<PAGE>
                                  United States
                       Securities and Exchange Commission
                              Washington, DC 20549

                                   Form 10-Q/A

{X} Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934

               For the quarterly period ended September 30, 2001

                                       OR

{ } Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934

                        For the transition period from       to
                                                      -------

                        Commission File Number 001-13460
                                               ---------


                        PhyAmerica Physician Group, Inc.
                        --------------------------------
             (Exact name of registrant as specified in its charter)

Delaware                                                   56-1379244
---------------------------------------------------------------------
(State or other jurisdiction of                            (IRS Employer
Incorporation or organization)                             Identification No.)

2828 Croasdaile Drive, Durham, NC                          27705
----------------------------------------------------------------
(Address of principal executive offices)                   (Zip Code)

                                 (919) 383-0355
                                 --------------
               (Registrant's telephone number including area code)

                                      None
                                      ----
(Former name, former address and former fiscal year, if changed since last
report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (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 ninety (90) days.

             {X} Yes                                       { } No

As of October 31, 2001 there were outstanding 43,694,987 shares of common stock,
par value $.01 per share.

<PAGE>
PhyAmerica Physician Group, Inc. hereby amends Items 1, 2, and 3 of Part I of
its Report on Form 10-Q, dated and filed November 14, 2001:


                        PHYAMERICA PHYSICIAN GROUP, INC.
                                      INDEX




PART I       FINANCIAL INFORMATION

Item 1.      Financial Statements

             Consolidated Balance Sheets at September 30, 2001 (unaudited) and
             December 31, 2000

             Unaudited Consolidated Statements of Operations:
                  Three months ended September 30, 2001 and 2000

             Unaudited Consolidated Statements of Operations
                   Nine months ended September 30, 2001 and 2000

             Unaudited Consolidated Condensed Statements of Cash Flows:
                  Nine months ended September 30, 2001 and 2000

             Notes to Consolidated Financial Statements (unaudited)


Item 2       Management's Discussion and Analysis of Financial Condition and
             Results of Operations


Item 3       Quantitative and Qualitative Disclosures About Market Risk


             SIGNATURES





                                       2

<PAGE>
                                     PART I

Item 1

                        PHYAMERICA PHYSICIAN GROUP, INC.
                     Consolidated Balance Sheets - Unaudited
                      (In thousands, except per share data)
<TABLE>
<CAPTION>

                                                                                    September 30,                  December 31,

                                                                                        2001                          2000
                                                                                   --------------                  -----------
                                   Assets

Current assets:
<S>                                                                              <C>                             <C>
    Cash and cash equivalents                                                    $         2,995                 $        ---
    Trade accounts receivable, net                                                        23,753                       32,514
    Reserves held by NCFE                                                                 15,226                       14,947
    Accounts receivable, other                                                               657                        1,301
    Receivables from related party                                                            58                          716
    Prepaid expenses and other current assets                                              7,375                        4,693
                                                                                   --------------                  -----------
Total current assets                                                                      50,064                       54,171
                                                                                   --------------                  -----------

Property and equipment, at cost, less accumulated depreciation                            10,808                       11,407
Excess of cost over fair value of net assets acquired, net                                16,457                       19,340
Other assets                                                                               1,498                        2,194
                                                                                   --------------                  -----------
Total assets                                                                     $        78,827                 $     87,112
                                                                                   ==============                  ===========

                Liabilities and Shareholders' Equity (Deficit)

Current liabilities:
    Current maturities and other short-term borrowings                           $        45,156                 $      1,728
    Accounts payable                                                                      26,966                       28,957
    Accrued physician fees and medical costs                                              16,636                       18,054
    Accrued expenses                                                                       8,566                        7,211
                                                                                   --------------                  -----------
Total current liabilities                                                                 97,324                       55,950
                                                                                   ==============                  ===========

Long-term debt, excluding current maturities                                             151,318                      175,352
                                                                                   --------------                  -----------
Total liabilities                                                                        248,642                      231,302
                                                                                   ==============                  ===========

Shareholders' equity (deficit):
Series D convertible preferred stock:   shares authorized 1,200; no
shares issued and outstanding
Additional paid-in capital preferred stock                                                   ---                          ---

Common stock $.01 par value: shares authorized 100,000; shares issued
and outstanding 43,695 and 42,991, respectively                                              437                          430
Additional paid-in capital                                                               180,006                      178,331
Common stock warrants                                                                        ---                        1,675
Retained earnings (accumulated deficit)                                                (350,258)                    (324,626)
                                                                                   --------------                  -----------
Total shareholders' equity (deficit)                                                   (169,815)                    (144,190)
                                                                                   --------------                  -----------
Total liabilities and shareholders' equity (deficit)                             $        78,827                 $     87,112
                                                                                   ==============                  ===========



