working capital requirements and debt
obligations and to finance any necessary capital expenditures for the
foreseeable future. Expansion of the Company's business through acquisitions
may require additional funds, which to the extent not provided by internally
generated sources, cash and marketable securities, and the Revolver, would
require the Company to seek additional debt or equity financing.

INFLATION

                  The Company's business is labor intensive with extensive
reliance on independent contractor physicians. Fees paid to such physicians
tend to increase during periods of inflation and when shortages in the labor
market occur. Restrictions exist on payments by government and private medical
insurance programs and pressure continues to contain the growth in the costs of
such programs. The Company bears the risk that the payment rates set by such
programs will not keep pace with inflation. Although the moderate inflation
rates of the past several years have not posed significant problems for the
Company, a substantial increase in the rate of inflation without a
corresponding increase in payment rates would adversely affect the Company's
business.


                                      23
<PAGE>   24



ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors
EmCare Holdings Inc.

                  We have audited the accompanying consolidated balance sheets
of EmCare Holdings Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

                  We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

                  In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial
position of EmCare Holdings Inc. at December 31, 1996 and 1995, and the
consolidated results of its operations and cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.


                                           ERNST & YOUNG LLP


Dallas, Texas
February 18, 1997,
except for Note 5, as to which the date is
March 7, 1997


                                      24
<PAGE>   25



                              EMCARE HOLDINGS INC.
                          CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                                                  DECEMBER 31,
                                                                              -------------------
                                                                                1996       1995
                                                                              --------   --------
                                            ASSETS
<S>                                                                           <C>        <C>
Current assets:
      Cash and cash equivalents                                               $  7,329   $  7,781
      Marketable securities                                                       --        1,507
      Accounts receivable, net                                                  46,413     29,813
      Prepaids and other current assets                                          2,016        766
                                                                              --------   --------
Total current assets                                                            55,758     39,867
Furniture and office equipment, net                                              4,418      3,384
Deferred tax assets                                                              4,981        949
Other assets:
      Goodwill                                                                  58,488     29,602
      Contracts                                                                 15,463      7,064
      Non-competition agreements                                                 6,104      4,141
      Deferred financing costs and other                                           694        493
                                                                              --------   --------
                                                                                80,749     41,300
      Less accumulated amortization                                              7,843      4,757
                                                                              --------   --------
                                                                                72,906     36,543
                                                                              --------   --------
Total assets                                                                  $138,063   $ 80,743
                                                                              ========   ========

                                LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Accounts payable                                                        $    326   $    254
      Accrued expenses:
        Physician fees                                                          10,623      8,520
        Accrued salaries and other compensation                                  5,579      3,280
        Collection fees                                                            344      1,637
        Accrued federal and state income taxes                                   1,463      1,781
        Department of Justice settlement                                         8,379       --
        Other accrued liabilities                                                3,206      2,242
      Deferred tax liabilities                                                     331        249
      Current portion of long-term debt                                          5,589      2,956
                                                                              --------   --------
Total current liabilities                                                       35,840     20,919
Long-term debt, less current portion                                            34,879      2,500
Professional liability insurance                                                 5,616      4,594
Commitments and contingencies

Stockholders' equity:
      Preferred stock, $0.01 par value:
        Authorized shares - 5,000,000
        No shares issued or outstanding                                           --         --
      Common stock, $0.01 par value:
        Authorized shares - 25,000,000
        Issued and outstanding shares - 8,150,000 and
        8,011,000 in 1996 and 1995                                                  82         80
        Shares to be issued                                                      1,500       --
      Additional paid-in-capital                                                43,096     41,025
      Retained earnings                                                         17,050     11,625
                                                                              --------   --------
Total stockholders' equity                                                      61,728     52,730
                                                                              --------   --------
Total liabilities and stockholders' equity                                    $138,063   $ 80,743
                                                                              ========   ========
</TABLE>




                            See accompanying notes
                                      25
<PAGE>   26

                              EMCARE HOLDINGS INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                    (In thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                             Year Ended December 31,
                                                      -----------------------------------
                                                        1996         1995         1994
                                                      ---------    ---------    ---------
<S>                                                   <C>          <C>          <C>
Net revenue                                           $ 196,257    $ 156,826    $ 118,250
Professional expenses                                   156,412      123,935       94,184
                                                      ---------    ---------    ---------
Gross profit                                             39,845       32,891       24,066

Expenses:
     General and administrative                          18,099       16,760       13,583
     Department of Justice settlement                     8,450         --           --
     Depreciation                                         1,124          651          262
     Amortization                                         3,029        1,852        1,171
                                                      ---------    ---------    ---------
                                                         30,702       19,263       15,016
                                                      ---------    ---------    ---------

Income from operations                                    9,143       13,628        9,050
Interest expense                                         (1,229)        (652)      (2,244)
Interest income                                             349          933          331
                                                      ---------    ---------    ---------
Income before income taxes and extraordinary charge       8,263       13,909        7,137
Income tax expense                                        2,838        5,216        2,568
                                                      ---------    ---------    ---------
Income before extraordinary charge                        5,425        8,693        4,569
Extraordinary charge from early extinguishment of
     debt, net of income tax benefit of $471               --           --            837
                                                      ---------    ---------    ---------
Net income                                            $   5,425    $   8,693    $   3,732
                                                      =========    =========    =========
Income per share before extraordinary charge          $    0.64    $    1.05    $    0.89
Extraordinary charge, net of taxes                         --           --           0.16
                                                      ---------    ---------    ---------
Net income per share                                  $    0.64    $    1.05    $    0.73
                                                      =========    =========    =========
Weighted average common and common equivalent
     shares outstanding                                   8,531        8,251        5,138
                                                      =========    =========    =========
</TABLE>



                            See accompanying notes
                                      26

<PAGE>   27

                              EMCARE HOLDINGS INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                             COMMON  ADDITIONAL   RETAINED
                                                                 COMMON     STOCK TO   PAID-IN    EARNINGS
                                                                 STOCK     BE ISSUED   CAPITAL    (DEFICIT)     TOTAL
                                                                -------------------------------------------------------

<S>                                                             <C>        <C>        <C>         <C>         <C>
Balance at January 1, 1994                                      $     19   $   --     $ (8,239)   $   (800)   $ (9,020)
     Exercise of stock options                                      --         --            9        --             9
     Conversion of mandatorily redeemable
       convertible preferred stock                                    29       --       14,471        --        14,500
     Issuance of 2,587,500 common shares in
       public offering                                                26       --       25,252        --        25,278
     Net income                                                     --         --         --         3,732       3,732
                                                                --------   --------   --------    --------    --------

Balance at December 31, 1994                                          74       --       31,493       2,932      34,499
     Exercise of stock options, including federal tax benefit          2       --        2,224        --         2,226
     Issuance of stock related to acquisitions                         4       --        7,308        --         7,312
     Net income                                                     --         --         --         8,693       8,693
                                                                --------   --------   --------    --------    --------

Balance at December 31, 1995                                          80       --       41,025      11,625      52,730
     Exercise of stock options, including federal tax benefit          2       --        2,071        --         2,073
     Stock to be issued related to acquisitions                     --        1,500       --          --         1,500
     Net income                                                     --         --         --         5,425       5,425
                                                                --------   --------   --------    --------    --------

Balance at December 31, 1996                                    $     82   $  1,500   $ 43,096    $ 17,050    $ 61,728
                                                                ========   ========   ========    ========    ========
</TABLE>

                            See accompanying notes

                                      27
<PAGE>   28




                              EMCARE HOLDINGS INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                                                           Year Ended December 31,
                                                                                     --------------------------------
                                                                                       1996        1995        1994
                                                                                     --------    --------    --------

<S>                                                                                  <C>         <C>         <C>
OPERATING ACTIVITIES
Net income                                                                           $  5,425    $  8,693    $  3,732
Adjustments to reconcile net income to net cash provided
   by operating activities:
      Deferred income taxes                                                            (6,162)     (3,209)      1,865
      Noncash interest expense                                                            424         431         666
      Extraordinary charge from early extinguishment of debt                             --          --         1,308
      Depreciation                                                                      1,124         651         262
      Amortization                                                                      3,029       1,852       1,171
      Changes in operating assets and liabilities, net of effects of acquisitions:
         Accounts receivable                                                           (6,478)     (3,557)     (2,222)
         Prepaids and other current assets                                               (226)        369       2,085
         Accounts payable and accrued expenses                                         (3,444)      2,341         390
         Department of Justice settlement                                               8,379        --          --
         Professional liability insurance                                                (350)        500        (242)
                                                                                     --------    --------    --------
Net cash provided by operating activities                                               1,721       8,071       9,015

INVESTING ACTIVITIES
Sales of marketable securities                                                          1,507       6,261        --
Purchases of marketable securities                                                       --          --        (7,768)
Purchases of furniture and office equipment                                            (2,212)       (919)     (1,170)
Payments for acquisitions and related intangibles, net of cash acquired               (14,344)    (17,515)     (4,300)
Payments to stockholders for non-competition agreements                                  --          --        (1,226)
Other                                                                                     171        (387)        132
                                                                                     --------    --------    --------
Net cash used in investing activities                                                 (14,878)    (12,560)    (14,332)

