SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549

                                FORM 10-K

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

                    FOR THE FISCAL YEAR ENDED JUNE 30, 1997

                       COMMISSION FILE NUMBER 0-28134

       [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                   THE SECURITIES EXCHANGE ACT OF 1934

                    HOUSECALL MEDICAL RESOURCES, INC.
          -------------------------------------------------------
          (Exact name of registrant as specified in its charter)

                  DELAWARE                             58-2114917
  -------------------------------                 ------------------
  (State or other jurisdiction of                   I.R.S. Employer
   incorporation or organization)                 Identification No.

  1000 ABERNATHY ROAD, BUILDING 400, SUITE 1825, ATLANTA, GEORGIA     30328
  ----------------------------------------------------------------------------
  (Address of principal executive offices)                          (Zip Code)

Registrant's telephone number, including area code: (770) 379-9000

Name of exchange on which registered: None

Securities pursuant to Section 12(g) of the Act: Common Stock, $0.01
   par value

     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   /x/.

     Aggregate market value of the voting stock held by non-
affiliates (which for purposes hereof are all holders other than
executive officers and directors) of the registrant as of September 
9, 1997: $21,525,066.75 based on 10,399,934 shares outstanding at $4
1/8 per share, the last sale price on The Nasdaq Stock Market on
September 9, 1997.)

     At September 9, 1997, there were issued and outstanding
10,399,934 shares of Common Stock, par value $.01 per share.

                DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's definitive Proxy Statement for the
1997 Annual Meeting of Shareholders, to be filed with the
Commission, are incorporated into Part III.<PAGE>
                             PART I

ITEM 1.  BUSINESS

     Housecall Medical Resources, Inc. (the "Company" or
"Housecall") is a Delaware corporation formed on June 6, 1994 to
acquire Housecall, Inc. (referred to herein as the "predecessor"
of the Company) and to develop a home health care services
company that provides a comprehensive range of quality, cost-
effective services and products with a substantial market share
in the Southeastern United States and select other geographic
regions.  As of September 1, 1997, the Company had 110 owned and 85
managed branch offices in 20 states.  Housecall provides a
comprehensive range of home health care services, including
nursing and related care, infusion therapy, hospice care,
respiratory therapy, and home medical equipment.  The Company also
provides management services -- consisting of clinical and
marketing support, computerized billing and records retention
services, staffing, and other general administrative support --
to 64 clients who own home health agencies.

     By offering a comprehensive range of quality, cost-effective
services and products, the Company seeks to provide an efficient
and convenient "one-stop-shop" for patients, their physicians,
managed care organizations, and other third party payors to
efficiently source their home health care service requirements
from a single provider.  Housecall's approach to "one-stop-shop"
home health care services includes the capacity to provide care
in residential environments other than patients' homes, such as
nursing homes and retirement communities, and includes hospice
care services as well.  Through strategic acquisitions and
alliances and by internal expansion, Housecall is seeking to
develop a substantial market presence as the leading provider of
comprehensive home health care services in the Southeast.

SIGNIFICANT ACQUISITIONS

     The Company acquired its predecessor (Housecall, Inc.) on
July 1, 1994.  Since the acquisition of its predecessor, the
Company has completed five significant acquisitions: the
purchase of all the stock of (i) Medical Support Services, Inc.
("MSS") on February 3, 1995; (ii) Home Care Affiliates, Inc.  ("Home Care")
on May 31, 1995; (iii) Biomedical Home Care, Inc. ("Biomedical") on July 10,
1995; (iv) Messick Home Care, Inc. ("Messick") on October 31, 1996; and
the purchase of stock and certain assets to acquire (v) the Healthfirst
entities (a group of home health management companies under common
management and control hereafter referred to as "Healthfirst") on
May 13, 1997.  The latter acquisition included the following affiliates
of Healthfirst:  HFI Management, Inc., HFI Home Care Management,
L.P.,  Computer Masters of Kentucky, Inc. and Health Care
Resources, Inc. 

     MSS, based in Centreville, Alabama, had been engaged for four
years exclusively in providing management and administrative
services to home care agencies.  Home Care, based in Louisville,
Kentucky, commenced operations in 1986, and provided
substantially the same range of services and products as the
Company's predecessor.  Home Care had operations in Florida,
Indiana, and Kentucky, in addition to Tennessee.  Biomedical,
based in Raleigh, North Carolina, was formed in 1983 and was
engaged primarily in the provision of infusion therapy services
in markets across the United States. The Biomedical acquisition

                               1<PAGE>
added substantially to the Company's infusion therapy services
business and contributed a large professional staff of infusion
therapists and pharmacists.  Messick, based in Murfreesboro, Tennessee,
has been engaged in the home medical equipment business for over 13
years.  Healthfirst, based in Knoxville, Tennessee,
has been in operations since 1992, providing home care management and
consulting services in markets across the United States.

     Unless otherwise indicated, references herein to "the
Company" or "Housecall" with respect to the nature or source of
operations (or to the length of time operations have been
conducted) include the historical operations of MSS, Home Care,
Biomedical,  Messick, and Healthfirst but such references with respect
to historical financial data do not include the historical financial data
of any such entity prior to the time of its acquisition by the Company.

CERTAIN FACTORS AFFECTING FORWARD LOOKING STATEMENTS

     Many of the matters discussed in this Annual Report on Form
10-K are forward looking statements, as defined in the Private
Securities Litigation Reform Act of 1995.  Any forward looking
statements included herein have  been included based upon facts
available to management as of the date of the statement.  These
statements involve a number of risks and uncertainties that could
cause actual results to differ materially from any such
statement.  The following is a nonexclusive list of factors that
could cause results to differ materially:

     HEALTH CARE REFORM.  The health care industry has
experienced extensive and dynamic change.  In addition to economic
forces and regulatory influences, continuing political debate is
subjecting the health care industry to significant reform.  Health
care reform proposals have been formulated by the current
administration, members of Congress, and, periodically, state
legislators.  Government officials can be expected to continue to
review and assess alternative health care delivery systems and
payment methodologies.  Changes in the law or new interpretations
of existing laws may have a dramatic effect on the definition of
permissible or impermissible activities, the relative costs of
doing business, and the methods and amounts of payment for
medical care by both governmental and other payors.  Such reforms
could have a material adverse effect on the Company's business,
results of operations, and financial condition.

     UNPREDICTABILITY OF CHANGES IN GOVERNMENT REIMBURSEMENT
PROGRAMS.  In fiscal 1997 approximately 61% of the Company's net
revenues was derived from Medicare cost-based reimbursement;
approximately 8% was derived from Medicare charge-based
reimbursement; and approximately 2% was derived from Medicaid.
Currently, Medicare (cost-based) reimburses the Company for
covered home health care services at the lowest of the Company's
reimbursable costs (based on Medicare regulations), cost limits
established by the Health Care Financing Administration ("HCFA"),
or the Company's charges.  Medicare (charge-based) reimburses the
Company on a "prospective payment" system.  The level of net
revenues and profitability of the Company, like those of other
home health care companies, will be subject to the effect of
possible reductions in coverage or payment rates by such payors
or the application by payors of existing regulations in a manner
designed to maximize cost savings.  Such changes could have a

                               2<PAGE>
material adverse effect on the Company's business, results of
operations, or financial condition.  The passage of the 1997 tax
bill could have a material effect on reimbursement in the home
healthcare industry by significantly altering the home health
reimbursement system.  Beginning with services furnished on or after
January 1, 1998, coverage of home health services under Medicare Part
A will be reduced to a maximum of 100 visits during a spell of illness
after a three-day hospitalization or after receiving any covered
services in a skilled nursing facility.  Coverage for all other
services will be provided under Part B.  Funding responsibility
will be gradually shifted from Part A to Part B over a period of
seven years.   As a result of these changes, the patient will be
required to pay some of the cost of home care.  Previously,
all home health  benefits fell under Part A and the number of
visits was unlimited.   Part B requires an annual deductible and
copayments.  Periodic Interim Payments ("PIP") will be eliminated
for cost reporting periods on or after October 1, 1999.  This
tax law will also require all home healthcare companies to post a
bond in the amount of $50,000 in a form to be specified.  At this
point, is it unclear whether this new requirement will be applied
on a per agency provider number, per organization, or per division
basis, or whether some other application criterion will be used.
Reductions will be made for oxygen and oxygen equipment.  Updates to
the durable medical equipment ("DME") fee schedule will be eliminated
for the years 1998 through 2002.  HCFA must also propose a plan
for the prospective payment system for cost reporting periods
beginning on or after October 1, 1999.  The ultimate timing or
effect of legislative efforts and market-driven reforms with respect
to Medicare, Medicaid, and other government reimbursement programs
cannot be predicted. 

     INCREASED PRICING PRESSURE.  The health care industry is
currently experiencing market-driven reforms from forces within
the industry that are exerting pressure on health care companies
to reduce health care costs.  Specifically, Medicare, Medicaid,
and other payors such as health maintenance organizations
("HMOs"), preferred provider organizations ("PPOs"), traditional
indemnity insurers, and third party  administrators ("TPAs") are
increasing pressure on health care providers to control health
care costs and are limiting increases in, and in some cases
decreasing, reimbursement rates for medical services.  In
addition, such payors are carefully examining each reimbursement
claim to find ways to maximize cost savings, thereby reducing the
payor's costs.  Such pricing pressures and practices could have a
material adverse effect on the Company's business, results of
operations, and financial condition.

     An industry study has found Tennessee to have some of the
highest Medicare home health care costs in the nation, primarily
due to a higher than average number of visits per patient.  As a
result of the study's findings and the related publicity, the
Company expects continuing increased scrutiny by both
governmental and private third party payors of reimbursement
claims for services provided in the State of Tennessee, and in
other parts of the southeastern United States, where the study
also found home health care costs to be higher than the U.S.
average.  A heightened level of examination of costs associated
with the provision of home health care services in Tennessee may
result in more audits of the Company's revenues and expenses,
different interpretations of existing laws and regulations, or
new laws and regulations, which could cause reimbursement delays,

                              3<PAGE>
adjustments in the Company's claims for reimbursement, or the
disallowance of certain claims.  Any such developments could have
a material adverse effect on the Company's business, results of
operations, or financial condition.

     RISKS ASSOCIATED WITH ACQUISITIONS AND GEOGRAPHIC
EXPANSIONS.  An important element of the Company's growth
strategy has been the acquisition of other home health care companies.
The Company has acquired five such companies since July 1, 1994,
and may pursue additional acquisitions in the future.  The Company has
slowed its acquisitions activities.  When and if the Company
resumes an emphasis on acquisitions, the Company will face significant
competition from other companies.  There can be no assurance that the
Company will be able to realize expected operating and economic efficiencies
from the prior acquisitions or from any future acquisitions.  To do so, the
operations, personnel, and management information systems of acquired
businesses must be successfully integrated into the Company without material
disruptions or unexpected expenses.  The failure to effectively integrate
acquisitions can adversely impact operations or profitability.

     EFFECT OF ACQUISITIONS ON QUALIFICATION FOR NASDAQ NATIONAL
MARKET LISTING.  The Company has been notified that the
administrative staff of The Nasdaq Stock Market, Inc. has
recommended that the Company's common stock be disqualified for
continued listing on the Nasdaq National Market because the Company
no longer satisfies the net tangible assets criterion of Nasdaq's
Marketplace Rule 4450(a)(3).  Marketplace Rule 4450(a)(3) requires
the Company to have at least $1,000,000 of net tangible assets,
calculated by deducting all goodwill as well as liabilities from the
Company's total assets.  Under that special calculation, the
Company, which has total assets as of June 30, 1997 of $130,766,000
and liabilities of only $68,919,000, has negative net tangible
assets of $(18,345,000) because it has $80,192,000 of goodwill as a
result of the required financial accounting for several prior
acquisitions by the Company.

     The Company otherwise satisfies all of the several criteria of
Marketplace Rule 4450, and has requested a review of the
administrative staff's determination by a committee of the NASD's
Board of Governors.  A hearing before the review committee has been
set for November 13, 1997, and no action can be taken to de-list the
Common Stock pending the conclusion of that hearing.  Management
believes that it should be able to establish (during the review of
the administrative staff's determination) that Housecall is a
substantial business enterprise that "substantially meets" the
Marketplace Rule's criteria -- which is the standard expressed in
that rule -- and warrants continued listing on the Nasdaq National
Market.  The Company believes that its acquisitions have provided
substantial value to its operations and business enterprise, which
should be considered favorably for listing purposes.  There is no
assurance, however, that the Company will be successful, and the
Common Stock might be de-listed from the Nasdaq National Market if
the review committee accepts the administrative staff's
determination.  In such event, the Company would apply to list the
Common Stock on the Nasdaq SmallCap Market or a stock exchange (for
which it should qualify) in order to ensure the existence of a
public trading market for the Common Stock, until such time that the
Company is able to increase its net tangible assets and again
qualify for listing on the Nasdaq National Market.  It is possible,
however, that investors might react negatively to such a development,
which could adversely affect trading in the Common Stock.

                               4<PAGE>
     HIGH LEVEL OF CURRENT GEOGRAPHIC CONCENTRATION. 
Approximately 82% of the Company's net revenues in fiscal year
1997 were derived from its operations in Tennessee and Florida.
Unless and until the Company's operations become more diversified
geographically (as a result of acquisitions or internal
expansion), adverse economic, regulatory, or other developments
in Tennessee or Florida could have an adverse effect on the
Company.

     DEPENDENCE ON REFERRAL SOURCES.  The growth and
profitability of the Company depend on its ability to establish
and maintain close working relationships with referral sources,
including payors, hospitals, physicians, and other health care
professionals.  Managed care organizations, which are exerting an
increasing amount of influence over the health care industry,
have become, and will continue to be, increasingly important to
the Company as referral sources.  There can be no assurance that
the Company will be able to successfully maintain existing
referral sources and cultivate new referral sources, or that
certain of its referral sources, particularly managed care
organizations and hospitals, will not become providers of home
health services.  The loss of any significant existing referral
sources or the failure to cultivate important new referral
sources (such as managed care organizations) could have a
material adverse effect on the Company's business, results of
operations, or financial condition.

     OTHER GOVERNMENTAL REGULATIONS.  The Company is subject to
extensive federal, state, and local regulation, in addition to
the reimbursement programs discussed above.  New laws and
regulations are adopted periodically to regulate new and existing
products and services in the health care industry.  Changes in
laws or regulations or new interpretations or applications of
existing laws or regulations can have a dramatic effect on
operating methods, costs, and reimbursement amounts provided by
government and other third-party payors.  For instance, the
Government has increased scrutiny of the home health care
industry by expanding Operation Restore Trust ("ORT") to twelve
states, as well as implementing "Wedge" audits.  Any adverse
findings under these types of audits can result in adjustments in
future payments.  See Regulation -- Fraud and Abuse Laws."

     In addition to Medicare reimbursement, federal laws
governing the Company's activities include regulations covering
the repackaging and dispensing of drugs, payment of remuneration
in exchange for patient referrals, and the provision of certain
services where a financial relationship exists between the
physician and the person providing the service. The Company is
subject to state laws governing Medicaid, professional training,
certificates of need, licensure, the dispensing and storage of
pharmaceuticals, payment of remuneration in exchange for patient
referrals, and the provision of certain services where a
financial relationship exists between the physician and the
person providing the service.  The branch offices operated by the
Company must comply with all applicable laws, regulations, and
licensing standards.  In addition, many of the Company's employees
must maintain certain licenses in order to provide some of the
services offered by the Company.  There can be no assurance that
federal, state, or local governments will not change existing
standards, or impose additional standards, or that the Company

                               5<PAGE>
will meet, or continue to meet, existing or future standards
relating to some aspect of the Company's operations.  Any such
development might adversely affect the Company's business.

     The Company is subject to federal and state laws prohibiting
direct or indirect payments for patient referrals and regulating
reimbursement procedures and practices under Medicare, Medicaid
and state programs, as well as in relation to private payors,
which prohibit referrals to an entity in which the referring
provider has a financial interest.  The anti-kickback provisions
of the federal Medicare and Medicaid Patient and Program
Protection Act of 1987 (the "Anti-Kickback Statute") prohibit the
offer, payment, solicitation, or receipt of any remuneration in
return for the referral of items or services paid for in whole or
in part under the Medicare or Medicaid programs (or certain other
state health care programs).  To date, courts and government
agencies have interpreted the Anti-Kickback Statute to apply to a
broad range of financial relationships between providers and
referral sources, such as physicians and other practitioners. 
The criminal penalty for conviction under the Anti-Kickback
Statute is a fine of up to $25,000 and up to five years of
imprisonment.  In addition, conviction mandates exclusion from
participation in the Medicare and Medicaid programs.

     The federal government has also enacted legislation
(commonly known as "Stark II"), which prohibits physicians from
making referrals to entities in which they (or immediate family
members) have an investment interest or other compensation
arrangement where such referral is for the provision of specific
"designated health services" covered by Medicare or Medicaid. 
The current listing of "designated health services" includes home
health services, equipment and supplies, parenteral and enteral
nutrients, ultrasound services, and home medical equipment, all
of which are provided by the Company.  If such a financial
relationship exists and referrals are made for the provision of
such designated health services, the physician will be prohibited
from making a referral to the health care provider, and the
provider will be prohibited from billing for the designated
health service for which a Medicare or Medicaid payment would
otherwise be made with some exceptions.  It is the Company's
policy to monitor closely its compliance with Stark II and to
take appropriate actions to ensure such compliance, but there can
be no assurance that all relationships between the Company and
physicians will be found to be in compliance with Stark II.  A
violation of Stark II could result in civil penalties and
exclusion from participation in Medicare and Medicaid programs. 

     Many states have also adopted statutes and regulations that
vary from state to state prohibiting provider referrals to an
entity in which the provider has a financial interest (direct or
indirect), remuneration or fee-splitting arrangements between
health care providers for patient referrals, and other types of
financial arrangements with health care providers.  Sanctions for
violation of these state restrictions may include loss of
licensure and civil and criminal penalties.  Certain states also
require health care practitioners to disclose to patients any
financial relationship with a provider and to advise patients of
the availability of alternative providers.

                               6<PAGE>
     REIMBURSEMENT PAYMENT DELAYS.  The Company generally is paid
for its services by government health administration authorities,
insurance companies, or other third party payors, not by the
patients themselves.  The home health care industry is generally
characterized by long collection cycles for accounts receivable
due to the complex and time consuming requirements for obtaining
reimbursement from private and governmental third party payors.
In addition, reimbursement from government payors is subject to
examination and retroactive adjustment.  Such delays or
retroactive adjustments can lead to cash shortages, which may
require the Company to borrow funds to meet its ongoing
obligations.  The Company would be adversely affected if it were
to experience such difficulties and were unable either to borrow
funds or to borrow funds on acceptable terms to meet possible
cash shortages.

     The Company's average collection cycle is currently 30 days
for governmental third party payors and 114 days for private
third party payors, both of which the Company believes are
consistent with or below the averages in the industry.

     DEPENDENCE ON KEY PERSONNEL.  The Company's growth and
success are highly dependent on the skills and efforts of its
Chief Executive Officer, Daniel J. Kohl; its Chief Financial
Officer, Fred C. Follmer; and a number of its other key
management and professional personnel.  Although the Company has
been successful in hiring qualified and experienced personnel,
the loss of services of any of the above executive officers or
other key personnel could have a material adverse effect on the
Company.  In addition, the Company's future growth and
development will require it to continue to recruit and retain
additional qualified personnel.  Competition for qualified
management personnel and health care professionals is strong.
There can be no assurance that the Company will be able to
recruit  and retain personnel with the skills and experience
needed to successfully manage the Company's business and
operations.

     COMPETITION.  Although the home health care market currently
remains highly fragmented, there are increasing pressures toward
market consolidation.  The increasing role of third party payors
in directing patients to specific companies and the economies of
scale associated with larger operations are expected to result in
further market consolidation.  While the Company's objective is to
save costs and enhance the one-stop-shop services provided in
each of its geographical regions,  the Company will face
significant competition from other companies.  The Company has
slowed its acquisitions activities.  When and if the Company
resumes an emphasis on acquisitions, the Company will face
significant competition from other companies.  The Company will
also face competition for patient referrals and important
personnel in many (if not most) of its markets regardless of the
market share and presence it is able to establish.  In addition,
relatively few barriers to entry exist in the home health care
industry in states that do not impose a certificate of need
("CON") requirement, and so new companies (perhaps including
managed care organizations and major health care providers not
currently serving the home health care market) may become
competitors.  Some of the Company's present or potential
competitors have or may obtain greater financial or other


                              7<PAGE>
important resources than the Company, which could have a material
adverse effect on the Company's ability to achieve its
objectives.