                                    See accompanying notes to consolidated financial statements.
</TABLE>

                                       3

<PAGE>
<TABLE>
<CAPTION>

                                                    PHYAMERICA PHYSICIAN GROUP, INC.
                                           Consolidated Statements of Operations - Unaudited
                                                 (In thousands, except per share data)

                                                                                               Three months ended
                                                                                                  September 30

                                                                                   2001                               2000
                                                                          -------------------------           ----------------------
                                                                                                                   (Restated)

Operating revenue, net                                                 $                    84,752        $                  81,800

<S>                                                                       <C>                                 <C>
Costs and expenses:
   Physician and other provider services                                                    61,854                           62,944
   Medical support services                                                                 12,292                           11,961
   Selling, general and administrative                                                      12,275                           13,712
   Related party expense, net                                                                  999                              468
                                                                          -------------------------           ----------------------
Total costs and expenses                                                                    87,420                           89,085
                                                                          -------------------------           ----------------------

Operating loss                                                                             (2,668)                          (7,285)
                                                                          -------------------------           ----------------------

Other income (expense):
   Interest expense                                                                        (5,395)                          (4,377)
   Interest income                                                                              79                               23
   Other related party expense, net                                                          (102)                            (102)
   Other, net                                                                                (121)                            1,222
                                                                          -------------------------           ----------------------
 Total other expense                                                                       (5,539)                          (3,234)
                                                                          -------------------------           ----------------------


Loss before income taxes                                                                   (8,207)                         (10,519)

Income taxes                                                                                   ---                              ---
                                                                          -------------------------           ----------------------

Net loss                                                               $                   (8,207)        $                (10,519)
                                                                          =========================           ======================

Net loss per common share:

Basic and diluted loss per share                                      $                     (0.19)       $                   (0.25)

Shares used to compute loss per share, basic and
diluted                                                                                     43,695                           42,764



                                   See accompanying notes to consolidated financial statements.
</TABLE>


                                       4

<PAGE>
<TABLE>
<CAPTION>
                                                    PHYAMERICA PHYSICIAN GROUP, INC.
                                           Consolidated Statements of Operations - Unaudited
                                                 (In thousands, except per share data)

                                                                                                Nine months ended
                                                                                                   September 30

                                                                                   2001                               2000
                                                                          -------------------------           ----------------------
                                                                                                                   (Restated)

<S>                                                                    <C>                                <C>
Operating revenue, net                                                 $                   251,282        $                 241,278

Costs and expenses:
   Physician and other provider services                                                   186,306                          184,688
   Medical support services                                                                 37,707                           34,079
   Selling, general and administrative                                                      36,175                           40,323
   Related party expense, net                                                                1,146                            1,287
                                                                          -------------------------           ----------------------
Total costs and expenses                                                                   261,334                          260,377
                                                                          -------------------------           ----------------------

Operating loss                                                                            (10,052)                         (19,099)
                                                                          -------------------------           ----------------------

Other income (expense):
   Interest expense                                                                       (15,996)                         (12,321)
   Interest income                                                                             314                               70
   Other related party expense, net                                                          (141)                            (304)
   Other, net                                                                                  243                            1,119
                                                                          -------------------------           ----------------------
 Total other expense                                                                      (15,580)                         (11,436)
                                                                          -------------------------           ----------------------


Loss before income taxes                                                                  (25,632)                         (30,535)

Income taxes                                                                                   ---                              ---
                                                                          -------------------------           ----------------------

Net loss before cumulative effect of change in accounting principle                       (25,632)                         (30,535)

Cumulative effect of change in accounting principle                                            ---                          (4,993)
                                                                          -------------------------           ----------------------
Net loss                                                               $                  (25,632)        $                (35,528)
                                                                          =========================           ======================
Net loss per common share:

Basic and diluted loss per share                                       $                     (.59)        $                  (0.71)
Cumulative effect of change in accounting principle                                             --                           (0.12)
                                                                          -------------------------           ----------------------
Net loss per share                                                     $                     (.59)        $                  (0.83)
                                                                          =========================           ======================
Shares used to compute loss per share, basic and diluted                                    43,576                           42,656