FINANCING ACTIVITIES
Proceeds from borrowings                                                               22,256       6,321       6,646
Payments on long-term debt                                                            (11,624)     (9,102)     (8,984)
Payment of subordinated debt                                                             --          --       (14,500)
Proceeds from exercise of stock options                                                 2,073       1,493           9
Proceeds from issuance of common stock                                                   --          --        25,278
                                                                                     --------    --------    --------
Net cash provided by (used in)  financing activities                                   12,705      (1,288)      8,449
                                                                                     --------    --------    --------
Net (decrease) increase in cash and cash equivalents                                     (452)     (5,777)      3,132
Cash and cash equivalents at beginning of year                                          7,781      13,558      10,426
                                                                                     --------    --------    --------
Cash and cash equivalents at end of year                                             $  7,329    $  7,781    $ 13,558
                                                                                     ========    ========    ========
</TABLE>




                            See accompanying notes
                                      28
<PAGE>   29

                              EMCARE HOLDINGS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 1996

1.     ORGANIZATION AND BASIS OF PRESENTATION

                  The Company is a provider of physician practice management
services in EDs in the United States. The Company recruits and evaluates the
credentials of physicians, arranges contracts for their services, assists in
monitoring their performance and arranges scheduling. In addition, the Company
assists its clients in such operational areas as staff coordination, quality
assurance, departmental accreditation, billing, record keeping, third-party
payment programs, and other administrative services. The Company markets these
services primarily to larger hospitals with higher volume EDs (more than 12,000
patient visits per year) and multi-site systems, where it believes it is able
to attract and retain higher quality physicians and establish more stable
relationships with hospital clients. The Company, through its predecessors and
affiliates, has been engaged in emergency physician practice management for
more than 20 years. As of December 31, 1996, the Company had management
contracts relating to 139 EDs in 19 states.

                  Emergency physician practice management is the Company's
principal line of business. In addition to the Company's higher volume
emergency physician practice management services, the Company provides
physician practice management services for lower volume emergency medicine
practices and in-patient physician group practices. The Company also provides
billing services for emergency physician practice management contracts and
physician placement services, primarily on a locum tenens basis, across a broad
range of practice specialties.

                  The Company structures its contractual arrangements for
physician practice management in one of two ways. In certain states, the
Company provides for its services in conjunction with PAs owned by Leonard M.
Riggs, Jr., M.D., the Company's Chairman of the Board and Chief Executive
Officer, or another officer of the Company who is a physician. The Company uses
the PA Structure to avoid uncertainty as to the scope of laws regulating the
corporate practice of medicine, for regulatory convenience, or because the
Company acquired contracts structured in that manner. Under the PA Structure,
the PA enters into a management agreement with the hospital client and
contracts with physicians, generally on an independent contractor basis, to
provide the necessary medical practice coverage. The Company provides the
non-medical portion of the service under the PA Structure pursuant to a PA
Management Agreement with the PA. In other jurisdictions, a wholly owned
subsidiary of the Company contracts directly with both the hospital and the
physicians. Under either structure, all decisions regarding patient care are
made exclusively by the physicians.

                  Under the PA Management Agreements, the PAs delegate to the
Company the administrative, management, and support functions (but not any
functions constituting the practice of medicine) that the PAs have agreed to
provide to the hospital client. In consideration for these services, the PAs
pay the Company a monthly fee, which may be adjusted from time to time to
reflect industry practice, business conditions, and actual expenses for
administrative costs and uncollectible accounts. These fees approximate the
excess of the PAs' revenue over their expenses.

                  Each PA Management Agreement has a rolling ten year term.
Accordingly, on each anniversary of the PA Management Agreement, the term
automatically extends for an additional year unless either party gives notice
to the contrary at least 60 days before such anniversary. The Company also may
terminate



                                      29
<PAGE>   30

1.     ORGANIZATION AND BASIS OF PRESENTATION  (CONTINUED)

each PA Management Agreement as of any such anniversary. Notwithstanding such
termination provisions, the Company and the PAs have acknowledged that they
intend that their arrangements are permanent, subject to the Company's right to
terminate them.

                  The consolidated financial statements include the accounts of
Holdings and its subsidiaries and the PAs. The financial statements of the PAs
are consolidated with Holdings and its subsidiaries because Holdings has
unilateral control over the assets and operations of the PAs, and
notwithstanding the lack of technical majority ownership, consolidation of the
PAs is necessary to present fairly the financial position and results of
operations of Holdings because of the existence of a parent-subsidiary
relationship by means other than record ownership of the PAs' voting stock.
Control of the PAs by Holdings is perpetual and other than temporary because
the PAs have agreed with Holdings that they will not terminate any management
agreement or other arrangements established with Holdings, without the prior
written consent of Holdings. All significant intercompany and interaffiliate
accounts and transactions have been eliminated.

2.     SIGNIFICANT ACCOUNTING POLICIES

                  NET REVENUE AND PROFESSIONAL EXPENSES. Revenue is recorded in
the period the services are rendered as determined by the respective contracts
with the health care providers. Professional expenses are based on the terms of
the respective contracts with the independent contractor physicians.

                  Services performed by physicians under contract with the
Company are generally charged on a fee for service basis, and the Company's
revenue is based upon such fees. These fees are either: (i) collected by the
related hospital, which remits a negotiated amount monthly to the Company, or
(ii) billed and collected independently by the Company. In independent billing
contract arrangements, the Company arranges for a subsidiary or a third-party
billing firm to bill and collect directly for services performed by these
physicians. Cost of collections is included in professional expenses.

                  CASH AND CASH EQUIVALENTS. Money market investments, U.S.
government agency securities, and certificates of deposit with banks with
maturities of three months or less from date of purchase are considered to be
cash equivalents. Money market investments are in overnight investment funds
whose underlying collateral is U.S. government securities.

                  MARKETABLE SECURITIES. Investments in marketable securities
are stated at cost, which approximates market. These investments are in U.S.
government securities and other federally-insured securities. All marketable
securities purchased by the Company are held to maturity. The marketable
securities held at December 31, 1995 matured in 1996.

                  ACCOUNTS RECEIVABLE. Accounts receivable are primarily
amounts due from hospitals, amounts due from third-party payors, such as
insurance companies, self-insured employers, and government-sponsored health
care programs (Medicare and Medicaid), and amounts due from patients.

                  Accounts receivable due under independent billing contracts
include an allowance for contractual adjustments and charity and other
adjustments, which is charged to operations based on an evaluation of potential
losses. Contractual adjustments result from the difference between the rates
for physician services performed and amounts allowed by third-party payors for
such services. Other



                                      30

<PAGE>   31

2.       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

adjustments represent services provided to patients that are not expected to be
collected at the time service is provided.


                  FURNITURE AND OFFICE EQUIPMENT. Furniture and office
equipment are stated at cost. Depreciation is computed using the straight-line
method over estimated useful lives generally ranging from five to seven years.
Property under capital lease is amortized using the straight-line method over
the life of the respective lease. Such amortization is included with
depreciation expense in the accompanying financial statements.

                  PROFESSIONAL LIABILITY INSURANCE. Professional liability
insurance expense has been accrued based on management's expectation that it
will provide extended reporting period coverage to its independent contractor
physicians. The accruals are based on amounts provided by the Company's
professional liability insurance carriers (see Note 11). Professional liability
insurance expense is included in professional expenses.

                  OTHER ASSETS. The non-competition agreements, contracts, and
goodwill are recorded at cost on the date of the agreement or acquisition. The
non-competition agreements are being amortized over the terms of the
agreements, which range from two to five years. The amortization is based on
straight-line or an accelerated method, which management believes
systematically recognizes the decline over time in the value of the
non-competition agreement. Contracts acquired in business acquisitions are
valued at the date of acquisition and are being amortized on a straight line
basis over eight to twelve years. Goodwill, which represents the excess
purchase price of acquired businesses over the fair value of net assets
acquired, is being amortized on a straight-line basis over 40 years.

                  Deferred financing costs, which consist of costs incurred in
obtaining financing, are amortized using the effective interest method over the
term of the related debt, and such amortization is included in interest
expense.

                  LONG-LIVED ASSETS. The Company reviews the carrying value of
a long-lived asset if facts and circumstances suggest that it may be impaired
or that the amortization period may need to be changed. The Company considers
external factors relating to the long-lived asset, including hospital and
physician contract changes, local market developments, changes in third party
payments, national health care trends, and other publicly available
information. If these external factors indicate the long-lived asset will not
be recoverable, based upon undiscounted cash flows of the long-lived asset over
its remaining life, the carrying value of the long-lived asset will be reduced
by the estimated shortfall of discounted cash flows. The Company does not
believe there are any indicators that would require an adjustment to the
carrying value of its long-lived assets or their remaining useful lives as of
December 31, 1996.