     LIABILITY AND ADEQUACY OF INSURANCE.  Providing health care
services entails an inherent risk of liability.  In recent years,
participants in the home health care industry have become subject
to an increasing number of lawsuits alleging malpractice, product
liability, or negligence, many of which involve large claims and
significant defense costs.  It is expected that the Company
periodically will be subject to such suits as a result of the
nature of its business.  The Company currently maintains liability
insurance intended to cover such claims.  There can be no
assurance, however, that claims in excess of the Company's
insurance coverage or claims not covered by the Company's
insurance coverage (e.g., claims for punitive damages) will not
arise.  A successful claim against the Company in excess of the
Company's insurance coverage could have a material adverse effect
upon the Company and its financial condition.  Claims against the
Company, regardless of their merit or eventual outcome, may also
have a material adverse effect upon the Company's ability to
attract patients or to expand its business.  In addition, the
Company's insurance policies must be renewed annually.  There can
be no assurance that the Company will be able to obtain liability
insurance coverage in the future on acceptable terms, if at all.

INDUSTRY OVERVIEW

     Home health care is among the fastest growing segments of
the health care industry, with total expenditures in 1995 of
approximately $36.1 billion, up from approximately $30.3 billion
in 1994, and estimated expenditures in 1996 of approximately
$42.5 billion and in 1997 of $48.9 billion.  With total health
care expenditures increasing at twice the rate of inflation in
recent years to approximately $1.1 trillion in 1995, the
pressure to contain health care costs, while maintaining quality
care, has intensified.  As a result, the growth of less expensive
alternate site care that reduces hospital admissions and lengths\
of stays, such as home health care (which in 1996 is estimated to
have accounted for only 3.7% of total health care expenditures),
has accelerated.  The Company believes that such growth in home
health care is influenced by the following industry and demographic
factors and trends:

     COST-EFFECTIVE ALTERNATIVE.  Medicare's diagnostic related
     group ("DRG") reimbursement system makes it more cost-
     effective for hospitals to discharge Medicare patients
     earlier, requiring follow-up professional care for many
     patients in their homes or other residential environments. 
     In addition, managed care organizations, which have become
     increasingly important in recent years, have recognized that
     home health care offers a less costly alternative to in-
     patient hospital care.

     TECHNOLOGICAL ADVANCES.  Advances in medical technology
     have made it possible to deliver an increasing amount
     of quality professional health care in the home and
     other residential environments.  In the last 15 years,
     the number of medical conditions treated in the home
     increased from approximately 30 to over 1,200.  Not only
     are there more types of medical services that can be

                               8<PAGE>
     safely and effectively performed at home, but such
     services can also be administered to higher acuity
     patients.

     DEMOGRAPHIC TRENDS.  As the U.S. population ages, the number
     of patients with chronic conditions requiring professional
     home care services is increasing.  The U.S. Bureau of the
     Census has estimated that in 2000 12.8% of the U.S.
     population would be 65 or more years of age, with the
     population of persons over 85 years of age growing at an
     annual rate of 4.0%.  The 85 and older population is expected
     to be growing at a rate of 20.4% by the year 2000.

     PATIENT PREFERENCE FOR HOME CARE.  In general, patients
     prefer to recuperate in their homes, where they are
     more comfortable than in a hospital or other
     institutional environment and can enjoy the close
     support of family and friends.  Moreover, it is
     generally believed that patients recover more quickly
     in such home environments.

     Historically, the home health care industry has been highly
fragmented, with a large number of small local providers serving
in discrete geographic areas and typically offering a single
service or perhaps offering a range of services on terms that are
not cost-effective.  However, as managed care has become more prevalent,
payors for home health care are increasingly seeking single
providers that can deliver or coordinate the delivery of a cost-
effective, comprehensive range of services in broad geographic
markets.  Small local providers often do not have the capital
necessary to expand the geographic scope of their operations or
to offer a comprehensive range of services, which limits their
ability both to compete for such managed care business and to
realize efficiencies in their operations.  These factors are
driving rapid consolidation in the home health care industry. 
Because of the extent of the historical fragmentation, however,
consolidation opportunities remain for several existing companies
and well-capitalized new companies.

STRATEGY AND PRINCIPAL INITIATIVES
 
     The Company has based its strategy and growth objectives on
the above industry trends.  Housecall's mission is to restore the
Company to profitability and then become the leading provider and
manager of home health care services in the Southeast.  The
Company's principal strategic initiatives include:  

     ORGANIZATIONAL RESTRUCTURING.  The Company has recently
undergone a restructuring to move its business from a product line
to a regional general management structure.  The Company believes
that in order to succeed with the one-stop-shop strategy, the
organization must be structured to support it.  The Company
believes an individual with general management responsibility for
all product lines will be inclined to cross sell and service its
whole array of products and services.  In addition, the Company
recently launched a project to create a shared support
organization for its field operations.  The Company will review
and consolidate its various administrative support departments
into one shared support organization.

                               9<PAGE>
     LEVERAGING NURSING SERVICES INTO ADDITIONAL SERVICES.  The
largest sector of the home health care industry is the provision
of nursing and related care, which in 1994 represented
approximately 64% of the $30.3 billion home health care market in
the United States, with a $30.1 billion market estimated in 1997
a $37.9 billion market estimated in 1999.  Home nursing and related
care represents the core of the Company's business.  The
relationship of the home nurse to patients and referral sources
provides an opportunity to identify other service requirements,
such as hospice care, infusion therapy, and respiratory therapy,
and to influence referral decisions to a specific home health
care provider.  The Company's principal strategy is to leverage
its substantial expertise and capacity in home nursing services
to create opportunities to provide additional types of home
health care services.  Such other services have traditionally
yielded higher operating margins for the Company than basic
nursing services.  To drive its growth of non-Medicare
reimbursed products and services, the Company expects to more
than double its sales force over the next several months from 6
to 14 for its owned agencies.

     EXPANDING ITS MANAGEMENT SERVICES BUSINESS.  The Company
seeks in its markets to develop relationships with leading
institutional health care providers, primarily hospitals, by
providing management services for their home health care
operations.  With the acquisition of HealthFirst, the Company has
significantly increased the size of its management services
business.  This business has historically had higher margins than
the owned agencies and is less capital intensive.  The Company
will aggressively market these services in an effort to both
capture the higher margin business and further expand its network
of providers.  Where possible, the Company will structure joint
ventures or alliances with its managed clients to enhance its
network capabilities and coverage.

     CULTIVATING MANAGED CARE REFERRAL SOURCES.  The Company has
focused a major part of its development and marketing efforts on
managed care organizations, as these organizations are
increasingly influencing the decision of which home health
provider a patient will use.  After assuring quality of care,
managed care organizations are primarily concerned with cost-
effectiveness and the convenience of accessing a comprehensive
range of patient services through a limited number of home health
care providers.  Housecall intends to meet these needs by
offering its comprehensive one-stop-shop services  and by
developing specialty programs that address specific needs of
population groups that are particularly important to these
organizations.  The Company is also developing the necessary
infrastructure to offer capitated arrangements where required by
such organizations.

     DEVELOPING STRATEGIC ALLIANCES.  The Company seeks alliances
that either result in direct sales of its products and services
or that increase the breadth of its disease management programs. 
The scope of alliances may begin with providing management or
consulting services to Medicare certified home health agencies
and expand into joint ventures in infusion therapy, private
nursing, or hospice programs.  Such management relationships
typically increase the Company's presence as a home health care
provider because Housecall and its personnel are often directly
involved (on behalf of the managed provider agency) with the
referral and payor sources doing business with the agency.

                              10<PAGE>
     BUILDING CRITICAL MASS AND MARKET PRESENCE.  The Company
believes that a critical mass of operations within selected
markets is important to its customers and promotes internal
operating efficiencies.  These  efficiencies, in turn, are
essential to Housecall's ability to offer a comprehensive range
of quality, cost-effective home health care services that will
attract significant referrals from cost-conscious managed care
organizations.  The Company also believes that its presence as a
leading provider in its markets will facilitate such referrals.
The Company will continue to build critical mass and market
presence in the Southeast through internal expansion and
strategic alliances.

SERVICES AND PRODUCTS

     The Company derives substantially all of its net revenues
from the provision of nursing and related care services, infusion
therapy, hospice care, respiratory therapy, home medical
equipment, and other specialty services and programs for patients
in the home and other residential environments.  The Company also
provides various management services for home health agencies
owned by other providers.  The following table sets forth the
percentage of net revenues from the above lines of business for
the periods presented:

<TABLE>
<CAPTION>
                           COMBINED <F1> YEAR ENDED JUNE 30,

                                              PRO FORMA
                                                 1995          1996           1997
                                                 ----          ----           ----
<S>                                             <C>            <C>            <C>
Nursing and related care                        76.8 %         78.5%          77.6%
Infusion therapy                                12.0            9.7            8.4
Hospice care                                     3.8            5.0            4.6
Respiratory therapy                              1.4            0.9            2.7
Management services                              3.9            4.0            5.3 <F2>
Home medical equipment                           2.1            1.9            1.4
                                                ----            ---            ----
Total                                          100.0%         100.0%         100.0%
                                                ===             ===            ===
<FN>
<F1> The above amounts for the twelve-month period of 1995 are presented on
     a pro forma combined basis to reflect the results achieved by the
     companies acquired by Housecall during 1995.  See -- "Significant
     Acquisitions", above.
<F2> Reflects approximately six weeks' revenues from Healthfirst following
     its acquisition on May 13, 1997. 
</FN>
</TABLE>

     Quality, professionally supervised care for all patients is
the Company's paramount objective.  In order to assure that
patients are receiving an appropriate level of care in a cost-
effective manner, each patient is assigned to a Care Management
Team of the Company's professional employees.  Under the
direction of a Case Manager, typically a registered nurse, team
members work together with the patient's physicians and payors to
implement a cost-effective plan of treatment tailored to the
patient's individual needs and goals.  The Case Manager closely
monitors the patient's care plan and maintains ongoing contact

                               11<PAGE>
with his or her physicians to report any changes in the patient's
condition.  The Case Manager also communicates with the payor's
case managers at agreed-upon intervals to keep the payor apprised
of the patient's progress.

NURSING AND RELATED CARE

     It is estimated that approximately $ 30.1 billion will be
expended in the United States in 1997 for nursing and related
care services (or "nursing services") provided in the home, and
that expenditures for these services have grown at a compound
annual rate of approximately 26% from 1989 to 1994, and are
projected to grow approximately 14% from 1994 to 1999.  For 1997, it
is estimated that 62% of all home health care expenditures in the
United States will be for nursing services.

     Nursing services represent the core of the Company's
business.  Management expects such services to continue to account
for the largest proportion of the Company's revenues.  Housecall
intends to use its expertise and market coverage in providing
nursing services to increase its volume of other health care
services, such as hospice care, infusion therapy, and respiratory
therapy, which are reimbursed by all payors on a charge-based
system.

     Housecall offers a broad range of nursing services through
its team of Company-employed nursing professionals, specialty
therapists, and home health aides.  The Company's nursing
professionals fall into the following categories:

     NURSING PROFESSIONALS

  -  Registered Nurses to provide a broad range of nursing care
     services, including pain management, infusion therapy,
     skilled observation and assessment, communication with the
     attending physician, and patient instruction regarding
     medical and technical procedures.

  -  Licensed Practical Nurses to perform a variety of technical
     nursing procedures, including injections and dressing
     changes.

     SPECIALTY THERAPISTS

  -  Physical Therapists to provide services related to the
     reduction of pain and improved rehabilitation of joints and
     muscles, including strength and range-of-motion exercise and
     massage.

  - Occupational Therapists to assist patients in restoring their
    ability to perform routine activities of daily life.

  - Speech Therapists to retrain patients who have swallowing
    difficulties or speech, language, or hearing problems.

  - Social Workers to help patients and their families deal with
    the emotional, financial, and personal problems that may
    occur as a result of illness or disability.

                              12<PAGE>
    HOME HEALTH AIDES

  - Home Health Aides, operating under the supervision of a nurse,
    to provide a variety of personal care services, such as
    bathing and assistance with walking.

  - Homemakers/Companions to assist with meal preparation and
    housekeeping.

INFUSION THERAPY

     It is estimated that approximately $6.2 billion was expended
in 1995 and $7.4 billion expended in 1996 and $8.9 billion will be
expended in 1997 for home infusion therapy in the United States.
Expenditures for such services have grown at a compound annual rate
of approximately 24% from 1989 to 1994 and are estimated to increase
approximately 19% from 1994 to 1999.  Infusion is the second largest
segment in home care with approximately 18% of the market for 1997,
and revenue is expected to grow to $12.4 billion by 1999 and represent
approximately 19% of the home care market.

     Housecall provides infusion therapy services from four (4)
Company-owned pharmacies in North Carolina, Tennessee and
Florida.  For service areas where the Company does not have a
branch office, the Company contracts with other pharmacies
through its networks to provide coverage in those areas.  The
Company is seeking to increase its volume of infusion therapy
business.

     Infusion therapy involves the administration of antibiotics,
nutrients, or other medications intravenously, intramuscularly,
subcutaneously, or through a feeding tube.  All pharmacy services
necessary to support infusion therapy treatments provided by the
Company are directed by a licensed pharmacist and coordinated by
a group of specially trained registered nurses who use advanced
medical equipment and supplies to carry out the prescribed
treatment plan.  Infusion therapy nurses also assist with the
ongoing monitoring of the patient's treatment plan as part of the
Company's Care Management Team.  Patient progress and performance
are reported on a regular basis to the attending physician and
the payor case manager, and adjustments are made to the treatment
plan when and as ordered by the physician.  The Company's
pharmacists are accessible to the patient, nurse, payor case
manager, and physician for consultation.

     The Company provides a comprehensive range of home infusion
therapy services, including the following:

 -  Antibiotic Therapy -- the infusion of antibiotic agents
    directly into the patients' blood stream to treat a
    variety of serious infections, such as osteomyelitis
    (bone infections), bacterial endocarditis (infection of
    the heart), cellulitis, septic arthritis/bursitis, wound
    infections, and the recurrent infections associated with
    the kidney and urinary tract and AIDS.

  - Enteral Nutrition Therapy -- the administration of
    nutrients to patients who cannot eat as a result of an
    obstruction of the digestive tract or because they are
    unable to swallow due to a neurological or mechanical
    problem.

                               13<PAGE>
 -  Pain Management Therapy -- the administration of analgesic
    medications to terminally or chronically ill patients
    suffering from acute or chronic pain.

 -  Total Parenteral Nutrition -- the intravenous
    administration of life sustaining nutrients to patients
    with impaired or altered digestive tracts due to a
    gastrointestinal illness.

 -  Chemotherapy -- the intravenous administration of
    medications to patients with various types of cancer.

 -  Congestive Heart Failure Therapy -- the administration of
    drugs such as dobutamine to help strengthen cardiac
    functions.

 -  Hemophilia Therapy -- the administration of agents that
    promote blood clotting (such as Factor VIII, Anti-
    inhibitor Coagulant, and Factor IX complex).

 -  Immunomodular Therapy -- the administration of a number of
    endogenous human proteins, as well as synthetic
    glycoproteins, which are used to augment or stimulate
    the immune system.  These therapies are usually
    administered subcutaneously or intravenously on a daily
    or intermittent basis.

HOSPICE CARE

     It is estimated that approximately $1.8 billion was expended
on Medicare-certified hospice care services in the United States
in 1995 and $2 billion in 1996.  It is estimated that $2.1
billion will be spent in 1997.  Medicare initiated reimbursement
for hospice benefits in 1982, eight years after hospice programs
were first offered in the United States.  Medicare's charge-based
reimbursement for hospice programs is at a regionally adjusted
daily rate, with the hospice being responsible for most health
care costs required to care for the patient.  Medicare hospice
benefits are available to Medicare beneficiaries with an
estimated life expectancy of less than six months.  The number of
Medicare-certified hospices has grown from 31 in January 1984, to
1604 in 1994, 1857 in 1995, and 2154 in 1996, though only 9.8% of
home health agencies in the United States offered hospice care
services in 1995.  Hospice care has traditionally been offered
primarily by non-profit and charitable organizations, but has
recently become more attractive to for-profit providers.

     The Company offers a Medicare-certified hospice program
throughout Tennessee and in portions of Virginia.  Hospice care
is a coordinated program of palliative and supportive services
provided in both the home and in-patient settings that provides
for physical, psychological, social, and spiritual care for
terminally ill persons and their families.  Hospice care services
include nursing and personal care, counseling, and specialized
therapy services, and the provision of equipment, supplies, and
medications.  Hospice care services are provided by an
interdisciplinary team of professionals and volunteers, under the
direction of a medical professional.  Bereavement care is also
available to the family following the death of the patient.

                               14<PAGE>
     Very few of the Company's home health care services
competitors provide hospice care, and management believes the
Company may be able to further distinguish itself from its
competitors by including hospice care as part of its more
comprehensive one-stop-shop home health services approach.

RESPIRATORY THERAPY

     It is estimated that approximately $4.8 billion was expended
in the United States in 1995, $5.8 billion in 1996, and $6.8
billion will be expended in 1997 for respiratory therapy services
provided in the home, and that such services have grown at a
compound annual rate of approximately 25% from 1989 to 1994,
and will grow approximately 17% from 1994 to 1999.

     The Company provides home respiratory therapy services to
patients who suffer from a variety of conditions, including
asthma, chronic obstructive pulmonary diseases (for example,
emphysema and bronchitis), cystic fibrosis, and neurologically-
related respiratory conditions.  The Company owns and operates
respiratory therapy branch offices in Florida, Tennessee, and
North Carolina.  The Company presently offers the following
respiratory therapy services:

 -  Oxygen systems, of which there are three types: (i) Oxygen
    concentrators, which are stationary units that extract
    oxygen from ordinary air to provide a continuous flow of
    oxygen, (ii) liquid oxygen systems, which are portable,
    thermally-insulated containers of liquid oxygen, and
    (iii) high pressure oxygen cylinders, which are used for
    portability with oxygen concentrators.

 -  Nebulizers, which deliver aerosol medication to patients to
    treat asthma, chronic obstructive pulmonary diseases,
    cystic fibrosis and neurologically-related respiratory
    problems.

 -  Home ventilators, which sustain a patient's respiratory
    function mechanically when a patient can no longer breathe
    normally.

 -  Continuous positive airway pressure therapy, which forces air
    through respiratory passage-ways during sleep for patients
    suffering from sleep apnea.

 -  Apnea monitors, which monitor and warn parents of apnea
    episodes in newborn infants as a preventive measure
    against sudden infant death syndrome (SIDS).

HOME MEDICAL EQUIPMENT

     The Company provides home medical equipment, including
hospital beds, wheelchairs, ambulatory aids, bathroom aids, and
patient lifts, to its patients from the same branch offices as
its Florida, Tennessee, and North Carolina respiratory therapy
branches.  Though home medical equipment does not represent a
substantial part of the Company's operations, the Company views
it as an important component to the Company's ability to provide
one-stop-shop home care services.

                               15<PAGE>
MANAGEMENT SERVICES

     The Company provides management services to client-owned
home health agencies which are either free-standing or provider-
based.  The Company has clients in over twenty states and plans
to continue to expand client relationship nationwide.

     Housecall's  management agreement provides business,
clinical, operations, financial, and Medicare-allowable marketing
support.  The client's agency pays the Company a prescribed
amount for services rendered.  The Company's management
agreements typically provide for a term of several years and are
subject to renegotiation in the event of certain changes in the
current reimbursement system.

     The Company believes that its management services enhance
the Company's overall presence as a home health care provider. 
This enhanced presence increases the likelihood of referrals to
the Company to provide home health services in markets where
Housecall operates its own agencies.  Providing management
services to another provider's agency may also give the Company
an advantage over competitors in seeking to acquire the home
health agency if the owner subsequently decides to sell the
business.  The provision of management services permits (1) the
labor and systems expenses associated with developing or
improving management systems and processes to be shared between
Housecall's owned and managed agencies; and (2) the Company and
its clients benefit from broader geographic coverage for managed
care contracting.