                                  See accompanying notes to consolidated financial statements.
</TABLE>

                                       5

<PAGE>
<TABLE>
<CAPTION>
                                                    PHYAMERICA PHYSICIAN GROUP, INC.
                                      Consolidated Condensed Statements of Cash Flows - Unaudited
                                                             (In thousands)

                                                                                                        Nine months Ended
                                                                                                          September 30,


                                                                                                      2001                     2000
                                                                                            ---------------          ---------------

<S>                                                                                       <C>                      <C>
Net cash used in operating activities                                                     $       (14,659)         $       (23,954)
                                                                                            ---------------          ---------------

Cash flows from investing activities:

     Purchases of property and equipment, net                                                        (647)                    (737)

     Acquisition of subsidiaries, net of cash acquired                                             (1,100)                       --
                                                                                            ---------------          ---------------
     Net cash used in investing activities                                                         (1,747)                    (737)
                                                                                            ---------------          ---------------

Cash flows from financing activities:
     Borrowings of long-term and short-term debts, net                                              19,394                   24,632
     Net proceeds from issuances of common stock                                                         7                       59
                                                                                            ---------------          ---------------
     Net cash provided by financing activities                                                      19,401                   24,691
                                                                                            ---------------          ---------------
     Net increase in cash and cash equivalents                                                       2,995                       --
Cash and cash equivalents at beginning of year                                                         ---                       --
                                                                                            ---------------          ---------------
Cash and cash equivalents at end of period                                                $          2,995         $            ---
                                                                                            ---------------          ---------------

Supplemental disclosures of cash flow information:

     Cash payments during the period for:

          Interest                                                                        $         15,997         $         12,731
          Income taxes                                                                                  --                      223

------------------------------------------------------------------------------------------------------------------------------------

                                                See accompanying notes to Consolidated Financial Statements.
</TABLE>

                                       6

<PAGE>

                        PHYAMERICA PHYSICIAN GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(1) Basis of Presentation

The accompanying consolidated financial statements of PhyAmerica Physician
Group, Inc. (the "Company") are unaudited and, in the opinion of management,
include all adjustments which are necessary for a fair presentation in
accordance with accounting principles generally accepted in the United States of
America. The unaudited consolidated financial statements should be read in
conjunction with the Company's audited consolidated financial statements and the
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000. Operating results for the interim periods presented are
not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 2001. The Company has made certain reclassifications to
financial information as of and for the three and nine months ended September
30, 2000. Such reclassifications have no impact on net loss or total
shareholders' deficit. See Note 5 regarding restatement of the statements of
operations for the three and nine months ended September 30, 2000.

(2) Comprehensive Income

Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income", establishes rules for the reporting and display of comprehensive income
or loss and its components. This Statement requires that unrealized gains or
losses on the Company's available-for-sale securities be included in other
comprehensive income. For the quarters ended September 30, 2001 and 2000,
comprehensive income is equal to the Company's net loss.

(3) Recent Accounting Pronouncements

In September 2000, the FASB issued Statement of Financial Accounting Standards
No. 140 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities ("A Replacement of FASB Statement 125") ("SFAS
140"). SFAS 140 provides the accounting and reporting guidance for transfers and
servicing of financial assets and extinguishments of liabilities. The
disclosures in SFAS 140 were effective for fiscal years ending after December
15, 2000. The adoption of SFAS 140 did not have a material impact on the
Company's financial condition or results from operations.

Effective January 1, 2001, the Company adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"). SFAS 133 requires entities to disclose information for
derivative financial instruments, and to recognize all derivatives as assets or
liabilities measured at fair value. The Company adopted this pronouncement and
it had no impact on its financial position or results of operations.

In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets."
Statement 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. Statement 141 also
specifies the criteria intangible assets acquired in a purchase method business
combination must meet to be recognized and reported apart from goodwill.
Statement 142 is effective for the Company beginning on January 1, 2002 and will
require that all goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least annually in
accordance with the provisions of Statement 142. Statement 142 will also require
that intangible assets with estimable useful lives be amortized over their
respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". In
connection with Statement 142's transitional goodwill impairment evaluation, the
Statement will require the Company to perform an assessment of whether there



                                       7

<PAGE>

is an indication that goodwill is impaired as of the date of adoption. Any
transitional impairment loss will be recognized as the cumulative effect of a
change in accounting principle in the Company's statement of earnings. Because
of the extensive effort needed to comply with adopting Statements 141 and 142,
it is not practicable to reasonably estimate the impact of adopting these
Statements on the Company's financial statements at the date of this report,
including whether it will be required to recognize any transitional impairment
losses as the cumulative effect of a change in accounting principle.