                  STOCK-BASED COMPENSATION. The Company has elected to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations in accounting for its
employee stock options. In accordance with APB 25, since the exercise price of
the Company's employee stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized. The Company
has adopted the disclosure-only provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("FASB 123").




                                      31
<PAGE>   32
2.       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


                  INCOME TAXES. The Company accounts for income taxes using the
liability method as required by FASB Statement No. 109, "Accounting for Income
Taxes." Under the liability method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.

                  NET INCOME PER SHARE. Net income per share is calculated by
dividing net income by the weighted average number of common and common
equivalent shares outstanding during the period. Common equivalent shares
consist of the dilutive effect of outstanding options calculated using the
treasury stock method.

                  USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.

                  Laws and regulations governing the Medicare and Medicaid
programs are complex and subject to interpretation. The Company believes it is
in compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential
wrongdoing, other than the Department of Justice matter and settlement (see
Note 14). Compliance with such laws and regulations can be subject to future
government review and interpretation as well as significant regulatory action
including fines, penalties, and exclusion from the Medicare and Medicaid
programs.

                  RECLASSIFICATIONS.  Certain  prior  period  amounts have been
reclassified to conform with the 1996 presentation.


3.       ACCOUNTS RECEIVABLE AND NET REVENUE

                  Accounts receivable are recorded at net realizable value. The
allowance for contractual adjustments and charity and other adjustments is
based on historical experience and future expectations. Accounts receivable
consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                                DECEMBER 31,
                                                                                          -----------------------
                                                                                             1996         1995
                                                                                          ----------    ---------
<S>                                                                                       <C>             <C>
  Independent billing..................................................................   $  103,016      $61,252
  Hospital contracts...................................................................       12,913        8,001
  Billing receivables..................................................................        2,161        2,042
  Locum tenens.........................................................................          934        1,316
                                                                                          ----------      -------
                                                                                             119,024       72,611
  Less allowance for contractual adjustments and charity and other
     adjustments.......................................................................       72,611       42,798
                                                                                          ----------      -------
                                                                                          $   46,413      $29,813
                                                                                          ==========      =======
</TABLE>



                                      32
<PAGE>   33



3.       ACCOUNTS RECEIVABLE AND NET REVENUE (CONTINUED)

                  Concentration of credit risk relating to accounts receivable
is limited by the diversity and number of contracting hospitals, physician
practices, patients, payors, and the geographic dispersion of the Company's
operations. The following is a geographic breakdown, based on hospital
location, of accounts receivable:




<TABLE>
<CAPTION>
                                  DECEMBER 31,
                                  ------------
                                  1996    1995
                                  -----  -----
<S>                                <C>     <C>
Texas ........................     36%     39%
Maryland .....................     17      16
Florida ......................     14      16
Other ........................     33      29
                                  ---     ---
                                  100%    100%
                                  ===     ===
</TABLE>

             Net revenue consists of the following (in thousands):


<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                ------------------------------
                                                  1996       1995        1994
                                                --------   --------   --------
<S>                                             <C>        <C>        <C>
Gross revenue ...............................   $314,828   $259,811   $194,863
Less provision for contractual adjustments and
   charity and other adjustments ............    118,571    102,985     76,613
                                                --------   --------   --------
Net revenue .................................   $196,257   $156,826   $118,250
                                                ========   ========   ========
</TABLE>

                  A significant portion of the Company's net revenue has been
derived from one customer. This customer accounted for 9% of the Company's net
revenue in 1996 and 11% of the Company's net revenue in 1995 and 1994.


4.     FURNITURE AND OFFICE EQUIPMENT

                  Furniture and office equipment, at cost, totaled $7,847,000
and $5,018,000 at December 31, 1996 and 1995, respectively. Accumulated
depreciation and amortization totaled $3,429,000 and $1,634,000 at December 31,
1996 and 1995, respectively.



                                      33
<PAGE>   34




5.     LONG-TERM DEBT

            Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                                 DECEMBER 31,
                                                                                          ------------------------
                                                                                             1996          1995
                                                                                          -----------  -----------

<S>                                                                                       <C>          <C>
  Line of credit......................................................................... $   14,300   $       --
  Long-term debt related to acquisitions, payable in varying amounts through 2002, with
     effective interest rates ranging from 7% to 14%, net of imputed interest discounts
     of $1,413,000 and $336,000 at December 31, 1996 and 1995, respectively;
     collateralized by accounts receivable and contract rights ($14.7 million of
     long-term debt was refinanced using the Company's line of credit in January
     1997)...............................................................................     25,779        5,100
  Other, including capitalized lease obligations.........................................        389          356
                                                                                          ----------    ---------
                                                                                              40,468        5,456
  Less current portion...................................................................      5,589        2,956
                                                                                          ----------   ----------
                                                                                          $   34,879   $    2,500
                                                                                          ==========   ==========
</TABLE>

                  During 1996, the Company had a revolving line of credit with
a bank for up to $50 million for working capital and acquisition purposes. On
March 7, 1997, the Company entered into a new Revolver with a bank acting as
administrative agent for a syndicate of lenders under which the Company can
borrow up to $100 million for working capital and acquisition purposes. This
revolving line of credit replaces the one that existed at December 31, 1996.
The Revolver matures on March 7, 2000. Borrowings under the Revolver bear
interest at variable rates based, at the Company's option, on the bank's base
rate or the Eurodollar rate. A per annum commitment fee varying from .1875% to
 .375% depending upon the Company's ratio of funded debt to operating cash flow
is required on the unused portion of the commitment. As of March 7, 1997, there
was $31.6 million outstanding on the Revolver.

                  The Revolver contains covenants which, among other things,
require the Company to maintain certain financial ratios and impose certain
limitations or prohibitions on the Company with respect to the incurrence,
guaranty, or assumption of indebtedness, the payment of dividends, the
redemption or repurchase of, or other payment with respect to, the Company's
capital stock, certain cash transactions with subsidiaries and affiliates,
acquisitions, contract management maintenance, and ownership of the PAs.
Throughout 1996 and at year end the Company was in compliance with all
covenants relative to the Revolver.


                  As of December 31, 1996, the maturities of long-term debt
were as follows (in thousands):


<TABLE>
<S>      <C>                                                                                     <C>
         1997...........................................................................         $   6,335
         1998...........................................................................             3,244
         1999...........................................................................             3,203
         2000...........................................................................            14,399
         2001...........................................................................            14,399
         Thereafter.....................................................................               301
                                                                                                 ---------
                                                                                                    41,881
         Less unamortized discount......................................................             1,413
                                                                                                 ---------
                                                                                                 $  40,468
                                                                                                 =========
</TABLE>




                                      34
<PAGE>   35

5.       LONG-TERM DEBT (CONTINUED)

                  Interest payments were $886,000, $289,000, and $2,317,000 in
1996, 1995, and 1994, respectively. No interest expense was incurred on debt to
stockholders and officers in 1996 or 1995. Interest expense incurred on debt to
stockholders and officers in 1994 totaled $1,672,000. The weighted average
interest rate is 6.33% and 8.07% on short-term borrowings outstanding at
December 31, 1996 and 1995, respectively.

6.     BENEFIT PLANS

                  In 1994, the Company instituted a qualified contributory
savings plan. The plan is qualified under Section 401(k) of the Internal
Revenue Code (the "401(k) Plan"). The 401(k) Plan is open to substantially all
full-time employees of the Company or any affiliate who have completed one year
of eligible service with the Company or such affiliate. The 401(k) Plan permits
participant contributions and requires a contribution from the Company based on
the participant's contribution and the subsidiary or affiliate that employs the
participant. The 401(k) Plan also allows the Company to make other
discretionary contributions, including profit sharing contributions. The
Company contributed $944,000, $325,000, and $321,000 to the 401(k) Plan in
1996, 1995, and 1994, respectively. The contributions in 1994 included $99,000
to a plan subsequently merged into the 401(k) Plan.

                  The Company's matching contributions on behalf of an eligible
employee generally become fully vested if such employee reaches normal
retirement age, dies, or becomes disabled while an employee, or completes five
years of service. Prior to an eligible employee completing five years of
service, such employee will partially vest at 40%, 60%, and 80%, at the end of
such employee's second, third, and fourth years of service, respectively.