     Housecall also offers individual components of its
management services.  Consulting for assessments, organizational
effectiveness, quality improvement, financial systems, specialty
programs, regulatory compliance, strategic planning, and staff
training are some of the services offered on an individual basis. 
These services are billed on either a retainer or project basis. 
In addition, Housecall offers management information systems that
utilize software to increase accountability, efficiency and cost-
effectiveness.  See "Management Information Systems."

PAYOR MIX
 
     The Company derives substantially all of its net revenues
from Medicare, Medicaid, and private third party payors, which
include managed care organizations such as health maintenance
organizations ("HMOs") and preferred provider organizations
("PPOs"), traditional indemnity insurers, and third party
administrators.  The following table outlines the payor mix for
the Company's net revenues for the periods presented.

                               16<PAGE>
<TABLE>
<CAPTION>
                                                  TWELVE MONTHS
                                               ENDED JUNE 30, (PRO
                                                    FORMA                       YEAR ENDED
                                                   COMBINED)<F1>                 JUNE 30,
                                               --------------------      -----------------------
                                                      1995                 1996             1997
                                               --------------------      -------           ------
<S>                                                  <C>                 <C>               <C>
Medicare - cost based <F2>                            60.7%               61.1%             60.7%
Medicare - charge based <F3>                           5.1                 4.8               7.6
Medicaid <F4>                                          1.5                 1.6               2.4
TennCare <F5>                                          8.0                 5.9               0.0
Managed care organizations <F4>                        5.8                 7.1               7.2
Other private payors                                  15.0                15.5              16.8
Management services contracts                          3.9                 4.0               5.3
                                                    ------               -----             ------
              Total                                 100.0%               100.0%            100.0%
                                                    =====                =====             =====
<FN>
<F1> The above amounts for the twelve-month period of 1995 is presented
     on a pro forma combined basis to reflect the results achieved by the
     companies acquired by Housecall during 1995.  See -- "Significant
     Acquisitions", above.
<F2> Represents reimbursement for all nursing services (including related
     products) to Medicare patients, except for any such services
     provided in connection with hospice care.
<F3> Represents reimbursements for all home health care services
     reimbursed by Medicare, except for nursing services.
<F4> Does not include TennCare payments.
<F5> The Company had no revenues in 1997 from TennCare as a result of the
     Company's February 1996 cancellation of its contract with its
     principal TennCare managed care organization.
</FN>
</TABLE>

OPERATIONS

     The Company owns or manages nearly 200 location locations in twenty
states.  The Company's branches are organized into seven geographical
regions, each of which receives support with respect to financial and
operating controls functions, and certain administrative support functions
-- such as human resources, legal, compliance, and quality improvement -- from
managers attached to the Company's Atlanta headquarters.  Management
believes that such a decentralized model for day-to-day operational
responsibilities and related functions establishes each geographic market as
a regional business unit for all home health services offered by
the Company in that particular market.  A Regional Vice President
oversees all home health services provided within the region's
business unit, with appropriate support from and reporting to corporate
headquarters.  The Company's seven regional market structure will
periodically be evaluated to determine the need to add or
reconfigure designations in response to acquisition and other
expansion initiatives.

MANAGEMENT INFORMATION SYSTEMS 

     Information Systems is responsible for delivering tools that
monitor patient and clinical outcomes, generate accurate and
timely billing, and provide data analysis and reporting capable
of supporting a wide range of internal and external users of
information.  At the present time, the Company's management information

                               17<PAGE>
systems are largely decentralized, reflecting significant
components of systems in place when Housecall made acquisitions.
Regional or other field-level information systems provide application
support for patient databases, scheduling, patient care, outcomes and
financial systems.

     The Company's long-term objective is to deliver fully-integrated,
quality home care to patients in the southeastern United States
through a one-stop-shop delivery medium.  In order to support that
business model, Information Systems has begun the task of implementing
a system that can efficiently process transactions across all lines of
business while providing management, at all levels, access to
data and information on a timely, accurate, and consistent basis.


COMPLIANCE AND QUALITY IMPROVEMENT

     Housecall's Compliance and Quality Improvement Department
monitors all of the Company's home health service activities to
improve processes and performances, with the goals of ensuring
regulatory compliance and improving patient and client outcomes.
The Company's Compliance and Quality Improvement program operates
at two levels.  At the corporate level, the Corporate Compliance
and Quality Improvement Department provides guidance and
recommends resources for regulatory and quality improvement
activities and assesses organization-wide activities.  At the
agency level, the Department assists in the collection of data,
facilitates quality improvement activities, provides education
for implementing the quality improvement processes, and routinely
monitors operational activity to ensure compliance.  State
Compliance Trainers are continually training local management
personnel on health care regulatory and licensure requirements to
ensure that systems and documentation are properly maintained.
Regular surveys are mailed to referral sources and patients to
solicit assessment about the quality of the Company's
performance.
 
     Since 1994, the Company has been accredited by the Joint
Commission on Accreditation of Hospitals (JCAHO), a nationally
recognized organization that develops standards for various
health care industry segments and monitors compliance with those
standards through voluntary surveys of participating providers.
Not all home health providers have chosen to undergo the
accreditation process, because of its expense and time burden. 
As the home health care industry has grown, the need for
objective quality measurements has increased.  Housecall has
chosen to undergo the rigorous review of its operations attendant
to JCAHO accreditation, and, consequently, management believes
Housecall has better positioned itself to procure managed care
contracts and referrals from other sources.  Housecall will be
surveyed for JCAHO renewal in fiscal year 1998.  The renewal will
involve all Housecall service divisions.


SALES AND MARKETING

     The Company focuses its marketing and sales efforts on its
existing and prospective referral sources.  The Company's
marketing department provides planning and development, market
research, marketing communications, and public and community
relations support for all of the Company's branch locations. 


                               18<PAGE>
Most referrals for home health services have historically come to
the Company from physicians and human service professionals
within the local health care community, and the Company will
continue to cultivate these traditional sources.  Management
believes, however, that managed care organizations and other
third party payors are rapidly becoming more important sources of
referrals to home health care providers as well as to other
providers of health care.  As a result, the Company has targeted
such organizations and payors for major marketing initiatives. 
The Company believes that an essential aspect of marketing to all
referral sources (but especially managed care organizations and
other third party payors) is the capacity to deliver quality,
comprehensive home health services on a cost-effective basis.

COMPETITION

     The home health care industry remains highly competitive. 
Competitors are recognizing the benefits of the one-stop-shop
strategy identified early on by the Company.  Over the past
twelve months, acquisitions and mergers have resulted in a
consolidation of some national competitors. 

     Also identifiable in the market is the emergence of disease
state management companies.  These companies are positioned to
address the high cost of treating specific chronic conditions and
are willing to take financial risk for managing the care of a
specific population.

     Emerging competitors include managed care providers and
physicians.  Managed care providers are recognizing the benefit
of home care in managing the care and the cost for their
subscribers and are establishing home care operations. 
Likewise, large physician groups are partnering with payors to
assume financial risk for patients under their care who are
subscribers to the payor's benefit plan.

     The Company believes its strategy to focus on a regional
model to provide a realistic one-stop-shop approach will prove
to be attractive to their customers.  Further, the Company
believes this model will allow the Company to meet the customers'
expectations when it comes to the principal competitive factors
in the home health care industry, quality of care, including
responsiveness of services and quality of professional personnel;
breadth of services offered; geographic coverage; general
reputation with payors and the medical community, including
patients, physicians, hospitals, and other health care
professionals; and relationships with referrals sources
generally.

REGULATION

     All home health care companies are subject to extensive
federal, state, and local regulation, including the requirement
of special licenses or permits to operate, detailed rules
regarding permissible costs and payments for services, and
complex rules designed to deter and punish fraud and abuse.

                               19<PAGE>
PERMITS AND LICENSURE

     Certain states require companies providing certain home
health care services to be licensed as home health agencies.  The
Company currently is licensed as a home health agency where
required by the law of the states in which it operates.  In
addition, certain of the Company's pharmacy operations require
state licensure and are also subject to federal and other state
laws and regulations governing pharmacies and the packaging and
repackaging and dispensing of drugs (including oxygen).  Federal
laws may also require registration with the Drug Enforcement
Administration of the United States Department of Justice and the
satisfaction of certain requirements concerning security, record
keeping, inventory controls, prescription, order forms, and
labeling.  In addition, certain health care practitioners
employed or otherwise engaged by the Company require state
licensure or registration and must comply with laws and
regulations governing standards of practice.  The failure to
obtain, renew, or maintain any of the required regulatory
approvals or licenses could adversely affect the Company's
business.  There can be no assurance, however, that either the
states or the Federal government will not impose additional
regulations upon the Company's activities that might adversely
affect its business, results of operations, or financial
condition.

CERTIFICATES OF NEED

     Certain states, including Florida, Tennessee, Alabama, and
Kentucky, require companies providing hospice and other home
health care services to obtain a Certificate of Need (CON) issued
by a state health planning agency.  These CONs are granted when a
need for specific healthcare services can be shown for a
specified geographical area.  Where required by law, the Company
has obtained certificates of need from those states in which it
operates.  There can be no assurance, however, that the Company
will be able to obtain any certificates of need that may be
required in the future if and when the Company expands the
geographic scope of its operations or seeks to offer new
services, or if state laws change to impose additional
certificate of need requirements.  Any requirement to obtain
additional certificates of need will cause the Company to incur
certain expenses and may affect the ability of the Company to
offer certain services in certain states.

     During fiscal year 1997, the Company was awarded a
Certificate of Need to provide infusion services (pharmacy and
first dose nursing) covering several counties in Kentucky.

FRAUD AND ABUSE LAWS

     The Company is subject to federal and state laws prohibiting
direct or indirect payments for patient referrals and regulating
reimbursement procedures and practices under Medicare, Medicaid
and state programs, as well as in relation to private payors,
which prohibit referrals to an entity in which the referring
provider has a financial interest.  While the Company believes
that it is in material compliance with such laws, it monitors
such compliance on a continuous basis.

                               20<PAGE>
     The anti-kickback provisions of the federal Medicare and
Medicaid Patient and Program Protection Act of 1987 (the "Anti-
Kickback Statute") prohibit the offer, payment, solicitation, or
receipt of any remuneration in return for the referral of items
or services paid for in whole or in part under the Medicare or
Medicaid programs (or certain other state health care programs). 
To date, courts and government agencies have interpreted the
Anti-Kickback Statute to apply to a broad range of financial
relationships between providers and referral sources, such as
physicians and other practitioners.  The United States Department
of Health and Human Services has adopted regulations creating a
limited number of "safe harbors" from federal criminal and civil
penalties under the Anti-Kickback Statute by exempting certain
types of ownership interests and other financial arrangements
that do not appear to pose a threat of Medicare and Medicaid
program abuse.  Transactions covered by the Anti-Kickback Statute
that do not conform to an applicable safe harbor are not
necessarily in violation of the Anti-Kickback Statute, but the
practice may be subject to increased scrutiny and possible
prosecution.  The criminal penalty for conviction under the Anti-
Kickback Statute is a fine of up to $25,000 and up to five years
of imprisonment.  In addition, conviction mandates exclusion from
participation in the Medicare and Medicaid programs.  Such
exclusion can also result from a conviction under other federal
laws which impose civil and criminal penalties for submitting
false claims, such as claims for services not provided as
alleged.  Exclusion from participation in the Medicare and
Medicaid programs may also occur as a civil penalty.  Several
health care reform proposals have included an expansion of the
Anti-Kickback Statute to apply to referrals of any patients,
regardless of payor source.  The federal government has recently
increased its investigatory efforts to determine whether various
business practices constitute remuneration for or to induce
referrals in violation of the Anti-Kickback Statute.

     The federal government has also enacted legislation
(commonly known as "Stark II"), which prohibits physicians from
making referrals to entities in which they (or immediate family
members) have an investment interest or other compensation
arrangement where such referral is for the provision of specific
"designated health services" covered by Medicare or Medicaid. 
The current listing of "designated health services" includes home
health services, equipment and supplies, parenteral and enteral
nutrients, ultrasound services, and home medical equipment, all
of which are provided by the Company.  If such a financial
relationship exists and referrals are made for the provision of
such designated health services, the physician will be prohibited
from making a referral to the health care provider, and the
provider will be prohibited from billing for the designated
health service for which Medicare or Medicaid payment would
otherwise be made.  Certain exceptions are available under Stark
II, which may or may not be available to the Company for
arrangements in which the Company may be involved.  Submission of
a claim that a provider knows or should know is for services for
which payment is prohibited under Stark II could result in
refunds of any amounts billed, civil money penalties of up to
$15,000 for each such service billed, and possible exclusion from
the Medicare and Medicaid programs.  Furthermore, Medicare
regulations contain similar self-referral restrictions that
provide that, unless certain conditions are met, a plan of care

                               21<PAGE>
for home health services generally may not be certified by a
physician who has a significant ownership interest in, or a
significant financial or contractual relationship with, the home
health agency.  It is the Company's policy to monitor closely its
compliance with Stark II and to take appropriate actions to
ensure such compliance, but there can be no assurance that all
relationships between the Company and physicians will be found to
be in compliance with Stark II.  A violation of Stark II could
result in civil penalties and exclusion from participation in
Medicare and Medicaid programs.

     In addition the government enacted the Healthcare
Portability and Accountability Act, a portion of which takes
effect this year, expanding the government's fraud and abuse
efforts.  Specifically the act creates a federal healthcare fraud
and abuse trust fund to finance future law enforcement
activities; expands the government's efforts for prosecuting 
fraud and abuse beyond Medicare and Medicaid to all payors;
empowers the Department of Justice and U.S. attorneys to subpoena
records relating to healthcare fraud; makes exclusion from the
Medicare and Medicaid programs mandatory for a minimum of five
years for any felony conviction relating to fraud; requires that
organization contracting with another organization or individual
be informed as to whether the organization or individual is
excluded from Medicare and Medicaid participation; enhances civil
penalties by increasing the amount of fines permitted; and
establishes civil penalties for physicians who negligently
certify the need for home care.  To support provider
organizations, the Act requires the Office of Inspector General
("OIG") to issue advisory opinions on how the anti-kickback
prohibitions apply to specific business transactions (excluding
the Stark self-referral laws). 
 
     Numerous states have instituted the "Wedge Project" under
the Health Care Financing Administration's Operation Restore
Trust initiative.  Under this process, an auditor representing
the state licensing body or fiscal intermediary randomly selects
a specific number of home care patients.  The auditor will then
contact the selected patients and ask specific questions after
which the auditor will determine if the patients met the
eligibility requirements for "homebound".  Similarly, the auditor
will review the patient's medical record to measure compliance
with Medicare coverage criteria.  Should any determination be
made that any number of patients does not meet the eligibility
requirements, a formula is applied for all reimbursement received
during a specific time frame.  Medicare, through its
intermediary, then recovers any amounts felt to be overpaid based
on the application of the formula on the total population of home
care patients receiving services from that Medicare provider
number.  The Company can make no guarantees that reimbursement
from the Intermediary will not be affected by the "Wedge".  It is
the Company's intent to confirm that patient's receiving home
care services meet the "homebound" and all other Medicare
eligibility requirements.

     With the passage of the 1997 tax bill, anti-fraud and abuse
efforts were addressed through the enlistment of patients to
monitor costs paid by the Medicare program for services.
Effective, January 1, 1998, this is accomplished through the use
of an explanation of benefits form itemizing services billed to
Medicare.  Any patient questioning the validity of the form may

                               22<PAGE>
receive a detailed statement from the provider.  Any provider
failing to provide the itemization will be subject to a $100
civil monetary penalty per statement.  Within 90 days of receiving
the statement, the patient may request an investigation by
Medicare into any irregularities.  Any request for Medicare review
must be investigated.  Also, providers contracting or arranging
for services or items from an individual excluded from Medicare
will be subjected to a civil monetary penalty.

     Many states have also adopted statutes and regulations that
prohibit provider referrals to an entity in which the provider has
a financial interest (direct or indirect), remuneration or fee-splitting
arrangements between health care providers for patient referrals, and other
types of financial arrangements with health care providers.  Sanctions
for violation of these state restrictions may include loss of
licensure and civil and criminal penalties.  Certain states also
require health care practitioners to disclose to patients any
financial relationship with a provider and to advise patients of
the availability of alternative providers.
 
     The federal government has increased significantly the
financial and human resources allocated to enforcing the fraud
and abuse laws.  The Office of the Inspector General, in
cooperation with other federal agencies, announced in mid-1995
its intention to scrutinize the activities of home health
agencies, home medical equipment suppliers, and skilled nursing
facilities in five states, including Florida, a state in which
the Company has significant operations.  Private insurers and
various state enforcement agencies also have increased their
scrutiny of health care providers' practices and claims,
particularly in the home health and home medical equipment areas. 
While regulations interpreting Stark I (prohibiting referrals to
clinical laboratories where the physician has a financial
interest in such laboratory) have been issued, regulations
interpreting Stark II have not been promulgated to date.  No
assurance can be given that all of the practices of the Company,
if reviewed, would be found to be in compliance with such laws or
with any future laws or regulations, as such laws and regulations
ultimately may be interpreted.

     The Company maintains a corporate compliance program, which
serves as a mitigating factor under the federal sentencing guidelines.
This program, proactive in nature, has been established to monitor
internal practices for adherence to applicable federal, state and
local rules and regulations.
 
REIMBURSEMENT

     The recently signed Budget Bill has provisions that will
impact reimbursement for home health care services.  The current
cost reimbursement system for home health services will remain in
effect for the 2 year period after which the prospective payment
system will be instituted in October 1999.  

     In August 1993, Congress passed the Omnibus Budget
Reconciliation Act of 1993 ("OBRA 1993"), which included
approximately $56 billion in reimbursement reductions to the
Medicare program over five years.  In January 1994, two
developments lowered the Company's reimbursement by Medicare for
nebulizers, each of which had a significant impact on net


                               23<PAGE>
revenues of the Company attributable to the rental of nebulizers. 
First, reclassification of nebulizers to "capped rental
equipment" pursuant to OBRA 1993 capped the total allowable
rental payments at the allowable purchase cost of such equipment. 
Second, new fee schedules published by the various Durable
Medical Equipment Carriers ("DMERCs") effective January 1, 1994,
reduced by approximately 50% the allowable monthly rental fees
for nebulizers.  Additionally, in December 1994 the DMERCs issued
a composite draft policy, which, if adopted, would further
restrict Medicare coverage of nebulizers and aerosol medication
treatments.  Comments on the proposed draft policy have been
submitted by members of the home care industry and currently are
being reviewed by the DMERCs and HCFA.  In its continuing effort
to contain health care costs, the Budget Bill contains provisions
to eliminate the update schedule for DME for the years 1998
through 2002.  The Bill also reduces the payment for oxygen to
75% of the 1997 rates for 1998 and 70% of the 1997 rates for 1999
and subsequent years.

     More generally, government officials are continuing to
review and assess alternative health care delivery systems and
payment methodologies in efforts to curtail costs.  Several
proposals involving potential changes in the way home health care
services are reimbursed are presently under consideration.  See
"-Current Developments" below.

CURRENT DEVELOPMENTS

     Political, economic, and regulatory influences are
subjecting the health care industry in the United States to
fundamental change.  On August 5, 1997, the Budget Bill was signed
by the President.  This comprehensive Bill is designed to achieve
$115 billion in savings from Medicare with projected saving from
home health of $16.2 billion over 5 years.

     Major provisions of the bill that affect home health include
(a) the shift of the bulk of home health coverage from Part A to
Part B; (b) the implementation of a prospective payment system
("PPS") designed by HCFA by October 1, 1999; ( c) the
implementation of an interim cost reimbursement system with cost
limits based on 105% of median cost and a new per beneficiary
aggregate limit; (d) a further reduction of the limits by 15% on
October 1, 1999 regardless of whether PPS is implemented; (e)
elimination of partial interim payments by October 1, 1999;
and (f) elimination of coverage of home health services for
venipuncture. 

     The effect that these changes will ultimately have on home
health reimbursement cannot be quantified at this time.  The
Company believes that these changes may have a material 
effect on the reimbursement that will be received from federal
sources over the next five years.  Furthermore, the Company cannot
predict what additional government regulations, if any, affecting
its business may be enacted in the future, how existing or future
laws and regulations might be interpreted, or whether the Company
will be able to comply with such laws and regulations in its
existing or future markets.  In addition, the level of net
revenues and profitability of the Company, like those of other
health care providers, will be affected by the continuing efforts
of payors to contain or reduce the costs of health care by
lowering reimbursement rates, increasing case management review
of services, negotiating reduced contract pricing, and capitation
arrangements.