7.     INCOME TAXES

                  Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
were as follows at December 31:

<TABLE>
<CAPTION>
                                                                                                1996     1995
                                                                                               ------- -------
                                                                                                 (DOLLARS IN
                                                                                                  THOUSANDS)
<S>                                                                                           <C>       <C>
  Deferred tax liabilities:
   Change in tax accounting method........................................................    $  886    $1,731
   Acquired tax basis differences.........................................................     3,249     1,020
                                                                                              ------    ------
                                                                                               4,135     2,751
  Deferred tax assets:
   Professional liability reserves........................................................     2,432     1,575
   Book over tax amortization and depreciation............................................       486       395
   Revenue recognition for tax purposes in excess of book income..........................     2,817     1,787
   Department of Justice settlement.......................................................     2,958         -
   Other..................................................................................        92        94
                                                                                              ------    ------
                                                                                               8,785     3,851
  Valuation allowance for deferred tax assets.............................................         -      (400)
                                                                                              ------    ------
  Total deferred tax assets...............................................................     8,785     3,451
                                                                                              ------    ------
  Net deferred tax assets.................................................................    $4,650    $  700
                                                                                              ======    ======
</TABLE>

                                      35

<PAGE>   36

Income Taxes (Continued)


7.       INCOME TAXES (CONTINUED)

                  Significant components of the federal income tax expense were
as follows for the year ended December 31:

<TABLE>
<CAPTION>
                                                                              1996          1995          1994
                                                                            ---------     ---------    ---------
                                                                                  (DOLLARS IN THOUSANDS)
<S>                                                                         <C>           <C>          <C>
    Current:
        Federal.........................................................    $   8,938     $   8,285    $     647
        State...........................................................           62           141           56
                                                                            ---------     ---------    ---------
    Total current.......................................................        9,000         8,426          703
    Deferred:
        Federal.........................................................       (6,162)       (3,210)       1,865
                                                                            ---------     ---------    ---------
    Total deferred......................................................       (6,162)       (3,210)       1,865
                                                                            ---------     ---------    ---------
                                                                            $   2,838     $   5,216    $   2,568
                                                                            =========     =========    =========
</TABLE>

                  The reconciliation of income tax expense computed at the
federal statutory tax rate to income tax expense is as follows for the years
ended December 31:

<TABLE>
<CAPTION>
                                                      1996                    1995                  1994
                                              ----------------------  ---------------------  -------------------
                                                AMOUNT      PERCENT     AMOUNT     PERCENT     AMOUNT   PERCENT
                                              -----------  ---------  ---------- ----------  --------- ---------
                                                                   (DOLLARS IN THOUSANDS)

<S>                                           <C>             <C>     <C>            <C>     <C>          <C>
Tax at statutory rate.......................  $   2,892       35%     $  4,868       35%     $ 2,427      34%

State income tax (net of federal tax
     benefit)...............................         40        -            92        1          141       2
Nondeductible amortization..................        242        3           219        2            -       -
Reduction in valuation allowance............       (400)      (5)            -        -            -       -
Other.......................................         64        1            37        -            -       -
                                              ---------     ----      --------      ---      -------    ----
                                              $   2,838       34%     $  5,216       38%     $ 2,568      36%
                                              =========     ====      ========      ===      =======      ==
</TABLE>

                  Income taxes paid during 1996, 1995, and 1994, were
$8,555,000, $6,124,000, and $330,000, respectively.

8.     STOCK OPTIONS

                  The Company's Stock Option and Restricted Stock Purchase Plan
(the "Stock Option Plan") provides for the granting of stock options and
restricted stock to employees and independent contractors. These options are
issued at exercise prices approximating the market value of the common stock on
the dates of grant and vest over periods of up to five years. The options
issued to date are nonqualified for federal income tax purposes.



                                      36
<PAGE>   37



8.       STOCK OPTIONS (CONTINUED)

                  Pertinent information regarding the Stock Option Plan for
1996, 1995, and 1994:

<TABLE>
<CAPTION>
                                                                                          OPTIONS
                                                                             -----------------------------------
                                                          WEIGHTED AVERAGE
                                     OPTION PRICE RANGE    EXERCISE PRICE
                                                                                1996          1995        1994
                                    -------------------- ------------------- ------------  ----------  ---------
<S>                                   <C>     <C>              <C>              <C>         <C>        <C>
Outstanding, beginning of period      $4.93-- $16.88           $10.41           830,007     729,391    501,641
Granted                               $20.25--$26.88            25.14           528,500     260,000    235,500
Forfeited                             $4.93-- $25.63            12.75          (136,100)     (2,600)    (6,700)
Exercised                             $4.93-- $16.88             9.12          (139,300)   (156,784)    (1,050)
                                                                              ---------    --------    -------
Outstanding, end of period            $4.93-- $26.88           $17.47         1,083,107     830,007    729,391
                                                                              =========    ========    =======
Weighted average fair value of options granted during
    the year                                                                    $ 13.58    $   7.72
</TABLE>


                  The following table summarizes information about stock
options outstanding and exercisable at December 31, 1996:


<TABLE>
<CAPTION>
                                       OPTIONS OUTSTANDING                              OPTIONS EXERCISABLE
                    -----------------------------------------------------------  -----------------------------------
                                          WEIGHTED
                                     AVERAGE REMAINING                               NUMBER            WEIGHTED
     RANGE OF        OUTSTANDING      CONTRACTUAL LIFE      WEIGHTED AVERAGE      EXERCISABLE          AVERAGE
 EXERCISE PRICES     AT 12/31/96                             EXERCISE PRICE       AT 12/31/96       EXERCISE PRICE
------------------- --------------   -------------------  ---------------------  ---------------   -----------------
<S>                    <C>                    <C>               <C>                  <C>                <C>
      $4.93            113,932                5                 $ 4.93               72,359             $ 4.93
 $11.00-- $13.75       457,175                8                  12.08              217,450              11.67
 $16.88-- $23.25       118,000               10                  22.42               23,000              22.34
 $25.63-- $26.88       394,000                9                  25.85               76,000              25.79
                     ---------                                                      -------
  $4.93-- $26.88     1,083,107                                                      388,809
                     =========                                                      =======
</TABLE>

                  The Company has adopted the disclosure only provisions of
FASB No. 123. Therefore, no compensation cost has been recognized for the Stock
Option Plan. Had compensation cost for the Company's Stock Option Plan been
accounted for based on the fair value at the grant date consistent with
provisions of FASB No. 123, the Company's net income and net income per share
would have been reduced to the pro forma amounts below:

<TABLE>
<CAPTION>
                                                                                           1996           1995
                                                                                      -------------  --------------
                                                                                          (DOLLARS IN THOUSANDS,
                                                                                          EXCEPT PER SHARE DATA)

<S>                                                                                         <C>             <C>
     Net income-- as reported....................................................           $5,425          $8,693
     Net income-- pro forma......................................................            4,424           8,428
     Net income per share-- as reported..........................................             0.64            1.05
     Net income per share-- pro forma............................................             0.52            1.02
</TABLE>


                  The effects of applying FASB No. 123 for the presentation of
pro forma disclosures above are not necessarily representative of the effects on
reported net income for future years (i.e. first year reflects expense for only
one year's vesting, while second year will reflect expense for two years'
vesting, etc.).




                                      37
<PAGE>   38

8.       STOCK OPTIONS (CONTINUED)

                  The fair value of the options granted in both 1996 and 1995
were estimated at the grant date using the Black-Scholes option pricing model
with the following weighted average assumptions: expected lives of 6 years;
expected volatility of .487; and expected dividend yield of 0%. A risk-free
interest rate of 6.28% and 7.15% was used for options granted in 1996 and 1995,
respectively.

                  Effective May 16, 1996, the number of shares of Common Stock
available for issuance under the Stock Option Plan was increased from 1,250,000
to 3,250,000. The Company has reserved 2,952,866 shares of common stock for
issuance upon exercise of stock options. At December 31, 1996, 1,869,759 shares
were available for future grants under the Stock Option Plan.

                  The exercise of stock options in 1996 and 1995 resulted in a
tax benefit of $850,000 and $733,000, respectively, which was accounted for as
paid-in-capital.

9.     STOCKHOLDERS' EQUITY

                  In December 1994, the Company issued 2,587,500 shares of
Common Stock at $11.00 per share in an initial public common stock offering.
Proceeds from the offering, net of commissions and other related expenses
totaling $3,185,000, were $25,278,000, of which $14,500,000 was used to repay
subordinated debt. In connection with the offering, the mandatorily redeemable
convertible preferred stock was converted into 2,939,976 shares of Common
Stock.

                  As a result of the early retirement of the subordinated debt
in December 1994, the Company incurred an extraordinary charge of approximately
$837,000 net of taxes. The extraordinary charge, before taxes, is comprised of
approximately $1,022,000 of unamortized original issue discount and $286,000 of
unamortized loan origination fees.

                  The Company has reserved 56,355 shares of Common Stock for
issuance in conjunction with an acquisition. See Note 13.

10.    LEASES

                  The Company leases office space for primary terms of one to
seven years, with options to renew for additional periods. Future minimum
payments due on these noncancelable operating leases are as follows at December
31, 1996 (in thousands):


<TABLE>
<S>           <C>                                                                               <C>
              1997............................................................................. $     2,231
              1998.............................................................................       2,205
              1999.............................................................................       1,683
              2000.............................................................................       1,209
              2001.............................................................................       1,206
              Thereafter.......................................................................       2,160
              Less: Sublease income............................................................        (337)
                                                                                                -----------
                                                                                                $    10,357
                                                                                                ===========
</TABLE>

                   Rent expense under operating leases for 1996, 1995, and 1994
was $900,000, $762,000, and $662,000, respectively.





                                      38
<PAGE>   39

11.    PROFESSIONAL LIABILITY INSURANCE

                  The Company requires the physicians with whom it contracts
to obtain professional liability insurance coverage and makes available to the
physicians such insurance. Prior to June 1, 1989, the Company procured
professional liability insurance for the physicians on a claims-made basis and,
effective May 31, 1989, exercised its option for seven-year extended reporting
period coverage. Beginning June 1, 1989, the Company again procured insurance
coverage for professional liability claims on a claims-made basis. The current
policy expires on December 31, 1998. Although the majority of the professional
liability insurance available for physicians is procured in this manner, in
certain cases, these physicians may obtain their own professional liability
insurance directly or through the contracting hospital.

12.    FAIR VALUES OF FINANCIAL INSTRUMENTS

                  The carrying amounts of the Company's financial instruments
at December 31, 1996 and 1995 approximate fair value. The following methods and
assumptions were used by the Company in estimating its fair value disclosures
for financial instruments:


      Cash and cash equivalents:        The carrying amount reported in the
                                        balance sheet for cash and cash
                                        equivalents approximates its
                                        fair value.

      Marketable securities:            The fair values for marketable
                                        securities are based on quoted
                                        market prices.

      Long-term debt:                   The fair values of the Company's
                                        long-term debt are estimated
                                        using discounted cash flow analyses,
                                        based on the Company's current
                                        incremental borrowing rates for
                                        similar types of borrowing arrangements.

13.    ACQUISITIONS

                  In 1996, the Company acquired six physician practice
management companies providing ED services to hospitals in Arkansas,
California, Illinois, Louisiana, Oklahoma, and Texas. The related physician
practices had 627,000 patient visits in 1996. The acquisitions established new
markets for the Company in California, Illinois, and Oklahoma. The Company
acquired these companies for an aggregate of $39.9 million, which consisted of
$29.3 million in cash, $9.1 million of obligations payable over two to seven
years, and 56,355 shares of Common Stock valued at an average of $26.62 per
share, or an aggregate of $1.5 million. One-third of the shares will be issued
and delivered to the respective sellers on each of the next three anniversaries
of the closing date of their transaction. The payment schedule of the
obligations depends upon certain criteria applicable to the contracts that the
respective companies held as of the closings. The sellers of the acquired
companies agreed not to compete against the Company for the three years
immediately after each respective acquisition. The



                                      39
<PAGE>   40

13.      ACQUISITIONS (CONTINUED)

Company allocated $2.0 million of the acquisition consideration to these
non-competition agreements.

                  In 1995, the Company acquired three physician practice
management companies. Two of these companies provide ED services to hospitals
in Arkansas, Maryland, Pennsylvania, and Virginia. The related physician
practices had 237,000 patient visits in 1996. The third company provides
in-patient physician services to hospitals in Maryland. The acquisitions
established new markets for the Company in Arkansas and the mid-Atlantic region
of the United States. In 1995 the Company also acquired an emergency medicine
billing company in Pennsylvania that provides billing services to emergency
physician groups who supply professional services to EDs in eight states. The
Company acquired these companies for an aggregate of $26.9 million, which
consisted of $16.7 million in cash, $2.9 million of obligations payable over
two to seven years, and 433,333 shares of Common Stock valued at $16.88 per
share, or an aggregate of $7.3 million. The sellers of the acquired companies
agreed not to compete against the Company for the three years immediately after
each respective acquisition. The Company allocated $1.3 million of the
acquisition consideration to these non-competition agreements.

                  All the acquisitions have been accounted for as purchases,
and the net assets and operations are included in the Company's consolidated
financial statements as of the date of acquisition.

                  The following unaudited pro forma information combines the
results of operations of the Company with the acquired businesses after giving
effect to amortization of non-competition agreements, contracts, and goodwill,
and interest expense on the related long-term obligations as if the
acquisitions had occurred on January 1, 1995:

<TABLE>
<CAPTION>
                                                                                         FOR THE YEAR ENDED
                                                                                             DECEMBER 31,
                                                                                    ----------------------------
                                                                                        1996            1995
                                                                                    -------------   ------------
                                                                                        (DOLLARS IN THOUSANDS,
                                                                                       EXCEPT PER SHARE AMOUNTS)
<S>                                                                                     <C>            <C>
   Net revenue.....................................................................     $227,836       $213,780
   Net income......................................................................        5,368          7,537
   Net income per share............................................................         0.63           0.90
</TABLE>

14.    CONTINGENCIES

                  The Company has reached an agreement in principle with the
Civil Division of the U.S. Department of Justice to settle the claims alleged
against it in the civil lawsuit styled United States ex rel. Theresa Semtner v.
Emergency Physician Billing Services, Inc. et al. Emergency Physician Billing
Services, Inc. ("EPBS") is an outside vendor that provided billing services on a
contract basis for the Company and others. The suit alleges improper coding of
charges for ED services reimbursed under the Medicare, Medicaid, CHAMPUS, and
Federal Employees Health Benefits programs.

                  Under the agreement in principle, the Company has agreed to
pay $7,750,000 to the United States and the various states for settlement of
the lawsuit. In return the DOJ Lawsuit will be dismissed with prejudice as to
the Company. An


                                      40
<PAGE>   41

14.      CONTINGENCIES (CONTINUED)

additional $250,000 in relator's attorneys' fees and $450,000 in other expenses
is also expected to be incurred. The Company does not admit any of the
allegations of the DOJ Lawsuit or any related liability, and the Company
anticipates that the settlement will insure the Company's rights to participate
fully in the future in Medicare, Medicaid, CHAMPUS, and Federal Employees
Health Benefits programs. The agreement is subject to execution of a definitive
settlement agreement after final approval by the DOJ and the states. The
related settlement expenses have been accrued for in the 4th quarter in the
accompanying 1996 financial statements.

                  The Company is also a defendant in various other legal
proceedings arising in the ordinary course of business. Although the results of
litigation cannot be predicted with certainty, management believes that the
outcome of the pending other litigation will not have a material adverse effect
on the Company's consolidated financial statements.

15.    RELATED PARTY TRANSACTIONS

                  In connection with servicing its independent billing
contracts, the Company enters into arrangements with companies that provide
accounts receivable management services. A director of the Company was a
director of a company that provided such services to the Company for the years
1994, 1995, and part of 1996. Management service fees paid by the Company to
this company in 1994, 1995, and 1996 were $1,102,000, $1,140,000, and
$1,167,000, respectively.

                  The Company believes that these arrangements have been on
terms no less favorable to the Company than could have been obtained from
unaffiliated third parties.


ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE.

                  None.


                                    PART III

                  Pursuant to General Instruction G(3) to Form 10-K, the
information required by Items 10, 11, 12, and 13 is incorporated by reference
to the Company's Proxy Statement for its 1997 Annual Meeting, which the Company
anticipates filing with the Securities and Exchange Commission on or before
April 30, 1997.


                                      41
<PAGE>   42

                                    PART IV

ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
                  8-K.

FINANCIAL STATEMENTS

                  Report of Ernst & Young LLP, Independent Auditors

                  Consolidated Balance Sheets at December 31, 1996 and 1995

                  Consolidated Statements of Income for the Years Ended
                  December 31, 1996, 1995, and 1994

                  Consolidated Statements of Stockholders' Equity for the Years
                  Ended December 31, 1996, 1995, and 1994

                  Consolidated Statements of Cash Flows for the Years Ended
                  December 31, 1996, 1995, and 1994

                  Notes to Consolidated Financial Statements

                  Financial Statement Schedule--Valuation and Qualifying
                  Accounts

                  All other schedules are excluded because they are either
inapplicable or the requested information is included in the Company's
consolidated financial statements.


EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO.                          DESCRIPTION
----------                           -----------
<S>   <C>
2.1  Securities Purchase Agreement, dated as of February 4, 1992, among the
     Company, EmCare, Inc., Leonard M. Riggs, Jr., M.D., William F. Miller,
     III, WCAS Capital Partners II, L.P., and certain other persons
     (incorporated by reference to Exhibit No. 10.17 to the Company's
     Registration Statement No. 33-81830 on Form S-1).

2.2  Amendment No. 1 to Securities Purchase Agreement, dated as of May 10,
     1993, among the Company, EmCare, Inc., Leonard M. Riggs, Jr., M.D.,
     William F. Miller, III, and certain other persons (incorporated by
     reference to Exhibit No. 10.18 to the Company's Registration Statement No.
     33-81830 on Form S-1).

2.3  Waiver and Release and Agreement Restricting Transfer of Shares, dated as
     of January 15, 1994, among the Company, EmCare, Inc., Leonard M. Riggs,
     Jr., M.D., William F. Miller, III, and certain other persons (incorporated
     by reference to Exhibit No. 10.19 to the Company's Registration Statement
     No. 33-81830 on Form S-1.).

2.4  Agreement and Plan of Merger, dated as of February 24, 1995, among the
     Company, Capital Equity Associates, LLC, CEA, and its Class A Stockholders
     (incorporated by reference to Exhibit No. 2.1 to the Company's Current
     Report on Form 8-K filed on March 14, 1995, as amended by a Current Report
     on Form 8-K/A filed on May 15, 1995).