                               24<PAGE>
INSURANCE

     The Company maintains a commercial general liability policy
with both a per-occurrence limit of $1,000,000 and annual
aggregate coverage limit of  $3,000,000.  In addition, the Company
has an umbrella liability or "excess" policy with a single per
occurrence limit of $20,000,000 and an annual aggregate limit of
$30,000,000 with a $10,000 per occurrence retention limit.  The
Company maintains a professional liability insurance policy with
limits of $1,000,000 per occurrence and an annual aggregate limit
of $3,000,000.  Health care providers with whom the Company has
contracted must provide evidence that they carry at least an equivalent
level of primary insurance coverage, although there is no assurance
that such providers will continue to do so; or that such insurance
is, or will continue to be, adequate or available to protect the
Company; or that the Company will not have liability independent
of that of such providers and their insurance coverage.  While
the Company believes that it has adequate insurance coverage,
there can be no assurance that such insurance will be sufficient
to cover any judgments, settlements, or costs relating to legal
proceedings or that any such insurance will be available to the
Company in the future on satisfactory terms, if at all.  If the
insurance carried by the Company is not sufficient to cover any
judgments, settlements, or costs relating to legal proceedings,
the Company's business could be materially adversely affected.

EMPLOYEES

     As of September 1, 1997, the Company had approximately 2,338
full time equivalent employees.  In addition, the Company
maintains registries of licensed nurses, therapists, home health
aides, and other home health care providers who are available for
staffing assignments on a temporary basis.  Management believes that
the Company's employee relations are good.  None of the Company's
employees are represented by a labor union or other collective
bargaining organization.

     The recruitment, training, and retention of qualified
employees is a high priority for the Company.  Management commits
a significant portion of its time to monitoring these functions,
and the Company has developed several programs designed to
implement that priority and to facilitate both high employee
performance and satisfaction.  The Company requires that all
employees attend certain training programs, such as the Company's
extensive orientation programs, which is designed to provide all
new employees with an understanding of the mission, philosophy,
goals, and expectations of the Company, and with an explanation
of how the employee's work relates to and impacts the Company's
success.  The Company's compliance program is also mandatory and
ensures that all employees comprehend basic regulations
concerning fraud and abuse issues affecting the home health
industry.  Employees are educated on applicable legal standards
and can access a confidential, toll-free number to ask questions
or raise concerns about compliance matters.

TRADEMARKS, COPYRIGHTS AND PROPRIETARY RIGHTS

     The Company currently owns five federal service mark
registrations for the mark Housecall(R) and the "house with a
heart" design, three of which are incontestable, covering a

                               25<PAGE>
variety of services.  Although the Company owns such federal
service mark registrations for a variety of services, there are
many unregistered users of marks that include variations of the
words "House" and "Call" in connection with the provision of
health care services.  A prior user of such a mark may be able to
challenge the Company's use of the Housecall(R) mark in the
specific geographic area of such prior use in connection with the
goods or services for which the prior use was made.  In the event
of challenge, the Company could be required to adopt an

alternative mark and name for its operations in certain
geographic areas or for use on certain goods and services.  Based
on the existence of a company in North Carolina that may have
prior rights in the term "Housecall," the Company may not be able
to use the Housecall(R) mark in that state.  

     Healthfirst will continue to use its registered trademark
and will employ efforts to protect the mark. 

     The Company also owns a federal trademark registration for
its Clinpen(R) mark used in connection with the Company's
proprietary management information system hardware and customized
software.

SUPPLIERS

     The Company purchases all pharmaceuticals and other
materials, and buys or rents medical equipment and supplies,
required in connection with the Company's business from many
suppliers.  The Company has not experienced, and does not
anticipate that it will experience, difficulty in purchasing such
materials or renting such equipment and supplies.  If the
Company's current suppliers should cease to supply the Company,
the Company believes that alternative sources can readily be
located that would adequately meet its needs.

EXECUTIVE OFFICERS OF HOUSECALL
 
     Executive officers of the Company are elected by the Board
of Directors annually and hold office until the next annual
meeting of stockholders or until they sooner resign or are
removed from office by the Board of Directors.
 
     The executive officers of the Company and their ages and
positions with the Company as of September 1, 1997 are as follows:

  NAME (AGE)               POSITION WITH COMPANY
------------------------  --------------------
Daniel J. Kohl (40)       President, Chief Executive Officer, and Director
Fred C. Follmer (55)      Vice President, Chief Financial Office and Secretary
Charles R. Hunziker (35)  Vice President, Sales & Marketing

         Mr. Kohl joined the Company in March 1997 as President and Chief
Executive Officer, and a Director.  Prior to joining the Company, Mr.
Kohl served as Senior Vice President and Group Executive in charge of the
Healthcare Information Services Group for Equifax healthcare business for
three and one-half years and  Mr. Kohl was President and Chief Operating
Officer at HMSS, Inc., a home infusion therapy company from 1991 through
1993.  Mr. Kohl has over 18 years of experience in the healthcare industry,
with approximately 14 years experience at a senior management level.

                               26<PAGE>
     Mr. Follmer joined Housecall Medical Resources as Chief Financial
Officer in March of 1997 after having served for over twenty years as a
senior financial officer for publicly traded companies.  Prior to his
appointment to Housecall, Mr. Follmer served from 1994 to 1996 as Chief
Financial Officer with Preferred Oncology Networks of America, Inc., an
oncology physician practice management group.  From 1992 to 1994, he
served as Senior Executive Vice President, Chief Operating Officer and
Chief Financial Officer for Comprehensive Care Corporation, a national
leader in behavioral health care.

     Mr. Hunizker joined the Company in January, 1997 as President of
Biomedical Housecall, Inc., the infusion therapy business of Housecall
Medical Resources, Inc.  On August 28, 1997 the Board approved his
promotion to VP of Sales and Marketing for Housecall Medical Resources,
Inc.  Prior to joining the Company, he was Vice President of Sales and
Marketing for ProMedical, Inc. from 1992 until 1997.
  
ITEM 2.  PROPERTIES
 
     The Company leases its executive office in Atlanta, Georgia, which
consists of approximately 10,000 square feet of office space, under a
lease expiring in May 1999.  The Company also leases spaces for its
various administrative offices in Knoxville, Tennessee, Louisville,
Kentucky, and Raleigh, North Carolina, and owns the offices
in Centreville, Alabama in which its Housecall Management Services
business is based.  The terms typically range from three to five years.
Management believes that the Company's owned and leased properties are
adequate for its present needs, and that suitable additional or
replacement space will be available as required.

     The following is a list of the Company's 110 owned and 85 managed
branch offices (the latter are marked with an asterisk (*)) as of September 1,
1997. 

ALABAMA
Alexander City                                  1*
Albertville                                     2*
Anniston                                        1*
Atmore                                          1*
Brewton                                         1*
Camden                                          1*
Chatom                                          1*
Demopolis                                       1*
Eutaw                                           1*
Foley                                           1*
Gadsden                                         1*
Georgiana                                       1*
Grove Hill                                      1*
Haleyville                                      1*
Monroeville                                     1*
Moulton                                         1*
Opp                                             1*
Tallahassee                                     1*
Union Springs                                   1*
Wedowee                                         1*
Wetumpka                                        1*
Winfield                                        1*

CALIFORNIA
Merced                                          1*
Santa Cruz                                      1*
San Jose                                        1*

                                27<PAGE>
FLORIDA
Apollo Beach                                    1
Bartow                                          1 
Bradenton                                       2 
Bradenton East                                  1 
Brandon                                         2 
Clearwater                                      2 
Crystal River                                   1 
Daytona Beach                                   1 
Deland                                          1 
Eustis                                          1
Ft. Myers                                       1 
Ft. Pierce                                      1 
Gainesville                                     1 
Haines City                                     1 
Holiday                                         2 
Holmes Beach                                    1 
Jacksonville                                    1 
Jay                                             1*
Lady Lake                                       1
Lakeland                                        1
Madison                                         1*
Melbourne                                       1
Naples                                          1 
Ocala                                           2
Orlando                                         1
Port Charlotte                                  1
Riviera Beach                                   1
Sarasota                                        2
Sebring                                         1
Spring Hill                                     1
St. Augustine                                   1
St. Petersburg                                  2
Stuart                                          1
Tampa                                           3
Tampa South                                     1
Tavares                                         1
Vero Beach                                      1
West Palm Beach                                 1
Winter Park                                     2
Zephyrhills                                     1

GEORGIA
Atlanta                                         1*
Perry                                           1*
Statesboro                                      1*

ILLINOIS
West Frankfort                                  1*

INDIANA
Fort Wayne                                      1
Indianapolis                                    1
Mishawaka                                       1
New Albany                                      1

KENTUCKY
Bowling Green                                   1* 
LaGrange                                        1 
Lawrenceburg                                    1
Louisville                                      1
Maysville                                       1*
Somerset                                        1*

                               28<PAGE>
LOUISIANA
Bossier City                                    1*
Coushatta                                       1*
Mansfield                                       1*
Metairie                                        1*
Plain Dealing                                   1*
Shreveport                                      1*
Springhill                                      1*

MAINE
Calais                                          2*
Pittsfield                                      1*
Waterville                                      1*

MISSOURI
Columbia                                        1*
Boonville                                       1*
Fulton                                          1*
Jefferson City                                  1*
Kirksville                                      1*
Linn                                            1*
Macon                                           1*
Osage Beach                                     1*
Versailles                                      1*

NEBRASKA
Papilion                                        1*

NEVADA
Boulder City                                    1*

NORTH CAROLINA
Charlotte                                       1*
Chapel Hill                                     1*
Monroe                                          1*
New Bern                                        1 
Raleigh                                         1 
Raleigh                                         1*
Waystation                                      1*
Yadkinsville                                    1*

OHIO
Boardman                                        1*
Barberton                                       1*

PENNSYLVANIA
Erie                                            1*

SOUTH CAROLINA
Abbeville                                       1*
Greenwood                                       1*

TENNESSEE
Adamsville                                      1 
Athens                                          1*
Bean Station                                    1 
Bean Station                                    1*
Chattanooga                                     1 
Chattanooga                                     2*
Clarksville                                     1
Cleveland                                       1*
Columbia                                        2 
Cookeville                                      1 

                               29<PAGE>
Covington                                       1 
Dayton                                          1*
Dyersburg                                       1 
Elizabethton                                    2 
Greeneville                                     1 
Hampton                                         1 
Harriman                                        1 
Harrogate                                       1 
Jackson                                         1 
Jasper                                          1*
Jefferson City                                  1 
Johnson City                                    1 
Kingsport                                       1
Knoxville                                       5
Knoxville                                       1* 
Lenoir City                                     1 
Lexington                                       1 
Madisonville                                    1 
Martin                                          1*
Maryville                                       1
Memphis                                         1 
Morristown                                      2 
Morristown                                      1*
Mountain City                                   2 
Murfreesboro                                    2 
Nashville                                       2
Newport                                         1
Newport                                         1*
New Tazewell                                    1
Oak Ridge                                       1
Rogersville                                     1
Sevierville                                     1
Shelbyville                                     1
Sneedville                                      1
Tullahoma                                       1

TEXAS
Bedford                                         1*
Tomball                                         1*

VIRGINIA
Chatham                                         1
Daleville                                       1
Grundy                                          1*
Jonesville                                      1
Martinsville                                    1
Richlands                                       1*
Roanoke                                         1
Rocky Mount                                     1
Salem                                           1

WEST VIRGINIA
Princeton                                       1*
Webster Springs                                 1*

         None of the properties owned by the Company are subject to
encumbrances.

                               30<PAGE>
ITEM 3.  LEGAL PROCEEDINGS

     Lawrence D. Paskowitz IRA, et al. v. Housecall Medical
Resources, Inc., et al., Civil Action No. 96-CV-2220-JEC (N.D.
Ga.) and Taam Associates, Inc., et al. v. Housecall Medical
Resources, Inc., et al., Civil Action No. 96-CV-2214-JEC (N.D.
Ga.) were filed on August 30, 1996.  On September 12, 1996, Carl
H. Peterson, et al. v. Housecall Medical Resources, Inc., Civil
Action No. E-52883 was filed in the Superior Court for Fulton
County, Georgia.  Carl H. Peterson, et al. v. Housecall Medical
Resources, Inc., et al., Civil Action No. 96-CV-2914-JEC (N.D.
Ga.) was filed on November 4, 1996.  All four actions were filed
by certain persons who seek to represent a class of shareholders
who purchased shares of the Company's Common Stock in its
April 1996 initial public offering or in the subsequent
aftermarket, respectively.  The individual plaintiffs in all four
cases alleged that they were induced to purchase the Company's
stock on the basis of misrepresentations about the Company and
its prospects.  All four complaints asserted claims under
Sections 11, 12(2), and 15 of the Securities Act of 1933 (the
"1933 Act").  All four complaints named as defendants the Company,
its directors and certain of its officers, and the lead underwriters
associated with its public offering.

     By an order dated December 5, 1996, the United States
District Court for the Northern District of Georgia consolidated
Civil Action Nos. 96-CV-2214-JEC, 96-CV-2220-JEC, and 96-CV-2914-
JEC.  The state court suit, Civil Action No. E-52883, was subsequently
dismissed without prejudice.  On March 13, 1997, the Company moved to
dismiss the consolidated action.  Both sides submitted briefs
to the court.  In the event that the action is not dismissed, the
Company will be required to file an answer to the complaint in the
consolidated action, and then the plaintiffs will be required to move
for class certification.  The Company is vigorously defending the
consolidated lawsuit.

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

     On April 17, 1997, the security holders of the Company voted
to amend and restate the original 1996 Stock Option and Restricted
Stock Purchase Plan to increase the shares of Common Stock authorized
for issuance under the Plan from 500,000 shares to 1,300,000 shares.
The holders 5,463,677 shares were voted, with the holders of 5,460,327
shares voting for approval and 3,350 voting against approval.  The number
of authorized stock options was increased to enable the Company to
attract, retain, and motivate key employees.

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

     The Company's Common Stock has been traded on The Nasdaq
Stock Market since April 4, 1996 under the symbol "HSCL".  Prior to
such date, there was no public trading market for the Common Stock. 

                                31<PAGE>
     The table below sets forth on a quarterly basis for the period from
April 14, 1996 through the end of the 1997 fiscal year the high and low
sales prices of the Company's Common Stock as reported by The Nasdaq
Stock Market.


Fiscal Year                    Prices
Ended June 30, 1996        High      Low
-------------------        ----      ---
Fourth Quarter           $23 1/8   $16 1/2


Fiscal Year Ended
June 30, 1997

First Quarter            $20 1/2   $ 5
Second Quarter             6 1/4     4
Third Quarter              6 3/4     4 5/8
Fourth Quarter             5 1/16    3 3/8

     The Closing sale price of the Company's Common Stock as reported on
The Nasdaq Stock Market on October 2, 1997 was $4 1/4.

     As of September 17, 1997, there were 92 holders of record of the
Company's Common Stock.

     The Company has paid no dividends on its Common Stock since
its organization.  It does not anticipate paying any cash
dividends on its Common Stock in the foreseeable future.  The
payment of future dividends will be at the sole discretion of the
Company's Board of Directors and will depend on, among other
things, future earnings, capital requirements, contractual
restrictions, the general financial condition of the Company, and
general business conditions.  The Company's credit facility
proscribes the payment by the Company of dividends on any of its
capital stock, including Common Stock, while any amounts are
outstanding thereunder. 

                               32<PAGE>
ITEM 6.
<TABLE>
<CAPTION>
                                                       SELECTED CONSOLIDATED FINANCIAL DATA
                                                      (In thousands, except per share data)

                                                                          Year ended June 30,
                                                                  -------------------------------------
                                                                   1995             1996            1997
                                                                   ----             ----            ----
<S>                                                               <C>            <C>              <C>
STATEMENT OF OPERATIONS:
Net revenues                                                      $84,219        $205,389         $192,065
Operating expenses: 
  Patient care                                                     42,879          95,688           85,225
  General and administrative                                       34,069          94,940          100,925
  Provision for doubtful accounts                                   3,395           6,074            5,498
  Depreciation and amortization                                     1,568           3,262            3,529
                                                                  -------         -------          -------
     Total operating expenses                                      81,911         199,964          195,177
                                                                  -------         -------          -------
  Income (loss) from operations                                     2,308           5,425            (3,112)
     Interest expense, net                                            902           4,331             2,699
                                                                  -------         -------          -------
Income (loss) before income taxes and extraordinary item            1,406           1,094            (5,811)
Provision (credit) for income taxes                                   709             895            (1,743)
                                                                  -------         -------           -------
Income (loss) before  extraordinary item                              697             199            (4,068)
Extraordinary loss from early extinguishment
  of debt, net of $387,000 income tax benefit                        --             --                 (902)
Cumulative dividends and accretion on 
  Series A Preferred Stock (redeemable)                            (1,327)         (2,006)             --
                                                                  -------         -------            ------
Net loss attributable to common stockholders                      $  (630)       $ (1,807)          $(4,970)
                                                                  =======        ========           =======
Net loss per common share:
  Income (loss) before extraordinary item                          ($0.10)         ($0.24)           ($0.40)
  Extraordinary item                                                 --             --                (0.09)
                                                                  -------        --------            -------
Net income (loss) attributable to common stockholders              ($0.10)         ($0.24)           ($0.49)
                                                                  =======        ========            =======
Weighted average common shares outstanding                          6,283           7,425            10,236
                                                                  =======        ========           =======

<CAPTION>
                                                                                  June 30,
                                                                   --------------------------------------
                                                                    1995            1996            1997
                                                                    ----          -------           ----
<S>                                                               <C>             <C>              <C>
BALANCE SHEET DATA:
Cash and cash equivalents                                         $ 18,349        $ 7,785          $ 2,074
Working capital                                                     19,302         18,646           18,140
Total assets                                                        92,403        103,945          130,766
Long-term debt and capital lease obligations, less
  current portion                                                   41,480         11,720           45,267
Series A Preferred Stock (redeemable)                               17,871           --               --  
Stockholders' equity                                                 8,096         66,751           61,847
</TABLE>


                                    33
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATION

GENERAL

     The Company generates net revenues primarily from providing home
health care services to patients through the operation of home health
agencies that it owns and providing management services to home health
care agencies owned by others.  Since the acquisition of its predecessor
on July 1, 1994, Housecall has pursued a growth strategy that has
expanded its operations from 58 branch offices, primarily in Tennessee,
to 110 owned and 85 managed branch offices in twenty states as of
September 1, 1997.
 
     Through its acquisitions, Housecall has sought to establish or
increase its presence and market share within its targeted geographic
areas; to add capacity necessary to attain its goal of providing
comprehensive, cost-effective one-stop-shop home health care services;
to add significant sources of home health care or related revenues; and
to solidify its foundation for using home nursing services to leverage
the expansion of its other home health services.  For example, the
acquisition of MSS on February 3, 1995 added management services as a new
source of revenue, which was recently tripled in net revenue by the
acquisition of Healthfirst on May 13, 1997; the Home Care Affiliates
acquisition on May 31, 1995 more than doubled the size of the Company's
home health care operations, expanded the Company's private nursing
services, and also added a solid base of operations in Florida; the
Biomedical acquisition on July 10, 1995 added a nationwide delivery
network and management systems, and contributed significant (although
less than expected) net revenues to the Company's infusion therapy
services business; and the Messick Homecare acquisition on October 31,
1996 rounded out the internal completion of the one-stop-shop by
significantly expanding the respiratory therapy and home medical
equipment services and products (RT/HME).  

     The Company is seeking to grow its home health care business in
geographic areas throughout the Southeast, and to extend its management
services operations nationwide.  
 
     In the following discussions, most percentages and dollar amounts
have been rounded to aid presentation; as a result, all such figures are
approximations.  References to such approximations have generally been
omitted.  In addition, reference is made to the discussion concerning
forward looking statements contained in Item 1 of this Annual Report on
Form 10-K under "Business -- Certain Factors Affecting Forward Looking
Statements".

SOURCES OF NET REVENUES

     "Net revenues" represent gross revenues for all services or products
provided or sold by the Company, adjusted to reflect anticipated
reductions thereto resulting from contractual adjustments and other
allowances to third party payors.  The Company separately reserves for
doubtful accounts.

     The Company derives substantially all of its net revenues from
Medicare, Medicaid, and private third party payors, which include managed
care organizations such as HMOs and PPOs, traditional indemnity insurers,
and TPAs.  The following table outlines the mix of
sources for the Company's net revenues for the periods presented:

                               34<PAGE>
<TABLE>
<CAPTION>
                                                                     YEAR ENDED JUNE 30,
                                                    --------------------------------------------------
                                                    1995 <F1>               1996                  1997
                                                    -------                 ----                  ----
<S>                                                 <C>                     <C>                   <C>
Medicare -- cost based(2)                             60.7%                  61.1%                60.7%
Medicare -- charge based(3)                            5.1                    4.8                  7.6
Medicaid(4)                                            1.5                    1.6                  2.4
TennCare(5)                                            8.0                    5.9                   -
Managed care organizations(4)                          5.8                    7.1                  7.2
Other private payors                                  15.0                   15.5                 16.8
Management services contracts                          3.9                    4.0                  5.3
                                                     -----                  -----                -----
  Total                                              100.0%                 100.0 %              100.0%
                                                     =====                  =====                =====
<FN>
<F1>The above amounts for the twelve-month periods are presented on a pro
    forma combined basis to reflect the results achieved by the companies
    acquired by Housecall during 1995.  See "Business -- Significant
    Acquisitions".
<F2>Represents reimbursement for all nursing services (including related
    products) to Medicare patients, except for any such services
    provided in connection with hospice care.
<F3>Represents reimbursements for all home health care services
    reimbursed by Medicare, except for nursing services.
<F4>Does not include TennCare payments.
<F5>Contract with Access Medplus for TennCare participants canceled
    February 1996. 
</FN>
</TABLE>

      As reflected above, the Medicare program reimburses for
home health care services under two basic systems: cost-based and
charge-based.  Under the cost-based system, the Company is
reimbursed at the lower of the Company's reimbursable costs
(based on Medicare regulations), cost limits established by HCFA,
or the Company's charges.  While certain of the Company's
corporate level and other overhead expenses are permitted as part
of reimbursable costs under Medicare regulations, such
reimbursable costs consist predominately of expenses and charges
directly incurred in providing the related services, and cannot
include any element of profit or net income to the Company.  As a
result, an increase of net revenues attributable to Medicare
cost-based payments does not contribute to net income, unless the
Company would have otherwise exceeded applicable Medicare cost
limits (and thus not be reimbursed for certain of its fixed costs
and expenses) without such increased revenues.  Under the charge-
based system, Medicare reimburses the Company on a "prospective
payment" basis, which consists in general of either a fixed fee
for a specific service or a fixed per diem amount for providing
certain services.  As a result, the Company can generate profit
or net income from Medicare charge-based revenues by providing
covered services in an efficient, cost-effective manner.
 
     All nursing services (including related products) provided
to Medicare patients, except for nursing services provided to
hospice patients, are Medicare cost-based reimbursed.  Hospice
care and all other home health care services (including non-
nursing related products) provided to Medicare patients are
Medicare charge-based reimbursed.

                               35<PAGE>
     On August 5, 1997, the United States Congress passed into
law, the Balanced Budget Act of 1997, which included several key
provisions related to the Medicare reimbursement program for
providers of home health services.  Provisions affecting the
providers of home health services include the establishment and
implementation of a prospective payment system in the Company's
fiscal year 2001 as well as establishing an interim payment
schedule prior to the implementation of the prospective payment
system in which the Company will be reimbursed on the lower of
its actual costs or a new reimbursement limit for services.  The
interim payment schedule will be effective for the Company's 1999
fiscal year.  The Company is studying the impact of the
forthcoming reimbursement changes on its Medicare nursing
business as it relates to the carrying value of its long-lived
assets.

     The Company's net revenues from private third party payors
such as managed care organizations, traditional indemnity
insurers, and TPAs have profit potential for the Company if it is
able to provide the related services and otherwise operate in a
sufficiently cost-effective manner.  The Company's full range of
home health care services is offered and provided to patients for
whom the payments for such services are made by private payors or
under state programs such as TennCare that do not prohibit a
profit component for the Company.  However, the Company
anticipates that Medicare cost-based payments will continue to
represent a significant component of its net revenues for the
foreseeable future.
 
     In connection with its management services, the Company is
typically paid a negotiated fixed fee per patient visit performed
and billed by the home health care provider for whom the Company
is providing management services.  The Company has been able to
perform these services in a sufficiently cost-effective manner
such that its costs have been less than the amount of the fees it
has received.
 
Results of Operation

     As discussed above, Housecall acquired MSS, Home Care
Affiliates, and Biomedical during 1995 (the "1995 Acquisitions")
Messick Homecare in 1996 and Healthfirst in 1997, each of which
has had significant effects on the Company.  See " General".  The
aggregate effects of the above acquisitions, each of which was
accounted for as a purchase transaction, result in the
inclusion of certain of their operating results in some
historical periods but not in others, and make period-to-period
comparisons of the Company's historical operating performance
difficult.
 
     The following table sets forth, for the periods indicated,
selected financial information as a percentage of net revenues.

                             36<PAGE>
<TABLE>
<CAPTION>
                                       PERCENT OF NET REVENUE

                                                                   YEAR ENDED JUNE 30,
                                                                   -------------------
                                                           1995              1996             1997 
                                                           ----              ----             ----
<S>                                                       <C>               <C>               <C>
Net revenues                                              100.0 %           100.0 %           100.0 %
Operating expenses:
  Patient care                                             50.9              46.6              44.4
  General and administrative                               40.5              46.2              52.5
  Provision for doubtful accounts                           4.0               3.0               2.9
  Depreciation and amortization                             1.9               1.6               1.8
                                                          -----             -----             -----
    Total operating expenses                               97.3              97.4             101.6
                                                          -----             -----             -----
Income(loss) from operations                                2.7               2.6              (1.6)

   Interest expense, net                                    1.1               2.1               1.4
                                                          -----             -----             -----
Income (loss) before income taxes                           1.6               0.5              (3.0)

   Provision (benefit) for income taxes                     0.8               0.4              (0.9)
                                                          -----             -----             -----
Net Income (loss) before extraordinary item                 0.8               0.1              (2.1)
Extraordinary loss from early extinguishment
  of debt, net of $387,000 income tax benefit                 -                -               (0.5)
                                                          -----             -----             -----
Net income (loss)                                           0.8%              0.1%             (2.6)%
                                                          =====             =====             =====
</TABLE>

FISCAL YEARS 1997 AND 1996

     The Company's results of operations during the fiscal year
ended June 30, 1997 reflect the performance for the entire year
of MSS, Home Care Affiliates and Biomedical, companies acquired in
the 1995 Acquisitions, and only reflect the performance of
Messick Homecare for eight months and Healthfirst for two months. 
This factor alone accounts for several significant changes in the
Company's period-to-period results discussed below.

     NET REVENUES.  In fiscal 1997, net revenues decreased 7% to
$192.1 million from $205.4 million in fiscal 1996.  The decrease
was largely due to a $14.0 million decrease in nursing and related
care, which was partially off-set by $6.8 million of net revenues
in fiscal 1997 from Messick Homecare and $2.8 million of net
revenue from Healthfirst, both of which were acquired during fiscal
1997.  The Company's operations attributable to its nursing division,
however, experienced a $8.9 million reduction in Medicare cost-
based revenues, which do not include a profit or net income
component for the Company, during fiscal 1997 from fiscal 1996
levels, primarily caused by cost and visit reductions at certain
agencies in Tennessee and Florida.  Efforts were made during
fiscal 1997 to closely scrutinize utilization of services.  This
resulted in a decrease in the number of visits per patient in
order for the agencies to be at or below national average
utilization.  In addition, the Company closed ten unprofitable
branch offices in fiscal 1997.

                               37<PAGE>
     Although the Company's net revenues decreased significantly
in fiscal 1997, net revenues for the fourth quarter of fiscal
1997 increased to $49.1 million from $46.5 million for the third
quarter.  The acquisition of Healthfirst in May 1997 added $2.8
million to management services net revenue in the fourth quarter.
Net revenues from certain of the Company's operations did not
grow during the fourth quarter at the rates the Company had
anticipated, and net revenues from the Company's hospice care
program actually declined during the fourth quarter from the
third quarter level.   As a result of this revenue shortfall and
certain other factors, the Company sustained a $1.9 million net
loss before income taxes in the fourth quarter of fiscal 1997.

     The Company doubled its sales force and developed new
programs in an effort to increase net revenues in certain areas
of its operations.  In particular, the Company is focused on
growing its private (non-Medicare) nursing, hospice care,
infusion therapy and RT/HME.  In addition, the Company has hired
new or additional sales personnel for the Company as a whole. 
The Company has restructured to a regional philosophy so that the
new sales force will sell across all product lines rather than
only one product line.  The Company has introduced sales
incentive programs and has retained new management for the
hospice care program.  While the volume of all such net revenues
will continue to remain small relative to the Company's Medicare
cost-based business, such net revenues (along with revenues from
the Company's management services) represent the Company's
predominate sources of operating income.

     PATIENT CARE COSTS.  Patient care costs are comprised of
salaries and related benefits for patient care personnel and cost
of sales for respiratory therapy, home medical equipment,
infusion products, and medical supplies.  In fiscal 1997, such
costs decreased 11% to $85.2 million from $95.7 million in fiscal
1996.  The $10.5 million decrease is primarily attributable to
the decrease in nursing revenues of $14 million or 9%.  As a
percentage of net revenue, patient care costs decreased from
46.6% to 44.4%.  Much of this decrease is attributable to a
change in the Company's business mix.  This decrease also reflects
the acquisition of Healthfirst and the resulting increase in
management services revenue, which do not generate any patient care
cost.  In addition, the increase in net revenue, in amount and as a
percentage of total revenue, for RT/HME, which has a significantly
lower patient care cost percentage of net revenue than nursing
services, is a result of the acquisition of Messick Homecare in
October 1996.  Net revenue for RT/HME increased 46% in fiscal
1997 over fiscal 1996.

     GENERAL AND ADMINISTRATIVE EXPENSES.  General and
administrative expenses are comprised of salaries and benefits
for administrative and support staff, occupancy expenses, and
other non-patient care operating costs.  In fiscal 1997 such
expenses increased 6.3% to $100.9 million from $94.9 million in
fiscal 1996.  Substantially all of the increase is attributable
to the fiscal 1997 acquisitions.  As a percentage of net revenues,
general and administrative expenses increased from 46.2% to
52.5%, reflecting higher corporate overhead and the presence of
Healthfirst management services as part of the Company's
operations for the last two months of fiscal 1997.  Healthfirst
requires more administrative personnel to provide such services,
and all expenses are classified as general and administrative. 

                              38<PAGE>
     The Company has undertaken steps to reduce general and
administrative expenses in several areas through further
consolidation of its acquired operations and certain Company-wide
cost-cutting measures.  Because certain of these measures involve
some personnel reductions, the Company has incurred certain one-
time severance costs in implementing those measures.  In
addition, the Company may incur additional expenses in connection
with the defense of the investor litigation, which would increase
general and administrative expenses to the extent not reimbursed
by the Company's insurance carrier.

     The anticipated growth in the Company's volume of business
will necessarily increase the aggregate amount of general and
administrative expenses, and increases or decreases in the source
of net revenues (including Medicare cost-based) will directly
affect such expenses as a percentage of overall net revenues. 
The Company's objective is to reduce the effect of general and
administrative expenses on the Company's net income, which may or
may not be revealed solely by an analysis of such expenses as a
percentage of net revenues, due to the effects of Medicare's
cost-based system for most of its reimbursement payments for home
health care nursing services.  In addition, as management services
revenues increase as a percentage of total revenues, general and
administrative expenses.

     PROVISION FOR DOUBTFUL ACCOUNTS.  The provision for doubtful
accounts decreased to $5.5 million for fiscal 1997 from $6.1
million for fiscal 1996.  As a percentage of net revenues, the
provision for doubtful accounts decreased slightly from 3.0% to
2.9%.  In addition, the Company canceled a contract to provide
services under the TennCare program in fiscal 1996, which
required a higher provision for doubtful accounts due to the
amount of unpaid claims.

     DEPRECIATION AND AMORTIZATION EXPENSES.  Depreciation is
provided on the Company's property and equipment.  Amortization
expense includes the amortization, over a 40-year period, of the
excess of purchase price over fair market value of the net
identifiable assets acquired by the Company (goodwill) and the
amortization of other intangibles.  Depreciation and amortization
expense was $3.5 million and $3.3 million in fiscal 1997 and
1996, respectively.  The increase is primarily attributable to
the fiscal year 1997 acquisitions.  Depreciation and amortization
expense increased slightly as a percentage of net revenues for
these periods from 1.6% to 1.8% mainly because of the increase in
furniture and equipment expenditures and the decrease in net
revenue from 1996 to 1997.

     INTEREST EXPENSE, NET.  Interest expense, net, reflects the
net result of interest income earned from short-term investments
of cash and the interest incurred by the Company on indebtedness. 
Interest expense, net, was $4.3 million in fiscal 1996 and
decreased substantially to $2.7 million in fiscal 1997,
reflecting a substantial decrease in the Company's outstanding
indebtedness during fiscal 1997.  In April 1996, the Company repaid
$37.6 million of its borrowings under its former NationsBank credit
facility from the proceeds of the initial public offering
(discussed below), which significantly reduced the interest
expense that the Company incurred during fiscal 1997.

     PROVISION (BENEFIT) FOR INCOME TAXES.  The Company generated a
tax net operating loss during the fiscal year ended June 30, 1997,
creating a current tax receivable of approximately $2.3 million.

                            39<PAGE>
In addition, the Company's deferred tax asset increased from approximately
$3.2 million in fiscal year 1996 to $3.9 million in fiscal year 1997,
primarily as a result of increases in nondeductible accruals and the
allowance for doubtful accounts.  The Company has not recorded a valuation
allowance against the tax benefits associated with the deductible temporary
differences as they believe strategic initiatives including organizational
restructuring and the expansion of its management services business will
generate sufficient taxable income in the future that such amounts will
be used before expiration.

     NET INCOME.  The Company's decrease in net income from
$199,000 for fiscal 1996 to a loss of $4.1 million before
extraordinary item in fiscal 1997, reflects the substantial
decrease in private nursing and infusion revenues and the
increase in general and administrative costs for fiscal year 1997
over fiscal year 1996.

FISCAL YEARS 1996 AND 1995

     The Company's results of operations during the fiscal year
ended June 30, 1996 reflect the performance for the entire year
of all three companies acquired in the 1995 Acquisitions.  The
Company's results of operations during the fiscal year ended June
30, 1995 do not reflect any performance by Biomedical and only
reflect the performance of MSS for five months and Home Care
Affiliates for one month.  This factor alone accounts for several
significant changes in the Company's period-to-period results as
discussed below.

     NET REVENUES.  In fiscal 1996, net revenues increased 144%
to $205.4 million from $84.2 million in fiscal 1995.  The $121.2
million increase reflects $16.2 million of net revenues in fiscal
1996 from Biomedical, which was acquired at the beginning of
fiscal 1996, and a $112.0 million increase in net revenues from
Home Care Affiliates and MSS over the amount attributable to them
for the relatively short period that their respective
performances are included in the fiscal 1995 results.  The
Company's operations attributable to its predecessor, however,
experienced a $7.0 million reduction in Medicare cost-based
revenues (which do not include a profit or net income component
for the Company) during fiscal 1996 from fiscal 1995 levels,
primarily caused by cost reductions principally from the
consolidation of certain operations in Tennessee following the
Home Care Affiliates acquisition.

     Although the Company's net revenues increased significantly
in fiscal 1996, net revenues for the fourth quarter of fiscal
1996 declined to $47.1 million from $53.7 million for the third
quarter.   Net revenues from certain of the Company's operations
did not grow during the fourth quarter at the rates the Company
had anticipated, and net revenues from the Company's infusion
therapy business actually declined during the fourth
quarter from their third quarter level.  As a result of this
revenue shortfall and certain other factors, the Company
sustained a $2.87 million net loss before income taxes in the
fourth quarter of fiscal 1996. 

     The Company's cancellation of its TennCare contract with
Access MedPlus (which was necessitated because of protracted
delays in payments to the Company) led to unanticipated
reductions in the volume of other referrals to the Company in
Tennessee during the fourth quarter of fiscal 1996.  Following
the cancellation of that contract, Housecall was required by law

                              40<PAGE>
to contact its referral sources throughout Tennessee and direct
them to refer all TennCare patients who were covered by Access
MedPlus to other health care providers who replaced the Company
in serving Access MedPlus.  Many of those referral sources also
redirected non-Access MedPlus patients (including some private as
well as TennCare patients) to such replacement health care
providers for delivery of home health care services.  In
addition, when the Company's then-contemplated proposal to
sell to Columbia/HCA certain of its duplicate Tennessee CON's and
related Medicare-certified agencies became generally known in
Tennessee, several of the Company's traditional referral sources
in Tennessee who were not favorably disposed to the Company's
proposed relationship with Columbia/HCA, reduced or ceased
entirely their referrals of patients to the Company.  Both of
these developments adversely affected net revenues for the
Company's Tennessee operations during the fourth quarter of
fiscal 1996, which caused the Company's operating costs at one of
its home health agencies to exceed allowable Medicare cost caps
by approximately $600,000.

     The Company's infusion business has historically had higher
profit margins than the Company's other lines of business (except
for the much lower volume management services business).  As a
result, the lower level of infusion net revenues during the
fourth quarter had a disproportionate effect on net income for
the fourth quarter and the year ended June 30, 1996, even though
the $16.2 million of net revenues for the year resulting from the
Biomedical acquisition caused an increase for this business line
over fiscal 1995. 

     PATIENT CARE COSTS.  In fiscal 1996, such costs increased 123% to
$95.7 million from $42.9 million in fiscal 1995.  The $52.8 million
increase is primarily attributable to the acquisition of Home
Care Affiliates late in fiscal 1995 and the acquisition of
Biomedical at the beginning of fiscal 1996.  These acquisitions
significantly increased in fiscal 1996, the Company's volume of
business that generate such costs.  As a percentage of net
revenues, however, patient care costs decreased from 50.9% to
46.6%.   The decrease reflects the presence of management
services (which do not generate patient care costs) as part of
the Company's operations for all of fiscal 1996 but for only the
last five months of fiscal 1995, due primarily to the acquisition
of MSS, and a lower patient care cost structure at Home Care
Affiliates compared to the Company's predecessor.

     GENERAL AND ADMINISTRATIVE EXPENSES. In fiscal 1996, such
expenses increased 179% to $94.9 million from $34.1 million in
fiscal 1995.  Substantially all of the increase is attributable
to the 1995 Acquisitions, which expanded the Company's
requirements for administrative personnel to support the
substantially higher volume of business resulting from those
acquisitions, as well as its need for additional corporate level
management and other personnel to support implementation of the
Company's expansion and growth plans.  As a percentage of net
revenues, general and administrative expenses increased from
40.5% to 46.2%, reflecting the presence of management services
(which requires more administrative personnel to provide such
services) as part of the Company's operations for all of fiscal
1996 but for only the last five months of fiscal 1995, primarily
due to the acquisition of MSS, and a higher general and
administrative cost structure at Home Care Affiliates compared to
the Company's predecessor.  These factors were partially offset
by cost reduction initiatives achieved through consolidation of

                              41<PAGE>
certain of the Company's Tennessee operations following the
acquisition of Home Care Affiliates.

     PROVISION FOR DOUBTFUL ACCOUNTS.  The provision for doubtful
accounts increased to $6.1 million for fiscal 1996 from $3.4
million for fiscal 1995, as a result of the Company's
significantly higher volume of business in fiscal 1996 and the
increase in unpaid claims that had been submitted to Access MedPlus
under the TennCare program.  The provision for doubtful accounts
decreased, however, as a percentage of net revenues (3.0% versus 4.0%
in fiscal 1996 and 1995, respectively), primarily as a result of an
improved payor mix reflected in the generally higher volume of business.

     DEPRECIATION AND AMORTIZATION EXPENSES.  Depreciation and
amortization expense was $3.3 million and $1.6 million in fiscal
1996 and 1995, respectively.  The large increase is primarily
attributable to the 1995 Acquisitions.  Depreciation and
amortization expense decreased slightly as a percentage of net
revenues for these periods (from 1.9% to 1.6%) because of the
differences in the various assets purchased as part of the
Company's acquisitions as compared with the revenues stream of
these acquisitions.