2.5  Stock Purchase Agreement, dated September 7, 1995, among EmCare, Inc.,
     RTI, and Stuart L. Wolf, the sole stockholder of RTI (incorporated by
     reference to Exhibit No. 2.1 to the Company's Current Report on Form 8-K
     filed on September 22, 1995, as amended by a Current Report on Form 8-K/A
     filed on November 7, 1995).
</TABLE>

                                      42
<PAGE>   43

<TABLE>
<CAPTION>
EXHIBIT NO.                          DESCRIPTION
----------                           -----------

<S>   <C>
2.6   Stock Purchase Agreement, dated as of April 1, 1996, among the Company,
      EmCare, Inc., MESA, and the MESA shareholders (incorporated by reference
      to Exhibit No. 2.1 to the Company's Current Report on Form 8-K filed on
      May 15, 1996, as amended by a Current Report on Form 8-K/A filed on July
      15, 1996).

3.1   Charter of the Company (incorporated by reference to Exhibit Nos. 3.2 and
      3.5 to the Company's Registration Statement No. 33-81830 on Form S-1).

3.2   Bylaws of the Company (incorporated by reference to Exhibit No. 3.4 to the
      Company's Registration Statement No. 33-81830 on Form S-1 ).

4.1   Specimen Common Stock certificate (incorporated by reference to Exhibit
      No. 4.1 to the Company's Registration Statement No. 33-81830 on Form S-1).

4.2   Registration Rights Agreement, dated as of February 5, 1992, among Leonard
      M. Riggs, Jr., M.D., William F. Miller, III, WCAS Capital Partners II,
      L.P., and certain other persons (incorporated by reference to Exhibit No.
      4.2 to the Company's Registration Statement No. 33-81830 on Form S-1).

10.1  Amended and Restated Stock Option and Restricted Stock Purchase Plan, as
      amended (incorporated by reference to Exhibit No. 4.1 to the Company's
      Registration Statement No. 333-12965 on Form S-8).

10.2  Non-Qualified Stock Option Agreement, dated February 4, 1992, between the
      Company and Leonard M. Riggs, Jr., M.D. (incorporated by reference to
      Exhibit No. 10.7 to the Company's Registration Statement No. 33-81830 on
      Form S-1).

10.3  Amendment No. 1 to Non-Qualified Stock Option Agreement, dated as of
      December 31, 1993, between the Company and Leonard M. Riggs, Jr., M.D.
      (incorporated by reference to Exhibit No. 10.8 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.4  Letter Agreement Regarding Additional Non-Qualified Stock Option
      Agreement, dated February 4, 1992, between the Company and Leonard M.
      Riggs, Jr., M.D. (incorporated by reference to Exhibit No. 10.9 to the
      Company's Registration Statement No. 33-81830 on Form S-1).

10.5  Amendment No. 1 to Additional Non-Qualified Stock Option Agreement, dated
      as of December 31, 1993, between the Company and Leonard M. Riggs, Jr.,
      M.D. (incorporated by reference to Exhibit No. 10.10 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.6  Non-Qualified Stock Option Agreement, dated as of December 31, 1993,
      between the Company and Leonard M. Riggs, Jr., M.D. (incorporated by
      reference to Exhibit No. 10.15 to the Company's Registration Statement No.
      33-81830 on Form S-1).

10.7  Non-Qualified Stock Option Agreement, dated as of February 4, 1992,
      between the Company and William F. Miller, III (incorporated by reference
      to Exhibit No. 10.11 to the Company's Registration Statement No. 33-81830
      on Form S-1).

10.8  Amendment No. 1 to Non-Qualified Stock Option Agreement, dated as of
      December 31, 1993, between the Company and William F. Miller, III
      (incorporated by reference to Exhibit No. 10.12 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.9  Letter Agreement Regarding Additional Non-Qualified Stock Option
      Agreement, dated February 4, 1992, between the Company and William F.
      Miller, III (incorporated by reference to Exhibit No. 10.13 to the
      Company's Registration Statement No. 33-81830 on Form S-1).

10.10 Amendment No. 1 to Additional Non-Qualified Stock Option Agreement, dated
      as of December 31, 1993, between the Company and William F. Miller, III
      (incorporated by reference to Exhibit No. 10.14 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.11 Non-Qualified Stock Option Agreement, dated as of December 31, 1993,
      between the Company and William F. Miller, III (incorporated by reference
      to Exhibit No. 10.16 to the Company's Registration Statement No. 33-81830
      on Form S-1).
</TABLE>



                                      43

<PAGE>   44


<TABLE>
<CAPTION>
EXHIBIT NO.                          DESCRIPTION
----------                           -----------

<S>   <C>
10.12 Form of Amendment to Non-Qualified Stock Option Agreement issued to
      Leonard M. Riggs, Jr., M.D., and William F. Miller, III, as of December
      31, 1993 (incorporated by reference to Exhibit No. 10.43 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.13 Amended and Restated Employment Agreement, dated as of February 5, 1992,
      between the Company and Leonard M. Riggs, Jr., M.D., with Addendum.

10.14 Amended and Restated Employment Agreement, dated as of February 5, 1992,
      between the Company and William F. Miller, III, with Addendum.

10.15 Severance Agreement, dated as of November 1, 1996, between the Company
      and Robert F. Anderson, II.

10.16 Third Amended and Restated Loan Agreement, dated March 7, 1997, among
      the Company, EmCare, Inc., Texas Commerce Bank National Association, and
      certain other banks.

10.17 Lease Agreement, dated May 23, 1989, between Elm Block Development
      Limited Partnership and EmCare, Inc., as amended (incorporated by
      reference to Exhibit No. 10.43 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1994).

10.18 Lease Agreement, dated December 27, 1995, between Walroad Associates,
      L.P. and RTI (incorporated by reference to Exhibit 10.36 to the Company's
      Annual Report on Form 10-K for the year ended December 31, 1995).

10.19 Stock Transfer and Option Agreement, dated as of February 24, 1997, among
      EmCare, Inc., certain PAs, and Leonard M. Riggs, Jr., M.D.

10.20 Stock Transfer and Option Agreement, dated as of February 24, 1997, among
      EmCare, Inc., certain PAs, and Steven W. Cooley, M.D.

10.21 Amended and Restated Memorandum of Understanding among the Company, its
      subsidiaries, and certain professional associations and corporations
      (incorporated by reference to Exhibit No. 10.44 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.22 Administrative Management Agreement, dated as of December 31, 1993,
      between EmCare Medical Services of New York, P.C. and EmCare OP, L.P.
      (incorporated by reference to Exhibit No. 10.22 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.23 Amendment No. 1 to Administrative Management Agreement, dated as of
      August 17, 1994, between EmCare Medical Services of New York, P.C., and
      EmCare OP, L.P. (incorporated by reference to Exhibit No. 10.38 to the
      Company's Registration Statement No. 33-81830 on Form S-1).

10.24 Administrative Management Agreement, dated as of December 31, 1993,
      between Emergency Health Services Associates and EmCare OP, L.P.
      (incorporated by reference to Exhibit No. 10.23 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.25 Amendment No. 1 to Administrative Management Agreement, dated as of
      August 17, 1994, between Emergency Health Services Associates and EmCare
      OP, L.P. (incorporated by reference to Exhibit No. 10.39 to the Company's
      Registration Statement No. 33-81830 on Form S-1).
</TABLE>


                                      44
<PAGE>   45
<TABLE>
<CAPTION>
EXHIBIT NO.                          DESCRIPTION
----------                           -----------
<S>   <C>
10.26 Administrative Management Agreement, dated as of December 31, 1993,
      between Emergency Health Services Associates of New Mexico, P.C. and
      EmCare OP, L.P. (incorporated by reference to Exhibit No. 10.24 to the
      Company's Registration Statement No. 33-81830 on Form S-1).

10.27 Amendment No. 1 to Administrative Management Agreement, dated as of
      August 17, 1994, between Emergency Health Services Associates of New
      Mexico, P.C., and EmCare OP, L.P. (incorporated by reference to Exhibit
      No. 10.40 to the Company's Registration Statement No. 33-81830 on Form
      S-1).

10.28 Administrative Management Agreement, dated as of December 31, 1993,
      between National Primary Care Network, P.A. and EmCare OP, L.P.
      (incorporated by reference to Exhibit No. 10.25 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.29 Amendment No. 1 to Administrative Management Agreement, dated as of
      August 17, 1994, between National Primary Care Network, P.A. and EmCare
      OP, L.P. (incorporated by reference to Exhibit No. 10.41 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.30 Management Agreement, dated as of July 24, 1995, between Network Family
      Physicians, P.A. and Network Family Physicians of McKinney, Inc.
      (incorporated by reference to Exhibit 10.38 to the Company's Annual Report
      on Form 10-K for the year ended December 31, 1995).

10.31 Management Agreement, dated as of September 22, 1995, between Bedford
      Family Physicians, P.A. and Bedford Family Physicians I, Inc.
      (incorporated by reference to Exhibit 10.37 to the Company's Annual Report
      on Form 10-K for the year ended December 31, 1995).

10.32 Management Services Agreement, dated as of September 1, 1996, between
      EmCare, Inc. and Emergency Physicians of Northern California, Inc.