     INTEREST EXPENSE, NET.  Interest expense, net, was $902,000 in
fiscal 1995 and increased substantially to $4.3 million in fiscal 1996,
reflecting a substantial increase in the Company's outstanding
indebtedness during 1996, primarily as a result of the 1995 Acquisitions
and an increased business.  In April 1996, however, the Company
repaid $37.6 million of its borrowings under its former NationsBank 
credit facility, which significantly reduced the interest expense
that the Company incurred during the remainder of fiscal 1996.

     NET INCOME.  The Company's decrease in net income (to
$199,000 for fiscal 1996 from $697,000 for fiscal 1995) reflects
a $2.87 million net loss before income taxes in the fourth
quarter of fiscal 1996 and is attributable to the above factors.


LIQUIDITY AND CAPITAL RESOURCES

     The Company's principal capital requirements are for
expansion of the services provided through its existing
operations and working capital.  The Company's near term growth
objectives will require that Housecall have available substantial
amounts of capital as the Company seeks to expand its presence
and market share in select geographic markets.  Historically, the
Company has financed these requirements principally through
issuances of stock, subordinated notes (including to affiliates), and
borrowings under the Company's various agreements with banks.

     At June 30, 1997, the Company had cash and cash equivalents
of $2.1 million and working capital of $18.1 million.  As of
August 31, 1997, the Company had approximately $4.4 million of
cash and cash equivalents and $1.6 million ($3.0 million less
$1.4 million letters of credit) of borrowing capacity under its
Toronto-Dominion Amended and Restated Credit Agreement. 

     Net accounts receivable at June 30, 1997 increased
approximately $1.6 million from June 30, 1996, primarily as a
result of net revenues increasing $2.0 million in the fourth
quarter of fiscal 1997 over the fourth quarter of fiscal 1996. 
Days sales outstanding of 53.1 at June 30, 1997 were
approximately one day higher than June 30, 1996.  The Company has

                               42<PAGE>
placed significant importance on cash collections and as result,
108% of net revenues have been collected during the three months
ended August 31, 1997.  Management believes that the Company will
generate positive cash flow from operations, which will enable the
Company to fund its operations and anticipated growth for at
least the next year.  However, there are no assurances that such
sources of capital will be adequate to meet the Company's
requirements or that alternative financing sources will be
available on terms acceptable to the Company.  In addition,
delays in reimbursements to the Company by third party payors or
the effect of a Medicare adjustment with respect to a prior
period's reimbursements may cause working capital constraints. 
While the Company has experienced such delays and adjustments,
the Company has not had a working capital shortfall as a result
of any such occurrence.

     During April 1996, the Company completed an initial public
offering of 4,140,000 shares of its Common Stock that yielded
$59.7 million of net proceeds to the Company.  The Company used
those proceeds to, among other things, redeem its outstanding
shares of Series A Preferred Stock and repay all of its $37.6
million of its outstanding indebtedness under its NationsBank
credit facility.

ANALYSIS OF CASH FLOWS

     At June 30, 1996, the Company had cash and cash equivalents
of $7.8 million and working capital of $18.6 million.  At June
30, 1997, these amounts were $2.1 million and $18.1 million,
respectively.  The change in these amounts from the end of fiscal
1996 reflects the acquisition of Messick Homecare and Healthfirst
as well as the Company's net loss for 1997.  Cash used by
operating activities was $5.6 million for the fiscal year ended
June 30, 1997.  A significant use of cash was a decrease in
accounts payable and other liabilities of $4.4 million.  This
decrease in accounts payable and other liabilities, net of the
acquisition of Messick Homecare and Healthfirst, reflects the
Company's lower volume of business in fiscal 1997 and also the
timing of accruals at the respective year ends.

     During the fiscal year ended June 30, 1997, the Company's
investing activities used $27.5 million in cash, with
approximately $25.6 million (net of cash acquired) used for the
acquisition of Messick Homecare and Healthfirst.
 
     Financing activities provided $27.5 million of cash during
the fiscal year ended June 30, 1997.  The net proceeds of
approximately $37.0 million from the Toronto Dominion Credit
Facility was used to (i)  acquire Messick Homecare and
Healthfirst; (ii) repay $4.0 million of indebtedness to NationsBank;
(iii) repay $3.3 million of assumed debt in the above acquisitions;
and (iv) pay $1.5 million in bank financing fees.

CERTAIN ACCOUNTING MATTERS

     In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard No. 128
"Earnings per Share" ("SFAS 128"), which will change the current
method of computing earnings per share.  The new standard
requires presentation of "basic earnings per share" and "diluted
earnings per share" amounts, as defined.  SFAS 128 will be
effective commencing with the Company's second quarter of the

                               43
<PAGE>
year ending June 30, 1998, and upon adoption, all prior-period
earnings and per share data presented will be restated to conform

with the provisions of the new pronouncement.  Earlier adoption
is not permitted.  The Company does not believe such adoption
will materially impact its financial statements.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Report of Independent Auditors, the Consolidated
Financial Statements and Notes to the Consolidated Financial
Statements that appear on pages F-1 through F-18 and S-1 of this
Annual Report on Form 10-K are incorporated herein by reference.

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

     During the Company's two most recent fiscal years, the
Company did not change accountants and had no disagreement with
its accountants on any matters of accounting principles or
practices or financial statement disclosure which if booked would
have a material impact on the financial statements.

                       PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY


     The information contained under the heading "Election of
Directors" in the definitive Proxy Statement to be used in connection
with the solicitation of proxies for the Company's 1997 Annual Meeting
of Shareholders, to be filed with the Commission, is incorporated herein
by reference.  Pursuant to instruction 3 to paragraph (b) of Item
401 of Regulation S-K, information relating to the executive
officers of the Company is included in Item 1 of this Report.

ITEM 11.  EXECUTIVE COMPENSATION

     The information contained under the headings "Summary
Compensation Table, "Option Grants in the Last Fiscal Year",
"Fiscal Year-End Option Values", "Ten Year Option/SAR Repricing",
"Directors' Compensation", "Employment Agreement and Severance
Agreements" in the definitive Proxy Statement to be used in connection
with solicitation of proxies for the Company's 1997 Annual Meeting of
Shareholders, to be filed with the Commission, is incorporated herein
by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

     The information contained under the heading " Voting Securities
and Principal Shareholders" in the definitive Proxy Statement to be
used in connection with the solicitation of proxies for the Company's
1997 Annual Meeting of Shareholders, to be filed with the
Commission, is incorporated herein by reference.  For purposes of
determining the aggregate market value of the Company's voting
stock held by nonaffiliates, shares held by all directors and
executive officers of the Company have been excluded.  The
exclusion of such shares is not intended to, and shall not,
constitute a determination as to which persons or entities may be
"affiliates" of the Company as defined by the Commission.

                               44<PAGE>
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information contained under the headings "Certain
Transactions" and  "Compensation Committee Interlocks and
Insider Participation" in the definitive Proxy Statement to be
used in connection with the solicitation of proxies for the
Company's 1997 Annual Meeting of Shareholders, to be filed with
the Commission, is incorporated herein by reference.


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

     (a) 1. Financial Statements.

     The following financial statements and notes thereto of the
Company are incorporated by reference in Item 8 of this Report:

          Report of Independent Auditors.

          Consolidated Balance Sheets at June 30, 1996 and June
          30, 1997

          Consolidated Statements of Operations for the years
          ended June 30, 1995, June 30, 1996, and June 30, 1997

          Consolidated Statements of Stockholders' Equity for the 
          Years ended June 30, 1995, June 30, 1996, and June 30, 1997

          Consolidated Statements of Cash Flows for the Years
          ended June 30, 1995,  June 30, 1996, and June 30, 1997

          Notes to Consolidated Financial Statements.

     2. Financial Statement Schedules.

     The following financial statement schedule is included on
page S-1 of this Annual Report on Form 10-K.  All other schedules have
been omitted because they are not applicable, not required, or the
information is included in the financial statements or notes
thereto.

                                45<PAGE>
     Schedule II -- Valuation and Qualifying Accounts

     3. Exhibits.

     The following exhibits are required to be filed with this
Annual Report on Form 10-K by Item 601 of Regulation S-K:
<TABLE>
<CAPTION>

EXHIBIT
NUMBER                                  DESCRIPTION OF EXHIBIT
------         -------------------------------------------------------------------------
<C>         <S>
3.1         -- Restated Certificate of Incorporation of the Company, included as Exhibit
               3.1 to the Company's Form S-1, File No. 333-688, previously filed with
               the Commission and incorporated herein by reference.

3.2         -- Bylaws of the Company, included as Exhibit 3.2 to the Company's Form S-1,
               File No. 333-688, previously filed with the Commission and incorporated
               herein by reference.

10.1        -- Registration Rights Agreement, dated June 30, 1994, by and among the
               Company and the Several Participants named therein, as amended by the
               First Amendment thereto, dated June 29, 1995 and the Second Amendment
               thereto, dated August 28, 1995, included as Exhibit 10.3 to the Company's
               Form S-1, File No. 333-688, previously filed with the Commission and
               incorporated herein by reference.

10.2(a)     -- Amended and Restated Employment Agreement, dated as of January 1,
               1996, by and between the Company and George D. Shaunnessy, included as
               Exhibit 10.4 to the Company's Form S-1, File No. 333-688, previously filed
               with the Commission and incorporated herein by reference.*

10.2(b)     -- Severance Agreement, dated April 10, 1997, by and between the Company
               and George D. Shaunnessy.

10.3        -- Amended and Restated Employment Agreement, dated as of January 1, 1996,
               by and between the Company and Peter J. Bibb, included as Exhibit 10.5 to
               the Company's Form S-1, File No. 333-688, previously filed with the
               Commission and incorporated herein by reference.*

10.4        -- Amended and Restated Employment Agreement, dated as of January 1, 1996,
               by and between the Company and Harold W. Small, included as Exhibit 10.6
               to the Company's Form S-1, File No. 333-688, previously filed with the
               Commission and incorporated herein by reference.*

10.5        -- Amended and Restated Employment Agreement, dated as of January 1, 1996,
               by and between the Company and Thomas F. Luthringer, included as Exhibit
               10.7 to the Company's Form S-1, File No. 333-688, previously filed with
               the Commission and incorporated herein by reference.*

10.6       --  Employment Agreement, dated March 11, 1997, by and between the Company
               and Daniel J. Kohl, included as Exhibit 10 to the Company's 10-Q ,
               File No. 0- 28134, previously filed with the Commission and incorporated herein by
               reference*

10.7       -- Asset Purchase Agreement between the Company and Messick Homecare, Inc.
              dated October 31, 1996, included as Exhibit 2 on the Company's 8-K, File No.
              000-28134,  previous filed with the Commission and incorporated herein by
              reference.

                                46<PAGE>
10.8       -- Covenant to Compete, dated May 31, 1995, executed by Home Care
              Affiliates, Inc. and the Company in favor of Res-Care, Inc., included as
              Exhibit 10.11 to the Company's Form S-1, File No. 333-688, previously
              filed with the Commission and incorporated herein by reference.

10.9      --  Asset Purchase Agreement between the Company and Healthfirst, Inc. dated
              May 13, 1997, included in the Company's Form 8-K, File No. 000-28134,
              previously filed with the Commission on August 27, 1997, and incorporated
              herein by reference.

10.10     -- Asset Purchase Agreement between the Company and R.N. Registry Inc.
             dated as of June 30, 1996, included as Exhibit 2.1 to the Company's Form 8-K
              having an event date of June 30, 1996, previously filed with the
              Commission and incorporated herein by reference.

10.11      -- Modified and Restated Credit Agreement("Credit Agreement"), dated July
              31, 1995 by and between the Company and NationsBank N.A. (Carolinas) as
              party and as agent for Toronto Dominion (Texas), Inc. and AmSouth Bank of
              Alabama, included as Exhibit 10.13 to the Company's Form S-1, File No.
              333-688, previously filed with the Commission and incorporated herein by
              reference.

10.12       -- Stock Option, granted as of September 19, 1995, by the Company to James
               E. Dalton, Jr., included as Exhibit 10.16 to the Company's Form S-1, File
               No. 333-688, previously filed with the Commission and incorporated herein
               by reference.*

10.13       -- Stock Option, granted as of September 19, 1995, by the Company to Howard
               R. Deutsch, included as Exhibit 10.17 to the Company's Form S-1, File No.
               333-688, previously filed with the Commission and incorporated herein by
               reference.*

10.14       -- Stock Option, granted as of September 19, 1995, by the Company to R. Dale
               Ross, included as Exhibit 10.18 to the Company's Form S-1, File No.
               333-688, previously filed with the Commission and incorporated herein by
               reference.*

10.15       -- Consulting Agreement by and between Green Mountain Software
               Corporation and Medical Support Services of Tennessee, Inc., dated October 25,
               1994,  included as Exhibit 10.19 to the Company's Form S-1, File No. 333-688,
               previously filed with the Commission and incorporated herein by reference.

10.16       -- Performance Stock Option and Restricted Stock Purchase Plan, dated June
               1994, included as Exhibit 4.3 to the Company's Form S-8, File No.
               333-07257, previously filed with the Commission and incorporated herein
               by reference.*

10.17       -- Stock Option and Restricted Stock Purchase Plan, dated June 1994 included
               as Exhibit 10.20 to the Company's Form S-1, Commission File No. 33-688,
               previously filed with the Commission and incorporated herein by
               reference.*

10.18       -- 1996 Stock Option and Restricted Stock Purchase Plan dated January 1996
               included as Exhibit 4.1 to the Company's Form S-8, File No. 333-07257,
               previously filed with the Commission and incorporated herein by
               reference.*

10.19       -- Asset Purchase Agreement between the Company and R.N. Registry, Inc.,
               dated as of June 30, 1996, included as Exhibit 2.1 to the Company's Form
               8-K, as amended, having an event date of June 30, 1996.

</TABLE>
                               47<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                  DESCRIPTION OF EXHIBIT
<C>         <S>
10.19 (a)   -- Acquisition Agreement by and among Housecall Medical Resources, Inc., HFI
               Acquisition Corp., HFI Management, Inc., HFI Home Care Management, L.P.,
               The Shareholders of HFI Management, Inc. and the Partners of HFI Homecare
               Management, L.P., dated May 13, 1997 and included as Exhibit 2.1 to the
               Company's Form 8-K, File No. 000-28134, previously filed with Commission and
               incorporated herein by reference.

10.19(b)    -- Share Purchase Agreement by and amont HFI Acquisition Corp. Housecall
               Medical Resources, Inc. HF Holdings, Inc., HTHF, Inc. and Home Technology
               Healthcare, Inc., dated May 13, 1997 and included as Exhibit 2.2 to the
               Company's File 8-K, File No. 000-28134, previously filed with Commission and
               incorporated herein by reference.

10.19(c)    -- First Amendment to Share Purchase Agreement and First Amendment to
               Acquisition Agreement by and between Housecall Medical Resources, Inc.,
               HFI Acquisition Corp., HFI Management, Inc., HFI Home Care Management,
               L.P., The Shareholders of HFI Management, Inc. and the partners of HFI Homecare
               Management, L.P., dated May 13, 1997 and included as Exhibit 2.3 to the
               Company's Form 8-K, File No. 000-28134, previously filed with Commission and
               incorporated herein by reference.

10.19(d)    -- Securities Acquisition Agreement by and between Housecall Medical Resources,
               Inc. and R. Steven Williams, dated as of May 13, 1997 and included as
               Exhibit 2.4 to the Company's Form 8-K, File No. 000-28134, previously
               filed with Commission and incorporated herein by reference.

10.20       -- Amended and Restated Credit Agreement with The Toronto-Dominion Bank dated 
               as of May 13, 1997

11          -- Statement regarding computation of earnings per share.
21          -- Subsidiaries of the Company.  
23          -- Consent of Ernst & Young LLP
27          -- Financial Data Schedule (for SEC use only).
99          -- Draft of Proxy Statement, dated October 15, 1997

*    Management contract or compensatory plan or arrangement required to be
     filed as an Exhibit to this Annual Report on Form 10-K pursuant to Item
     14(c) of Form 10-K

                               48<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Auditors...............................................F-2
Consolidated Balance Sheets at, June 30, 1996 and June 30, 1997..............F-3
Consolidated Statements of Operations -
Year Ended June 30, 1995, June 30, 1996, and June 30, 1997...................F-4
Consolidated Statements of Stockholders' Equity --
Year Ended June 30, 1995, June 30, 1996, and June 30, 1997...................F-5
Consolidated Statements of Cash Flows --
Year Ended June 30, 1995, June 30, 1996, and June 30, 1997...................F-6
Notes to Consolidated Financial Statements...................................F-7
Schedule II -- Valuation and Qualifying Accounts.............................S-1

                               49<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Housecall Medical Resources, Inc.

     We have audited the accompanying consolidated balance sheets of
Housecall Medical Resources, Inc. (the "Company") as of June 30, 1996 and
1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the
period ended June 30, 1997.  Our audits also included the financial
statement schedule listed in the Index at Item 14(a)2.  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 the Company at June 30, 1996 and 1997, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended June 30,1997, 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.
 
                                          /s/  ERNST & YOUNG LLP
 
Atlanta, Georgia
September 8, 1997

                             F-2<PAGE>
                 HOUSECALL MEDICAL RESOURCES, INC.

                     CONSOLIDATED BALANCE SHEETS


</TABLE>
<TABLE>
<CAPTION>
                                                                                            June 30,
                                                                                      ----------------------
                                                                                      1996              1997
                                                                                      ----              ----
<S>                                                                          <C>                  <C>
                                            ASSETS
Current assets:
   Cash and cash equivalents                                                 $     7,785,000      $  2,074,000 
   Accounts receivable -- less allowance for doubtful accounts of
      $2,920,000 in 1996 and $6,394,000 in 1997                                   27,293,000        28,927,000 
   Income taxes receivable                                                           940,000         2,368,000 
   Deferred income taxes                                                           3,223,000         3,956,000 
   Inventory                                                                       1,067,000         1,144,000 
   Other current assets                                                              920,000         1,125,000 
                                                                              --------------       -----------
          Total current assets                                                    41,228,000        39,594,000 

   Property and equipment:
      Land                                                                            25,000            25,000 
      Building                                                                     1,411,000         1,526,000 
      Furniture and equipment                                                      5,660,000        10,219,000 
                                                                              --------------       -----------
                                                                                   7,096,000        11,770,000
   Less accumulated depreciation and amortization                                  1,927,000         2,738,000 
                                                                              --------------       -----------
Net property and equipment                                                         5,169,000         9,032,000 
Excess of cost of acquired businesses over fair values of net
   acquired                                                                       55,575,000        80,192,000 
Deferred financing costs                                                           1,480,000         1,361,000 
Other assets                                                                         493,000           587,000 
                                                                              --------------       -----------
                                                                             $   103,945,000      $130,766,000 
                                                                              ==============       ===========

                                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                                                          $     7,455,000      $  5,383,000 
   Accrued payroll and related expenses                                            7,749,000         7,965,000 
   Other accrued liabilities                                                       2,632,000         3,830,000 
   Current portion of long-term debt                                               4,085,000         3,517,000 
   Current portion of capital lease obligations                                      661,000           759,000 
                                                                              --------------       -----------
      Total current liabilities                                                   22,582,000        21,454,000 

   Long-term debt                                                                 10,186,000        43,214,000 
   Capital lease obligations                                                       1,534,000         2,053,000 
   Other long-term liabilities                                                     1,887,000         1,370,000 
   Deferred income taxes                                                           1,005,000           828,000 
   Commitments and contingencies
   Stockholders' equity:
     Preferred stock, $.10 par value, 9,800,000 shares authorized,
       no shares issued and outstanding
     Common stock, $.01 par value, 30,000,000 shares
       authorized, 10,218,900 and 10,285,400 shares issued and
       outstanding in 1996 and 1997                                                  102,000           103,000 
   Additional paid in capital on common stock                                     66,649,000        66,714,000 
   Retained earnings (deficit)                                                        --            (4,970,000)
                                                                              --------------       -----------
          Total stockholders' equity                                              66,751,000        61,847,000 
                                                                              --------------       -----------
                                                                             $   103,945,000      $130,766,000 
                                                                              ==============       ===========
</TABLE>
See accompanying notes.
                                F-3
<PAGE>
                 HOUSECALL MEDICAL RESOURCES, INC.

                CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>


                                                                       Year Ended June 30,
                                                           -------------------------------------------
                                                           1995                1996              1997
                                                           ----                ----              ----
<S>                                                  <C>                <C>                 <C>
Net revenues                                         $   84,219,000     $  205,389,000      $  192,065,000
Operating expenses:
  Patient care                                           42,879,000         95,688 000          85,225,000
  General and administrative                             34,069,000         94,940,000         100,925,000
  Provision for doubtful accounts                         3,395,000          6,074,000           5,498,000
  Depreciation and amortization                           1,568,000          3,262,000           3,529,000
                                                       ------------      -------------       -------------
       Total operating expenses                          81,911,000        199,964,000         195,177,000
                                                       ------------      -------------       -------------
  Income(loss) from operations                            2,308,000          5,425,000          (3,112,000)
  Other income (expense):
   Interest income                                          180,000            348,000             219,000
   Interest expense                                      (1,082,000)        (4,679,000)         (2,918,000)
                                                       ------------      -------------       -------------
Income (loss) before income taxes                         1,406,000          1,094,000          (5,811,000)
Provision (benefit) for income taxes                        709,000            895,000          (1,743,000)
                                                       ------------      -------------       -------------
Net income (loss) before extraordinary item                 697,000            199,000          (4,068,000)
Extraordinary loss from early extinguishment
   of debt, net of $387,000 income tax benefit                 --                  --             (902,000)
                                                       ------------      -------------       -------------
Net income (loss)                                          697,000             199,000          (4,970,000)
Cumulative dividends and accretion on 
   Series A Preferred Stock (redeemable)                (1,327,000)         (2,006,000)               --
                                                       -----------       -------------      ---------------
Net loss attributable to common stockholders         $    (630,000)      $  (1,807,000)      $  (4,970,000)

Net loss per common share:
  Loss before extraordinary item                     $       (0.10)      $       (0.24)      $       (0.40)
  Extraordinary Item                                           --                  --                (0.09)
                                                       ===========       =============       ==============
                                                     $       (0.10)    $         (0.24)     $        (0.49)
                                                       ===========       =============       ==============
Weighted average common shares outstanding               6,283,000           7,425,000           10,326,000
                                                       ===========       =============       ==============

</TABLE>

See accompanying notes

                                F-4<PAGE>
 
                 HOUSECALL MEDICAL RESOURCES, INC

          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                            Additional       Retained
                                                    Common Stock             Paid-in         Earnings
                                                Shares         Amount        Capital         (Deficit)           Total
                                                ---------------------       ----------      -----------          ------
<S>                                            <C>           <C>           <C>            <C>              <C>
Balance at July 1, 1994                              -       $      -      $         -    $        -       $           -
  Issuance of stock for cash                   5,454,150        56,000       8,340,000             -            8,396,000
  Issuance of stock in connection with
    an acquisition                               424,750         3,000         327,000             -              330,000
  Net income                                           -             -               -         697,000            697,000
  Accretion on Series A Preferred Stock                -             -               -         (27,000)           (27,000)
  Cumulative dividends on Series A
    Preferred Stock                                    -             -        (630,000)       (670,000)        (1,300,000)
                                              ----------      --------      ----------     -----------      -------------
Balance at June 30, 1995                       5,878,900        59,000       8,037,000              -           8,096,000

  Issuance of stock for cash                     200,000         2,000          798,000             -             800,000
  Issuance of stock in connection with
    initial public offering, net of
    issuance costs                             4,140,000        41,000       59,621,000             -          59,662,000
  Net income                                           -             -                -        199,000            199,000
  Accretion on Series A Preferred Stock                -                       (26,000)       (199,000)          (225,000)
  Cumulative dividends on Series A
    Preferred Stock (redeemed April, 1996)             -              -     (1,781,000)             -          (1,781,000)
                                              ----------      --------      ----------     -----------      -------------
Balance at June 30, 1996                      10,218,900       102,000      66,649,000                         66,751,000

  Exercise of common stock options                66,500         1,000          65,000              -              66,000 
  Net loss                                             -             -               -      (4,970,000)        (4,970,000)
                                              ----------      --------      ----------     -----------      -------------
Balance at June 30, 1997                      10,285,400     $ 103,000     $66,714,000     $(4,970,000)     $  61,847,000
                                              ==========      =========     ===========     ==========       ============
</TABLE>
See accompany notes.

                                 F-5<PAGE>
                 HOUSECALL MEDICAL RESOURCES, INC.

                CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                           Year Ended June 30,
                                                                      -----------------------------------
                                                                      1995          1996             1997
                                                                      ----          ----             ----
<S>                                                            <C>            <C>              <C>
OPERATING ACTIVITIES
Net income (loss)                                              $    697,000   $    199,000     $  (4,970,000)
Adjustments to reconcile net  income (loss) to net cash
 provided (used) by operating activities:
 Depreciation and amortization                                    1,568,000      3,262,000         3,529,000 
 Amortization of deferred financing costs                             --           433,000           442,000 
 Deferred income taxes                                              489,000        (98,000)         (613,000)
 Extraordinary item                                                   --             --              902,000 
 Changes in operating assets and liabilities, net of
   businesses:
      Accounts receivable                                          (750,000)    (5,455,000)           (21,000)
      Other current assets and inventory                           (577,000)       386,000            515,000 
      Accounts payable                                            1,624,000       (395,000)        (2,876,000)
      Accrued payroll and related expenses                       (1,143,000)       912,000           (235,000)
      Other accrued liabilities                                     792,000     (1,769,000)        (1,297,000)
      Income taxes payable/receivable                            (1,803,000)        38,000         (1,042,000)
                                                                -----------    -----------        -----------
Net cash provided (used) by operating activities                    897,000     (2,487,000)        (5,666,000)

INVESTING ACTIVITIES
Payments for business acquisitions, net of cash acquired        (42,198,000)    (9,178,000)       (25,622,000)
Additions to property and equipment                                (118,000)    (1,039,000)        (2,169,000)
Other, net                                                          (99,000)    (1,010,000)           261,000 
                                                                -----------    -----------        -----------
Net cash used in investing activities                           (42,415,000)   (11,227,000)       (27,530,000)

FINANCING ACTIVITIES
Net (repayments) borrowings under line of credit agreement         (793,000)         --                  --
Repayment of long-term debt                                           --       (41,731,000)          (123,000)
Proceeds from issuance of long-term debt                         44,576,000      9,171,000         36,999,000 
Refinancing of long-term debt                                    (5,524,000)    (3,713,000)        (7,307,000)
Repayment of Series A Preferred Stock                                 --       (19,877,000)              --
Proceeds from issuance of Series A Preferred Stock               15,884,000           --                 --
Proceeds from issuance of common stock                            8,396,000    60,462,000              66,000 
Principal payments under capital lease obligations                 (868,000)   (1,064,000)           (663,000)
Deferred financing costs                                         (1,804,000)      (98,000)         (1,487,000)
                                                                -----------    ----------          ----------
Net cash provided by financing activities                        59,867,000     3,150,000          27,485,000 
                                                                -----------    ----------          ----------
Net increase (decrease) in cash and cash equivalents             18,349,000   (10,564,000)         (5,711,000)
Cash and cash equivalents at beginning of year                        --       18,349,000           7,785,000 
                                                                -----------    ----------          ----------
Cash and cash equivalents at end of year                       $ 18,349,000   $ 7,785,000         $ 2,074,000 
                                                                ===========    ==========           =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid                                                  $    856,000  $  4,341,000        $ 2,473,000 
                                                                ===========    ==========           =========
Income taxes paid (received)                                   $  1,463,000  $  2,294,000        $  (574,000)
                                                                ===========    ==========           =========
</TABLE>
See accompanying notes.

                               F-6<PAGE>
                    HOUSECALL MEDICAL RESOURCES, INC.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

   DESCRIPTION OF BUSINESS

     Housecall Medical Resources, Inc. (the "Company") was incorporated
in June 1994 and commenced operations on July 1, 1994.  The Company
provides home health services and products including, home nursing and
related care, infusion therapy, respiratory therapy, home medical
equipment and hospice care.  In addition, the Company provides management
services -- consisting of clinical and marketing support, computerized
billing and records retention services, staffing and other general
administrative support -- to clients who are home health agencies.  At
June 30, 1997, the Company had operations in twenty states and the
District of Columbia.  A majority of the Company's outstanding common
stock is owned by Welsh, Carson, Anderson & Stowe VI, L.P.  and its
affiliates.  

PRINCIPLES OF CONSOLIDATION
 
     The consolidated financial statements include the accounts of the
Company and its majority-owned subsidiaries.  All significant
intercompany accounts and transactions have been eliminated in
consolidation.
 
NET REVENUES AND ESTIMATED SETTLEMENTS WITH THIRD PARTY PAYORS
 
     Services rendered to patients covered by Medicare and Medicaid
programs represented approximately 70%, 67% and 71% of net revenues for
the years ended June 30, 1995, 1996 and 1997, respectively.  Payments for
services rendered to patients covered by these programs are generally
less than the billed charges.  Provisions for contractual adjustments are
made to reduce the charges to these patients to estimated receipts based
upon the programs' method of payment, generally based on cost
reimbursement determined on a retrospective basis.  Final settlements
under these programs are subject to administrative review and audit, and
provisions are currently made for adjustments which may result during the
period in which such adjustments become known.  Net revenues are
presented net of provisions for contractual adjustments and other
allowances of $23,331,000, $58,407,000 and $44,234,000 in 1995, 1996, and
1997, respectively, in the accompanying consolidated statements of
operations.

      In the ordinary course of business, services are rendered to
patients who are financially unable to pay for the care.  The value of
these services is not material to the results of operations.
 
     Management services revenues are recognized at contracted rates as
services are provided.  The Company's management services agreements are
generally for terms of one to five years.  The Company is generally
compensated based on the number of visits performed and billed by the
managed agencies.  Renewal of the agreements is subject to negotiation at
their expiration.  Management services revenues were $2,600,000, 
$8,100,000, and $10,100,000 1995, 1996 and 1997, respectively.  

                                F-7<PAGE>
CASH EQUIVALENTS

     All highly liquid investments with maturities of three months or
less are considered to be cash equivalents.

INVENTORY

     Inventory, which is comprised primarily of medical supplies held for
sale and durable medical equipment, is valued at the lower of cost
(determined by the first-in, first-out method) or market.

PROPERTY AND EQUIPMENT
 
     Property and equipment are recorded at cost.  Depreciation and
amortization are computed using the straight-line method over the
following estimated useful lives or the term of the lease, if shorter:

    Buildings                  30 to 35 years
    Furniture                    3 to 7 years
    Leasehold improvements      5 to 10 years

     Depreciation expense of $1,039,000, $1,854,000 and $1,850,000
includes amortization of assets recorded under capital leases for years
ended June 30, 1995, 1996 and 1997, respectively.

EXCESS OF COST OF ACQUIRED BUSINESSES OVER THE FAIR VALUES OF ASSETS
ACQUIRED

     The excess of cost of acquired businesses over the fair values of
assets acquired (goodwill) is being amortized by the Company over 40
years.  Accumulated amortization at June 30, 1996 and 1997 was $1,855,000
and $3,481,000, respectively. 

     The amortization period of goodwill was determined based on the
Company's assessment of the future cash flows of the Company's acquired
home health businesses.  In evaluating anticipated future cash flows, the
Company considered  factors such as general home health industry trends,
competition, regulatory and legal issues and other economic factors.
 
     In accordance with FASB Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of ("Statement No. 121"), the Company records impairment losses on long-
lived assets used in operations when events and circumstances indicate
that such assets might be impaired and the undiscounted cash flows
estimated to be generated by those assets are less than assets' net book
values.  Statement No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of.  Based on the Company's
estimate of future undiscounted cash flows, the Company expects to
recover the carrying amounts of its long-lived assets. Nonetheless, it is
reasonably possible that estimates of undiscounted cash flows may change
in the near term resulting in the need to write-down certain assets to
their fair values.  

     On August 5, 1997, the United States Congress passed into law, the
Balanced Budget Act of 1997, which included several key provisions
related to the Medicare reimbursement program for providers of home
health services.  Provisions affecting the providers of home health
services include the establishment and implementation of a prospective
payment system in the Company's fiscal year 2001 as well as establishing
an interim payment schedule prior to the implementation of the
prospective payment system in which the Company will be reimbursed on the

                              F-8<PAGE>
lower of its actual costs or a new reimbursement limit for services.  The
interim payment schedule will be effective for the Company's 1999 fiscal
year.  The Company is studying the impact of the forthcoming
reimbursement changes on its Medicare nursing business as it relates to
the carrying value of its long-lived assets.

DEFERRED FINANCING COSTS
 
     The costs incurred in connection with negotiating and closing
financing  agreements are capitalized and amortized over the terms of the
related agreements.  Accumulated amortization of deferred financing costs
at June 30, 1996 and 1997 was $423,000 and $331,000, respectively.
 
PER SHARE DATA
 
      Net loss per common share is calculated using the weighted average
number of common and common equivalent shares, when dilutive, outstanding
during the period.  In addition, pursuant to the requirements of the
Securities and Exchange Commission, common stock issued at prices lower
than the initial public offering price and options to purchase common
stock granted during the twelve months preceding January 26, 1996 (see
Note 5) have been included in the calculation of the shares used in
computing per share information as if they were outstanding for all
periods presented (using the treasury stock method at the initial public
offering price of $16 per share).  Net loss per common share calculated
in accordance with generally accepted accounting principles would equal
$(.26) and $(.12) for the years ended June 30, 1996 and 1995,
respectively. 

     In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128 "Earnings per Share"
("SFAS 128"), which will change the current method of computing earnings
per share.  The new standard requires presentation of "basic earnings per
share" and "diluted earnings per share" amounts, as defined.  SFAS 128
will be effective commencing with the Company's second quarter of the
year ending June 30, 1998, and upon adoption, all prior-period earnings
and per share data presented will be restated to conform with the
provisions of the new pronouncement.  Earlier adoption is not permitted. 
The Company does not believe such adoption will materially impact the
financial statements.

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.  Although these estimates are based on
management's knowledge of current events and actions it may undertake in
the future, they may ultimately differ from actual results.


FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts reported in the consolidated balance sheets for
cash and cash equivalents, accounts receivable, income tax receivable,
deferred income taxes, other current assets, other assets, accounts
payable, accrued payroll and related expenses, and other accrued
liabilities approximate their fair values.  The carrying amounts reported
in the consolidated balance sheets for the term loan, revolver and
capital lease obligations approximate fair value since the debt and
capital leases bear interest at rates which approximate current market
rates.

                                F-9<PAGE>
CONCENTRATION OF CREDIT RISK

     The Company's principal financial instruments subject to potential
concentration of credit risk are its trade accounts receivable.  At June
30, 1996 and 1997, $13,475,000 and $12,611,000, respectively, of net
accounts receivable were due from Medicare and Medicaid. The
concentration of credit risk with respect to accounts receivable from
non-governmental payors is limited due to the large number of payors and
their dispersion across many different insurance companies, individuals
and geographic locations.  Approximately 82% of the Company's net revenues
in fiscal year 1997 were derived from its operations in Tennessee and
Florida.
 
RECLASSIFICATIONS
 
     Reclassifications of certain 1995 and 1996 financial statement
amounts have been made to conform to the 1997 presentation.

2. ACQUISITIONS

     On July 1, 1994, the Company acquired all of the outstanding stock
of its predecessor entity Housecall, Inc. (the "Predecessor"), a home
health company primarily operating in Tennessee and Virginia, for
consideration of approximately $13,010,000 in cash, 330,000 shares of
common stock and 6,600 shares of Series A Preferred Stock.  The estimated
fair value of the common stock and Series A Preferred Stock issued in
connection with this transaction was $990,000.  A portion of the cash
consideration, approximately $3,325,000, was paid into escrow to secure
the indemnification obligations of the selling shareholders of the
Predecessor.  As of June 30, 1997, the Company had made claims against
the escrowed amount primarily relating to Medicare reimbursement
liabilities which were not disclosed by the selling shareholders at the
date of acquisition.  Any amounts ultimately collected from the escrowed
amount will be reflected as a reduction in the purchase price.
 
     On February 3, 1995, the Company acquired all of the outstanding
stock of Medical Support Services, Inc. ("MSS"), a home health management
company primarily operating in Alabama, for cash consideration of
approximately $4,250,000.  A portion of the cash consideration,
approximately $300,000, was paid into escrow to secure the
indemnification obligations of the selling shareholder of MSS. In
connection with this transaction, the Company entered into employment and
stock option agreements with the selling shareholder.  Under the stock
option agreement, the selling shareholder was granted an option to
purchase 50,000 shares of the Company's common stock at an exercise price
of $1 per share (the estimated fair value of the Company's common stock
at that date).  The selling shareholder exercised the option in March
1997.

     On May 31, 1995, the Company acquired all of the outstanding stock
of Home Care Affiliates, Inc. ("HCAI"), a home health company primarily
operating in Florida, Tennessee, Kentucky and Indiana for aggregate
consideration of approximately $27,860,000, of which $25,600,000 was paid
in cash with the remainder to be paid over the next four years.  In
addition, the Company agreed to grant to two of the selling shareholders
the right to purchase up to 200,000 shares of the Company's common stock
for $4 per share (the estimated fair value of the Company's common stock
at that date).  The selling shareholders exercised these purchase rights
in August 1995, and purchased an aggregate of 200,000 shares of common
stock for cash consideration of $800,000.  After completing the HCAI
acquisition, the Company evaluated the collectibility of accounts
receivable of HCAI, and using its regular systematic approach, concluded


                                 F-10<PAGE>
that it would record a $1 million charge to bad debt expense as of June 30,
1995, which amount is reflected in the Company's financial statements
for the year then ended.

     On July 10, 1995, the Company acquired all of the outstanding stock
of Biomedical Home Care Affiliates, Inc. ("Biomedical"), an infusion
therapy services company primarily operating in Florida and North
Carolina, for consideration of approximately $9,000,000 in cash,
including transaction costs and bonuses paid to Biomedical employees, and
a subordinated note of $1,000,000.

     On June 30, 1996, the Company acquired the primary operating assets
of R. N. Registry, Inc. ("R.N. Registry"), a home health agency operating
in eleven counties in Indiana, for consideration of approximately
$225,000 in cash and $283,000 in assumed liabilities.

     On October 31, 1996, the Company acquired all of the outstanding
stock of Messick Homecare, Inc. ("Messick"), a respiratory therapy and
home medical equipment company primarily operating in Tennessee, for
consideration of  approximately $5,500,000 in cash and $2,100,000 in
assumed debt.  Approximately $850,000 of the merger consideration was
placed in an escrow account at the closing; up to $750,000 of that escrow
fund may be repayable to the Company depending on developments over the
next 17 months with respect to decreases in the Medicare reimbursement
rate for oxygen therapy and related services; the remaining $100,000 of
the escrow amount comprises an indemnification fund.  At June 30, 1997,
the entire $850,000 remains in the escrow account.

     On May 13, 1997, the Company acquired all of the outstanding stock
of the Healthfirst Entities, a group of companies related through common
control and management, ("Healthfirst"), a group of management services
companies that operate in nineteen states, for consideration of
approximately $21,800,000 in cash and, $1,200,000 in assumed debt.  In
connection with the acquisition, the Company has agreed to issue
approximately 63,000 shares of common stock in accordance with an
employment agreement with one of the selling shareholders.

     Each of the above acquisitions was accounted for as a purchase
transaction and, accordingly, the various assets acquired and liabilities
assumed have been recorded at their respective fair values as of the
dates of acquisition.  The results of operations of the acquired
businesses have been included in the accompanying consolidated statements
of operations since their respective purchase dates.


     The following unaudited pro forma information for the year ended
June 30, 1996 is presented as if Messick, Healthfirst and R.N. Registry
had been acquired on July 1, 1995 and such information for the year ended
June 30, 1997 is presented as if Messick and Healthfirst had been
acquired on July 1, 1996.  This information does not purport to be
indicative of the results that would have actually been obtained if the
acquisitions had occurred on such dates.