10.33 Management Services Agreement, dated as of November 1, 1996, between
      EmCare, Inc. and Gould Physicians, P.A.

10.34 Subcontractor Agreement, dated as of December 1, 1993, between EmCare
      Medical Services of Pennsylvania, P.C. and EmCare, Inc. (incorporated by
      reference to Exhibit No. 10.26 to the Company's Registration Statement No.
      33-81830 on Form S-1).

10.35 Texas Operations Management Agreement, dated as of December 31, 1993,
      between EmCare, Inc. and EmCare OP, L.P. (incorporated by reference to
      Exhibit No. 10.27 to the Company's Registration Statement No. 33-81830 on
      Form S-1).

10.36 Credit Agreement, dated as of July 1, 1994, between EmCare Medical
      Services of New York, P.C., and EmCare OP, L.P. (incorporated by reference
      to Exhibit No. 10.31 to the Company's Registration Statement No. 33-81830
      on Form S-1).

10.37 Credit Agreement, dated as of July 1, 1994, between Emergency Health
      Services Associates, and EmCare OP, L.P. (incorporated by reference to
      Exhibit No. 10.32 to the Company's Registration Statement No. 33-81830 on
      Form S-1).

10.38 Credit Agreement, dated as of July 1, 1994, between Emergency Health
      Services Associates of New Mexico, P.C., and EmCare OP, L.P. (incorporated
      by reference to Exhibit No. 10.33 to the Company's Registration Statement
      No. 33-81830 on Form S-1).

10.39 Credit Agreement, dated as of July 1, 1994, between National Primary Care
      Network, P.A. and EmCare OP, L.P. (incorporated by reference to Exhibit
      No. 10.30 to the Company's Registration Statement No. 33-81830 on Form
      S-1).

10.40 Credit Agreement, dated as of July 1, 1994, between EmCare Medical
      Services of Pennsylvania, P.C., and EmCare OP, L.P. (incorporated by
      reference to Exhibit No. 10.34 to the Company's Registration Statement No.
      33-81830 on Form S-1).

11.1  Statement Re: Computation of Per Share Earnings.

21.1  Subsidiaries of the Company.
</TABLE>



                                      45
<PAGE>   46
<TABLE>
<CAPTION>
EXHIBIT NO.                          DESCRIPTION
----------                           -----------
<S>   <C>
23.1  Consent of Ernst & Young LLP concerning the incorporation by reference of
      its report on the Company's consolidated financial statements into the
      Company's Registration Statements Nos. 33-94684 and 333-12965 on Form S-8.

27.1  Financial Data Schedule (EDGAR filing only).

99.1  Financial Statement Schedule--Valuation and Qualifying Accounts.
</TABLE>

REPORTS ON FORM 8-K

           None.


                         [SIGNATURES ON THE NEXT PAGE]

                                      46
<PAGE>   47


                                   SIGNATURES

                  Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.


Date March 27, 1997                     EMCARE HOLDINGS INC.

                                        By: /s/ Leonard M. Riggs, Jr., M.D.
                                           -----------------------------------
                                        Name:  Leonard M. Riggs, Jr., M.D.
                                        Title: Chairman of the Board and Chief
                                               Executive Officer

                  Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on behalf
of the Company and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
         Signature                           Title                         Date
         ---------                           -----                         ----
<S>                                  <C>                               <C>
/s/ Robert F. Anderson, II           Chief Financial Officer, Senior   March 27, 1997
----------------------------------   Vice President, Secretary,
ROBERT F. ANDERSON, II               and Treasurer


/s/ Andrew G. Buck                   Chief Accounting Officer and      March 27, 1997
----------------------------------   Vice President
ANDREW G. BUCK


/s/ Terry Hartshorn                  Director                          March 27, 1997
----------------------------------
TERRY HARTSHORN


/s/ James T. Kelly                   Director                          March 27, 1997
----------------------------------
JAMES T. KELLY


/s/ William F. Miller, III           President, Chief Operating        March 27, 1997
----------------------------------   Officer, and Director
WILLIAM F. MILLER, III


/s/ Andrew M. Paul                   Director                          March 27, 1997
----------------------------------
ANDREW M. PAUL


/s/ Leonard M. Riggs, Jr., M.D.      Chairman of the Board, Chief      March 27, 1997
----------------------------------   Executive Officer, and Director
LEONARD M. RIGGS, JR., M.D.


/s/ Richard H. Stowe                 Director                          March 27, 1997
----------------------------------
RICHARD H. STOWE
</TABLE>




                                      47

<PAGE>   48
                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT NO.                          DESCRIPTION
----------                           -----------
<S>   <C>
2.1  Securities Purchase Agreement, dated as of February 4, 1992, among the
     Company, EmCare, Inc., Leonard M. Riggs, Jr., M.D., William F. Miller,
     III, WCAS Capital Partners II, L.P., and certain other persons
     (incorporated by reference to Exhibit No. 10.17 to the Company's
     Registration Statement No. 33-81830 on Form S-1).

2.2  Amendment No. 1 to Securities Purchase Agreement, dated as of May 10,
     1993, among the Company, EmCare, Inc., Leonard M. Riggs, Jr., M.D.,
     William F. Miller, III, and certain other persons (incorporated by
     reference to Exhibit No. 10.18 to the Company's Registration Statement No.
     33-81830 on Form S-1).

2.3  Waiver and Release and Agreement Restricting Transfer of Shares, dated as
     of January 15, 1994, among the Company, EmCare, Inc., Leonard M. Riggs,
     Jr., M.D., William F. Miller, III, and certain other persons (incorporated
     by reference to Exhibit No. 10.19 to the Company's Registration Statement
     No. 33-81830 on Form S-1.).

2.4  Agreement and Plan of Merger, dated as of February 24, 1995, among the
     Company, Capital Equity Associates, LLC, CEA, and its Class A Stockholders
     (incorporated by reference to Exhibit No. 2.1 to the Company's Current
     Report on Form 8-K filed on March 14, 1995, as amended by a Current Report
     on Form 8-K/A filed on May 15, 1995).

2.5  Stock Purchase Agreement, dated September 7, 1995, among EmCare, Inc.,
     RTI, and Stuart L. Wolf, the sole stockholder of RTI (incorporated by
     reference to Exhibit No. 2.1 to the Company's Current Report on Form 8-K
     filed on September 22, 1995, as amended by a Current Report on Form 8-K/A
     filed on November 7, 1995).

2.6  Stock Purchase Agreement, dated as of April 1, 1996, among the Company,
     EmCare, Inc., MESA, and the MESA shareholders (incorporated by reference
     to Exhibit No. 2.1 to the Company's Current Report on Form 8-K filed on
     May 15, 1996, as amended by a Current Report on Form 8-K/A filed on July
     15, 1996).

3.1  Charter of the Company (incorporated by reference to Exhibit Nos. 3.2 and
     3.5 to the Company's Registration Statement No. 33-81830 on Form S-1).

3.2  Bylaws of the Company (incorporated by reference to Exhibit No. 3.4 to the
     Company's Registration Statement No. 33-81830 on Form S-1 ).
</TABLE>


<PAGE>   49


<TABLE>
<CAPTION>
EXHIBIT NO.                          DESCRIPTION
----------                           -----------
<S>   <C>
4.1  Specimen Common Stock certificate (incorporated by reference to Exhibit
     No. 4.1 to the Company's Registration Statement No. 33-81830 on Form S-1).

4.2  Registration Rights Agreement, dated as of February 5, 1992, among Leonard
     M. Riggs, Jr., M.D., William F. Miller, III, WCAS Capital Partners II,
     L.P., and certain other persons (incorporated by reference to Exhibit No.
     4.2 to the Company's Registration Statement No. 333-81830 on Form S-1).

10.1 Amended and Restated Stock Option and Restricted Stock Purchase Plan, as
     amended.

10.2 Non-Qualified Stock Option Agreement, dated February 4, 1992, between the
     Company and Leonard M. Riggs, Jr., M.D. (incorporated by reference to
     Exhibit No. 10.7 to the Company's Registration Statement No. 33-81830 on
     Form S-1).

10.3 Amendment No. 1 to Non-Qualified Stock Option Agreement, dated as of
     December 31, 1993, between the Company and Leonard M. Riggs, Jr., M.D.
     (incorporated by reference to Exhibit No. 10.8 to the Company's
     Registration Statement No. 33-81830 on Form S-1).

10.4 Letter Agreement Regarding Additional Non-Qualified Stock Option
     Agreement, dated February 4, 1992, between the Company and Leonard M.
     Riggs, Jr., M.D. (incorporated by reference to Exhibit No. 10.9 to the
     Company's Registration Statement No. 33-81830 on Form S-1).

10.5 Amendment No. 1 to Additional Non-Qualified Stock Option Agreement, dated
     as of December 31, 1993, between the Company and Leonard M. Riggs, Jr.,
     M.D. (incorporated by reference to Exhibit No. 10.10 to the Company's
     Registration Statement No. 33-81830 on Form S-1).