<TABLE>
<CAPTION>
                                                            1996              1997
                                                            ----              ----
<S>                                                    <C>              <C>
Net revenue                                            $228,858,000     $207,837,000
Net loss                                                   (422,000)      (4,573,000)
Net loss attributable to common stockholders             (2,428,000)      (4,573,000)
Net loss per common share                                     (0.32)           (0.45)

                               F-11<PAGE>
3. LONG-TERM DEBT

     At June 30, 1996 and 1997, long-term debt consisted of:
                                                             1996              1997
                                                             ----              ----

Revolving credit and term loan agreement                  $4,000,000      $37,000,000
Subordinated notes payable                                 9,645,000        9,714,000 
Other                                                        626,000           17,000 
                                                          ----------      -----------
                                                          14,271,000       46,731,000 
Current portion                                            4,085,000        3,517,000 
                                                          ----------       ----------
                                                         $10,186,000      $43,214,000 
                                                          ==========       ==========

     In May 1995, the Company entered into a Credit Agreement (the
"Agreement") with NationsBank, N.A..  The Agreement provided for a
$30,000,000 term loan facility ("Term Loan A"), a $13,000,000 term loan
facility ("Term Loan B") and a revolving credit facility of $12,000,000. 
In April 1996, the Company's borrowings under Term Loan A were repaid
with proceeds from the Company's initial public offering, and the Term
Loan A facility was no longer available for borrowings by the Company. As
of June 30, 1996, the Company had borrowings of $4,000,000 under the
revolving credit facility.
  
     In October 1996, the Company entered into a loan (the "Bridge Loan")
with a bank.  The Bridge Loan provided for a $15,000,000 revolving credit
facility.  Borrowings under the Bridge Loan were used to repay the
remaining indebtedness under the NationsBank Credit Facility and for the
acquisition of Messick in October 1996.  Borrowings outstanding under the
Bridge Loan bear interest, at the Company's option, at either the bank's
prime rate plus .75% or LIBOR plus 2.25%.  Commitment fees of .5% are
payable quarterly on the unused portion.  The Company recorded charges in
connection with the write-off of certain deferred financing costs related
to the  NationsBank Credit Facility.  These items, totaling $1,289,000,
have been reported as an extraordinary item, net of income taxes of
$387,000 during the year ended June 30, 1997.  

     On May 13, 1997 the Company entered into an Amended and Restated
Credit Agreement (the "Restated Agreement") that provides for a
$22,000,000 term loan and an $18,000,000 revolver.  The proceeds of the
term loan were used to acquire Healthfirst.  Approximately $15,000,000
was drawn on the revolver to repay the Bridge Loan.

     Borrowings outstanding under the Restated Agreement bear interest,
at the Company's option, at either the bank's prime rate (8.5% at June
30, 1997) plus 2.0% or an adjusted eurodollar rate, as defined by the
Restated Agreement (5.8125% at June 30, 1997) plus 3.0%.  Commitment fees
of .375% are payable quarterly on the unused portion of the funds
available under the Restated Agreement.  In addition, in connection with
the Restated Agreement, warrants for 150,000 shares of the Company's
common stock were issued to the lender at a exercise price of $5.00 per
share.  The warrants are exercisable at any time through May 13, 2002. 
The outstanding balance under the term loan is due in nine quarterly
installments comprising currently earned interest and principal payments
ranging from $1,500,000 to $3,500,000. The remaining outstanding balance
under the revolving credit facility is due in full on May 1, 2000. 
Borrowings under the Restated Agreement are secured by substantially all
of the assets of the Company and its subsidiaries. As of June 30, 1997,
the Company had borrowed $15,000,000 under the revolving credit facility. 
The Company has standby letters of credit of approximately $1,400,000 as
of June 30, 1997.

                                F-12<PAGE>
     On June 23, 1997, the Company entered into interest rate swap
transactions with the bank under which the Company effectively fixed the
interest rate on $22,000,000 of its borrowings under the Restated
Agreement at approximately 9.17% for the period from June 23, 1997 to
May 1, 1999.

     The Restated Agreement requires prepayment of the borrowings for the
amount of any excess cash flows, as defined, beginning in July 1998, and
for the net proceeds from asset sales, the issuance of stock for cash
under certain circumstances or the issuance of any additional debt.

     The Restated Agreement contains numerous restrictive covenants,
which limit, among other things: future borrowings; payment of dividends
on any class of the Company's capital stock; loans to subsidiaries,
affiliates or third parties and certain investments.  The Agreement also
requires the maintenance of specified levels of cash flows, interest
coverage and net worth. 

     The subordinated notes (held by an affiliate of Welsh, Carson,
Anderson & Stowe VI, L.P. -- see Note 1) have a face value of $10,000,000
and a stated interest rate of 10.5%.  The notes were issued at a discount
of $454,000 and have an effective interest rate of approximately 12.5%. 
The notes are due in two equal installments on June 30, 2001 and June 30,
2002.  The notes are subordinate to all obligations of the Company to
banks or other financial institutions for borrowed money. 

     The aggregate annual maturities of long-term debt at June 30, 1997
are:

                    YEAR ENDED JUNE 30,

1998                       $    3,517,000
1999                            7,500,000
2000                           26,000,000
2001                            4,857,000
Thereafter                      4,857,000
                           --------------
                           $   46,731,000
                           ==============



4. LEASE COMMITMENTS
 
CAPITAL LEASES
 
     The Company leases equipment under capital leases.  During 1996 the
Company entered into capital lease obligations with original principal
amounts of approximately $225,000.  During 1997, except for capital
leases assumed in acquisitions, the Company did not enter into any new
capital leases.  At June 30, 1996 and 1997 property under capital leases
consist of:

                                                          1996               1997
                                                          ----               ----
Building                                             $    662,000       $  1,764,000
Furniture and equipment                                 1,389,000          2,608,000
                                                       ----------        -----------
                                                        2,051,000          4,372,000
Less Accumulated amortization                             811,000          1,566,000
                                                       ----------        -----------
                                                     $  1,240,000       $  2,806,000
                                                       ==========        ===========

                               F-13<PAGE>
     The aggregate future minimum lease payments under capital leases are:

                                          YEAR ENDED JUNE 30,

1998                                              $   1,004,000
1999                                                    835,000 
2000                                                    614,000 
2001                                                    370,000 
2002                                                    308,000 
Thereafter                                              308,000 
                                                    -----------
Total future minimum lease payments                   3,439,000
Less amount representing interest                       627,000
                                                    -----------
Present value of minimum lease
  payments at June 30, 1997                       $   2,812,000
                                                    ===========


OPERATING LEASES

     The Company leases equipment and office facilities under operating
leases expiring through 2002.  At June 30, 1997, the future minimum
rentals under these operating leases are:

                     YEAR ENDED JUNE 30,

1998                                     $    7,620,000
1999                                          5,296,000
2000                                          3,501,000 
2001                                          1,505,000
2002                                            404,000
Thereafter                                         --
                                           ------------
                                         $   18,326,000
                                           ============

     Rental expense under operating leases amounted to approximately
$1,953,000,  $6,347,000 and $10,659,000 for 1995, 1996 and 1997,
respectively.
 
5. EQUITY
 
     In April 1996, the Company completed an initial public offering for
the sale of 4,140,000 shares of common stock.  Net proceeds from the
offering were approximately $59,662,000.  The net proceeds were used in
part to repay a portion of the Company's outstanding indebtedness under
the NationsBank Credit facility, the $1 million subordinated note issued
in connection with the acquisition of Biomedical, and to redeem all of
the 167,960 shares of the Series A Preferred Stock and related
accumulated and unpaid Series A Preferred Stock dividends for
approximately $19,877,000.  The difference between the carrying value of
the Series A Preferred Stock and its redemption value, approximately
$205,000, was recorded as additional accretion to Preferred Stock
resulting in a corresponding reduction in income attributable to common
stockholders for the Company's fiscal 1996 fourth quarter results.

                               F-14<PAGE>
6. COMMITMENTS AND CONTINGENCIES

     At June 30, 1996, the Company maintained general and professional
liability insurance with independent insurance carriers primarily on a
claims-made basis.  Beginning August 1, 1996, the Company purchased
professional liability insurance with terms which are on an occurrence
basis.  The current policy expires on August 1, 1998.  Should this policy
not be renewed or replaced with equivalent insurance, claims based on
occurrences during the term of the policy, but asserted subsequently,
would be insured.  Additionally, the Company's risk management system has
procedures for identifying and reporting claims on a timely basis.  Based
on the claims history to date and the risk management system, management
believes any incurred but not reported claims at June 30, 1997, would not
be material to the Company's financial position or its results of
operations.
 
     The Company is a party to a number of legal actions arising in the
ordinary course of its business.  In management's opinion, after
consultation with legal counsel, settlement of these actions, will not
have a material adverse effect on the Company's consolidated financial
position, liquidity or results of operations. 

      On August 30, 1996, two lawsuits were filed by certain persons who
seek to represent a class of shareholders who purchased shares of the
Company's common stock in the April 1996 public offering or in the
subsequent aftermarket.  In September and November 1996 two additional
lawsuits were filed with similar representations.  The individual
plaintiffs in all four cases allege that they were induced to purchase
the Company's stock on the basis of misrepresentations about the Company
and its prospects.  The complaints assert claims under Sections 11, 12(2)
and 15 of the Securities Act of 1933.  The complaints name as the
defendants the Company, its directors and certain of its officers, and
the lead underwriters associated with the public offering.  By an order
dated December 5, 1996, The United States District Court for the Northern
District of Georgia consolidated all four actions.  In January 1997 a
Consolidated Amended Complaint was filed in the Northern District of
Georgia.  On March 13, 1997, the Company moved to dismiss the
Consolidated Amended Complaint.  The Company intends to vigorously defend
this lawsuit.
 
7. INCOME TAXES
 
     The components of the provision (benefit) for income taxes for 1995,
1996 and 1997 consist of:

                                     1995          1996            1997
Current:
  Federal                        $  185,000    $ 1,400,000   $ (1,231,000)
  State                              35,000        123,000       (106,000)
                                   --------      ---------     ----------
    Total current                   220,000      1,523,000     (1,337,000)
Deferred:
  Federal                           411,000       (529,000)      (342,000)
  State                              78,000        (99,000)       (64,000)
                                    -------      ---------      ---------
    Total deferred                  489,000      (628,000)       (406,000)
                                    -------      ---------      ---------
                                 $  709,000    $  895,000    $ (1,743,000)

                               F-15<PAGE>
     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.  Deferred tax assets and liabilities at June 30, 1996 and 1997
are:

                                                 1996            1997
                                                 ----            ----
Deferred tax assets
    Nondeductible accruals and allowances   $ 3,223,000     $  3,956,000
                                             ----------       ----------
         Total deferred tax assets            3,223,000        3,956,000
Deferred tax liabilities
    Amortization                               (381,000)       (395,000)
    Depreciation                               (414,000)       (428,000)
    Other                                      (210,000)         (5,000)
                                             ----------        --------
                                             (1,005,000)       (828,000)
                                             ----------      ----------
Net deferred income taxes                   $ 2,218,000     $ 3,128,000
                                            ===========      ==========


     A reconciliation of the provision (benefit) for income taxes to the
federal statutory rate of 34% for 1995, 1996 and 1997 is:

</TABLE>
<TABLE>
<CAPTION>
                                                     1995         1996            1997
                                                     ----         ----            ----
<S>                                              <C>          <C>         <C>
Statutory federal income tax expense (benefit)   $ 478,000    $ 372,000   $  (1,976,000)
    State income taxes, net of federal expense      65,000       44,000        (113,000)
       (benefit)
    Non-deductible amortization of intangible
    assets                                         150,000      393,000         499,000 
    Other                                           16,000       86,000        (153,000)
                                                 ---------     --------     -----------
    Provision (benefit) for income taxes         $ 709,000    $ 895,000   $  (1,743,000)
</TABLE>

8. RETIREMENT PLANS

     Substantially all of the Company's employees participate in various
defined contribution benefit plans.  Company contributions to the plans
are generally at the discretion of the Company.  The Company made
contributions of $163,000, $883,000 and $655,000 to these benefit plans
for 1995, 1996 and 1997, respectively.
 
9. STOCK OPTION PLANS
 
     The Company has adopted three stock option and restricted stock
purchase plans (the "Plans").  Under the Plans, an aggregate of 2,517,702
shares have been reserved for issuance to employees, officers and
directors of the Company.  On May 1, 1997 the 1996 Restricted Stock and
Stock Option Plan ("1996 Plan") was amended and restated  to increase the
number of options from 500,000 to 1,300,000 that may be issued.  The
Board of Directors, or a committee thereof, has the sole authority to
grant the options including the determination of the exercise price, the
vesting period, the exercise period and the number of options granted. 
The plans provide for the granting of both non-qualified stock options
and incentive stock options.  A summary of activity under the Plans is as
follows:

                               F-16<PAGE>
                                                   OPTION            WEIGHTED
                                    NUMBER OF        PRICE           AVERAGE
                                     SHARES        PER SHARE          PRICE

Balance, July, 1994                      -      $       -        $       -  
     Granted                         1,157,220     1.00-4.00             1.81
     Canceled                          (23,000)    1.00-4.00             1.00
                                     ---------    -----------        --------
Balance, July, 1995                  1,134,220     1.00-4.00             1.83
     Granted                           428,625     8.00-13.00           11.06
     Canceled                          (42,425)    1.00-13.00            6.87
                                     ---------    -----------        --------
Balance, July, 1996                  1,520,420     1.00-13.00            4.29
     Granted                           946,000     4.00-4.50             4.08
     Canceled                         (694,557)    1.00-13.00            5.86
     Exercised                         (66,481)    1.00-4.00             1.15
                                     ---------    -----------        --------
Balance, July, 1997                $ 1,705,382  $  1.00-13.00            3.65
                                     =========    ===========        ========

     The stock options granted under the Plans during 1996 and 1997 have
been at exercise prices equal to or greater than the fair market value of
the Company's common stock at the date of grant.  No compensation expense
was recognized for the options granted in 1996 and 1997.  Options under
the incentive plan generally will vest over a five-year period.  Options
to purchase 250,000 shares were granted under a performance plan with
accelerated vesting at the achievement of certain stock price targets.  

     Effective May 22, 1997, the Company approved a plan to reprice
options to purchase 667,400 shares of common stock granted to employees
pursuant to the 1996 Plan. Options originally priced from $5.69 to $13.00
per share were repriced at $4.00 per share, the closing market price on
May 22, 1997. None of the repriced options were fully vested prior to the
repricing. The vesting schedule of the repriced options did not change as
a result of the repricing.  
 
     Options under the Plans generally vest ratably over one to five year
service periods from the date of grant.  All options have a term of ten
years.
 
     Options for the purchase of 361,369 and 561,636 shares of common
stock were exercisable at June 30, 1996 and 1997, respectively.  The
following table summarizes information concerning outstanding and
exercisable options at June 30, 1997:
 

                               F-17<PAGE>
<TABLE>
<CAPTION>
                              Options outstanding                 Options Exercisable 
                     ------------------------------------      --------------------------
                                     Weighted 
                                     Average     Weighted                       Weighted 
  Range of               Number     remaining    Average         Number         Average  
  Exercise              Options     Contractual  Exercise        Options        Exercise
    Price             Outstanding      Life       Price        Exercisable        Price
  --------            -----------   ----------   --------      -----------      --------
<S>                   <C>              <C>       <C>             <C>           <C>
$1.00-$4.50           1,610,932         8.69     $  3.14         510,746       $    1.90 

$8.00-$13.00             94,450         8.47     $  12.50         50,890       $   12.81 
                     ------------------------------------       ------------------------

                      1,705,382         8.67     $   3.65        561,636       $   2.89 
                     ------------------------------------       ------------------------
</TABLE>

     In July 1996, the Company adopted FASB Statement No. 123, "Accounting
for Stock-Based Compensation."  Under Statement No. 123, the Company may
continue following existing accounting rules or adopt a new fair value
method of valuing stock-based awards.  The Company has elected to
continue to follow APB Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related Interpretations in accounting for its
employee stock options and not adopt the alternative fair value method of
accounting provided under Statement No. 123.  Under APB 25, because 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.

     Pro Forma information regarding net income and earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to June 30, 1995 under the fair value method of that
Statement.  The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for both 1996 and 1997: risk free interest
rates of 5.39% to 6.40% depending on the date of grant; a dividend yield
of 0%; volatility factors of the expected market price of the Company's
common stock of 0.795; a weighted-average expected life of the options of
six years and a weighted average expected life of the warrants of five
years.

     For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the options' vesting periods. 
The Company's pro forma information follows (in thousands, except for
earnings per share information):

                                           Year Ended June 30,
                                        ----------------------
                                        1996             1997
                                        ----             ----
         Pro forma net loss         $(1,880,000)     $(6,216,000)
         Pro forma loss per share   $     (0.25)     $     (0.61)

     The weighted-average fair value of options granted during 1996 and
1997 is $7.07 and $2.31, respectively.  The weighted average fair value
of warrants granted during 1997 is $4.16.  Because Statement 123 is
applicable only to options granted subsequent to June 30, 1995, its pro
forma effect will not be fully reflected until 2000.

                                F-18<PAGE>
<TABLE>
<CAPTION>
                                                          SCHEDULE II---VALUATION AND QUALIFYING ACCOUNTS
                                                                 HOUSECALL MEDICAL RESOURCES, INC.
                                                                            June 30, 1997


                Column A                    Column B                Column C                  Column D           Column E
-------------------------------------------------------------------------------------------------------------------------
                                                                   Additions
                                                         ---------------------------
                                           Balance at
                                          Beginning of    Charged to       Charged to                         Balance at End
               Description                   Period      and Expenses      Accounts-     Deductions-Describe    of Period
-----------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>           <C>                             <C>                  <C>
Year Ended June 30, 1997:
     Deducted from Assets Accounts:
        Allowance for Doubtful Accounts   $  2,920,000  $ 5,498,000                      $  2,024,000<F1>    $   6,394,000
                                          ============  ===========                      ===============     ==============


Year Ended June 30, 1996:
     Deducted from Assets Accounts:
        Allowance for Doubtful Accounts   $ 2,510,000   $ 6,074,000                      $  5,664,000 <F1>   $   2,920,000
                                          ===========   ===========                      =================   ==============

Year Ended June 30, 1995:
     Deducted from Assets Accounts:
        Allowance for Doubtful Accounts   $ 1,619,000   $3,395,000                       $  2,504,000 <F1>   $   2,510,000
                                          ===========   ==========                       =================   =============

<FN>
<F1>     Uncollectible accounts written off, net of
         recoveries
</TABLE>
                                  S-1<PAGE>
                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Atlanta, State of Georgia, on the 7th day of October, 1997.

                                          HOUSECALL MEDICAL RESOURCES, INC.
                                            (Registrant)

                                          By:   /s/  DANIEL J. KOHL
                                             -----------------------------------
                                                    Daniel J. Kohl
                                            Title: President and Chief Executive
                                                           Officer

                        POWER OF ATTORNEY AND SIGNATURES
 
     Know all men by these presents, that each person whose signature appears
below constitutes and appoints Daniel J. Kohl or Fred C. Follmer, or either
of them, as attorney-in-fact with each having the power of substitution, for him
in any and all capacities, to sign any amendments to this Annual Report on Form
10-K and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or is
substitute or substitutes, may do or cause to be done by virtue hereof.
 
     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
in the capacities set forth and on the 7th day of October, 1996.

SIGNATURE                                        TITLE
--------------------------------------------  ---------------------------------

/s/  DANIEL J. KOHL                           President, Chief Executive
--------------------------------------------  Officer, and Director
Daniel J. Kohl                                (Principal Executive Officer)

/s/  FRED C. FOLLMER                          Vice President, Chief Financial
--------------------------------------------  Officer, and Secretary (Principal
Fred C. Follmer                               Financial and Accounting Officer)

/s/  JAMES B. HOOVER                          Chairman of the Board
--------------------------------------------
James B. Hoover

/s/  HOWARD R. DEUTSCH                         Director
--------------------------------------------
Howard R. Deutsch

/s/  JAMES E. DALTON, JR.                       Director
--------------------------------------------
James E. Dalton, Jr.

/s/  ANDREW M. PAUL                             Director
--------------------------------------------
Andrew M. Paul

/s/  R. DALE ROSS                               Director
---------------------------------------------
Dale Ross

<PAGE>
                           EXHIBIT INDEX

Exhibit
Number         Description
-------        -----------
10.2(b)        Severance Agreement, dated April 10, 1997, by and between
                the Company and George D. Shaunnessey
10.20          Amended and Restated Credit Agreement with The Toronto-Dominion
               Bank dated as of May 13, 1997
11             Statement regarding computation of earnings per share
21             Subsidiaries of the Registrant
23             Consent of Ernst & Young LLP
27             Financial Data Schedule (for SEC use only)
99             Draft of Proxy Statement dated October 15, 1997