10.6 Non-Qualified Stock Option Agreement, dated as of December 31, 1993,
     between the Company and Leonard M. Riggs, Jr., M.D. (incorporated by
     reference to Exhibit No. 10.15 to the Company's Registration Statement No.
     33-81830 on Form S-1).

10.7 Non-Qualified Stock Option Agreement, dated as of February 4, 1992,
     between the Company and William F. Miller, III (incorporated by reference
     to Exhibit No. 10.11 to the Company's Registration Statement No. 33-81830
     on Form S-1).

10.8 Amendment No. 1 to Non-Qualified Stock Option Agreement, dated as of
     December 31, 1993, between the Company and William F. Miller, III
     (incorporated by reference to Exhibit No. 10.12 to the Company's
     Registration Statement No. 33-81830 on Form S-1).
</TABLE>


<PAGE>   50

<TABLE>
<CAPTION>
EXHIBIT NO.                          DESCRIPTION
----------                           -----------
<S>   <C>
10.9  Letter Agreement Regarding Additional Non-Qualified Stock Option
      Agreement, dated February 4, 1992, between the Company and William F.
      Miller, III (incorporated by reference to Exhibit No. 10.13 to the
      Company's Registration Statement No. 33-81830 on Form S-1).

10.10 Amendment No. 1 to Additional Non-Qualified Stock Option Agreement, dated
      as of December 31, 1993, between the Company and William F. Miller, III
      (incorporated by reference to Exhibit No. 10.14 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.11 Non-Qualified Stock Option Agreement, dated as of December 31, 1993,
      between the Company and William F. Miller, III (incorporated by reference
      to Exhibit No. 10.16 to the Company's Registration Statement No. 33-81830
      on Form S-1).

10.12 Form of Amendment to Non-Qualified Stock Option Agreement issued to
      Leonard M. Riggs, Jr., M.D., and William F. Miller, III, as of December
      31, 1993 (incorporated by reference to Exhibit No. 10.43 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.13 Amended and Restated Employment Agreement, dated as of February 5, 1992,
      between the Company and Leonard M. Riggs, Jr., M.D., with Addendum.

10.14 Amended and Restated Employment Agreement, dated as of February 5, 1992,
      between the Company and William F. Miller, III, with Addendum.

10.15 Severance Agreement, dated as of November 1, 1996, between the Company
      and Robert F. Anderson, II.

10.16 Third Amended and Restated Loan Agreement, dated March 7, 1997, among
      the Company, EmCare, Inc., Texas Commerce Bank National
      Association, and certain other banks.

10.17 Lease Agreement, dated May 23, 1989, between Elm Block Development
      Limited Partnership and EmCare, Inc., as amended (incorporated by
      reference to Exhibit No. 10.43 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1994).

10.18 Lease Agreement, dated December 27, 1995, between Walroad Associates,
      L.P. and RTI (incorporated by reference to Exhibit 10.36 to the Company's
      Annual Report on Form 10-K for the year ended December 31, 1995).
</TABLE>


<PAGE>   51

<TABLE>
<CAPTION>
EXHIBIT NO.                          DESCRIPTION
----------                           -----------
<S>   <C>
10.19 Stock Transfer and Option Agreement, dated as of February 24, 1997,
      among EmCare, Inc., certain PAs, and Leonard M. Riggs, Jr., M.D.

10.20 Stock Transfer and Option Agreement, dated as of February 24, 1997,
      among EmCare, Inc., certain PAs, and Steven W. Cooley, M.D.

10.21 Amended and Restated Memorandum of Understanding among the Company, its
      subsidiaries, and certain professional associations and corporations
      (incorporated by reference to Exhibit No. 10.44 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.22 Administrative Management Agreement, dated as of December 31, 1993,
      between EmCare Medical Services of New York, P.C. and EmCare OP, L.P.
      (incorporated by reference to Exhibit No. 10.22 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.23 Amendment No. 1 to Administrative Management Agreement, dated as of
      August 17, 1994, between EmCare Medical Services of New York, P.C., and
      EmCare OP, L.P. (incorporated by reference to Exhibit No. 10.38 to the
      Company's Registration Statement No. 33-81830 on Form S-1).

10.24 Administrative Management Agreement, dated as of December 31, 1993,
      between Emergency Health Services Associates and EmCare OP, L.P.
      (incorporated by reference to Exhibit No. 10.23 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.25 Amendment No. 1 to Administrative Management Agreement, dated as of
      August 17, 1994, between Emergency Health Services Associates and EmCare
      OP, L.P. (incorporated by reference to Exhibit No. 10.39 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.26 Administrative Management Agreement, dated as of December 31, 1993,
      between Emergency Health Services Associates of New Mexico, P.C. and
      EmCare OP, L.P. (incorporated by reference to Exhibit No. 10.24 to the
      Company's Registration Statement No. 33-81830 on Form S-1).

10.27 Amendment No. 1 to Administrative Management Agreement, dated as of
      August 17, 1994, between Emergency Health Services Associates of New
      Mexico, P.C., and EmCare OP, L.P. (incorporated by reference to Exhibit
      No. 10.40 to the Company's Registration Statement No. 33-81830 on Form
      S-1).
</TABLE>


<PAGE>   52

<TABLE>
<CAPTION>
EXHIBIT NO.                          DESCRIPTION
----------                           -----------
<S>   <C>
10.28 Administrative Management Agreement, dated as of December 31, 1993,
      between National Primary Care Network, P.A. and EmCare OP, L.P.
      (incorporated by reference to Exhibit No. 10.25 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.29 Amendment No. 1 to Administrative Management Agreement, dated as of
      August 17, 1994, between National Primary Care Network, P.A. and EmCare
      OP, L.P. (incorporated by reference to Exhibit No. 10.41 to the Company's
      Registration Statement No. 33-81830 on Form S-1).

10.30 Management Agreement, dated as of July 24, 1995, between Network Family
      Physicians, P.A. and Network Family Physicians of McKinney, Inc.
      (incorporated by reference to Exhibit 10.38 to the Company's Annual Report
      on Form 10-K for the year ended December 31, 1995).

10.31 Management Agreement, dated as of September 22, 1995, between Bedford
      Family Physicians, P.A. and Bedford Family Physicians I, Inc.
      (incorporated by reference to Exhibit 10.37 to the Company's Annual Report
      on Form 10-K for the year ended December 31, 1995).

10.32 Management Services Agreement, dated as of September 1, 1996, between
      EmCare, Inc. and Emergency Physicians of Northern California, Inc.

10.33 Management Services Agreement, dated as of November 1, 1996, between
      EmCare, Inc. and Gould Physicians, P.A.

10.34 Subcontractor Agreement, dated as of December 1, 1993, between EmCare
      Medical Services of Pennsylvania, P.C. and EmCare, Inc. (incorporated by
      reference to Exhibit No. 10.26 to the Company's Registration Statement No.
      33-81830 on Form S-1).

10.35 Texas Operations Management Agreement, dated as of December 31, 1993,
      between EmCare, Inc. and EmCare OP, L.P. (incorporated by reference to
      Exhibit No. 10.27 to the Company's Registration Statement No. 33-81830 on
      Form S-1).

10.36 Credit Agreement, dated as of July 1, 1994, between EmCare Medical
      Services of New York, P.C., and EmCare OP, L.P. (incorporated by reference
      to Exhibit No. 10.31 to the Company's Registration Statement No. 33-81830
      on Form S-1).

10.37 Credit Agreement, dated as of July 1, 1994, between Emergency Health
      Services Associates, and EmCare OP, L.P. (incorporated by reference to
      Exhibit No. 10.32 to the Company's Registration Statement No. 33-81830 on
      Form S-1).

10.38 Credit Agreement, dated as of July 1, 1994, between Emergency Health
      Services Associates of New Mexico, P.C., and EmCare OP, L.P. (incorporated
      by reference to Exhibit No. 10.33 to the Company's Registration Statement
      No. 33-81830 on Form S-1).

10.39 Credit Agreement, dated as of July 1, 1994, between National Primary Care
      Network, P.A. and EmCare OP, L.P. (incorporated by reference to Exhibit
      No. 10.30 to the Company's Registration Statement No. 33-81830 on Form
      S-1).

10.40 Credit Agreement, dated as of July 1, 1994, between EmCare Medical
      Services of Pennsylvania, P.C., and EmCare OP, L.P. (incorporated by
      reference to Exhibit No. 10.34 to the Company's Registration Statement No.
      33-81830 on Form S-1).

</TABLE>

<PAGE>   53

<TABLE>
<CAPTION>
EXHIBIT NO.                          DESCRIPTION
----------                           -----------
<S>   <C>
11.1  Statement Re: Computation of Per Share Earnings.

21.1  Subsidiaries of the Company.

23.1  Consent of Ernst & Young LLP concerning the incorporation by reference of
      its report on the Company's consolidated financial statements into the
      Company's Registration Statements Nos. 33-94684 and 333-12965 on Form S-8.

27.1  Financial Data Schedule (EDGAR filing only).

99.1  Financial Statement Schedule--Valuation and Qualifying Accounts.
</TABLE>