In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 143 (SFAS No. 143), "Accounting
for Asset Retirement Obligations", which addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement cost. This standard requires the
Company to record the fair value of an asset retirement obligation as a
liability in the period in which it incurs a legal obligation associated with
the retirement of tangible long-lived assets that result for the acquisition,
construction, development and or normal use of the assets. The Company also is
to record a corresponding increase to the carrying amount of the related
long-lived asset and to depreciate that cost over the life of the asset. The
liability is changed at the end of each period to reflect the passage of time
and changes in the estimated future cash flows underlying the initial fair value
measurement. This statement is effective for fiscal years beginning after June
15, 2002. At this time, the Company is assessing the impact of SFAS No. 143 on
its financial condition and results of operations.

In October 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 144 (SFAS No. 144), "Accounting
for the Impairment or Disposal of Long-Lived Assets", which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This standard provides guidance on differentiating between long-lived assets to
be held and used, long-lived assets to be disposed of other than by sale and
long-lived assets to be disposed of by sale. SFAS No. 144 supersedes FASB
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".
SFAS No. 144 also supersedes Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions". This statement is effective for fiscal years beginning
after December 15, 2001. At this time, the Company is assessing the impact of
SFAS No. 144 on its financial condition and results of operations.

(4) Segment Information

During the quarters ended September 30, 2001 and 2000, the Company had 4
reportable segments: Emergency Physician Management, Government Services,
Billing and Business Management Services and Divested Businesses. The Emergency
Physician Management Group contracts principally with hospitals to identify and
recruit physicians as candidates for admission to a client's medical staff and
to coordinate the on-going scheduling of independent contractor physicians who
provide clinical coverage in designated areas. While the Company also provides
Obstetrics, Gynecology and Pediatrics Emergency Physician Management, the
provision of contract management services to hospital emergency departments
represents the Company's principal hospital-based service. The Government
Services segment provides similar services to governmental agencies such as the
Department of Defense and state and local governments. The Billing and Business
Management Services segment provides support to independent contractor
physicians, independent practices and other health care practitioners. These
services are often provided as part of the Company's Emergency Physician
Management Group and are also marketed independently to unaffiliated providers.
Divested Businesses consist of 2 health plans, which were divested during 1998,
and the wrap up of businesses divested prior to 1998. The Company also has a
Corporate Group included in "All Other" that provides administrative services to
the operating segments. "All Other" also includes amounts related to
eliminations. As part of its evaluation of the carrying value of goodwill,
management recorded an adjustment to reduce goodwill by approximately $250,000
during the quarter ended June 30, 2001, which was recorded in the Emergency
Physician Management Segment.


                                       8

<PAGE>
<TABLE>
<CAPTION>
                        Quarter ended September 30, 2001

------------------------------ ----------  --------  -------  --------  ----------  -------- --------
                               Emergency                                Total
                               Physician   Gov't              Divested  Reportable  All
(In Thousands)                 Management  Services  Billing  Segments  Segments    Other
                                                                                             Totals
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
<S>                               <C>        <C>      <C>       <C>        <C>          <C>   <C>
Revenue from external sources     $72,936    $5,660   $6,156    $-----     $84,752      $---  $84,752
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
Intersegment revenues                 ---       ---    6,950     -----       6,950   (6,950)      ---
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
Interest expense                    4,892       322      ---     -----       5,214       181    5,395
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
Depreciation and amortization       1,381         7      254     -----       1,642        44    1,686
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
Segment profit (loss)             (7,668)     (237)    2,183        12     (5,710)   (2,497)  (8,207)
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
Segment assets                     64,592     2,878    6,120     2,326      75,916     2,911   78,827
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
</TABLE>
<TABLE>
<CAPTION>

                   Quarter ended September 30, 2000 (Restated)

------------------------------ ----------  --------  -------  --------  ----------  -------- --------
                               Emergency                                Total
                               Physician   Gov't              Divested  Reportable  All
(In Thousands)                 Management  Services  Billing  Segments  Segments    Other
                                                                                             Totals
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
<S>                                <C>        <C>      <C>        <C>       <C>         <C>   <C>
Revenue from external sources      70,391     6,230    5,191      $---      81,812      (12)  $81,800
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
Intersegment revenues                 ---       ---    6,303       ---       6,303   (6,303)      ---
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
Interest expense                    2,695     1,900       32       ---       4,627     (250)    4,377
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
Depreciation and amortization       1,371         8      322        --       1,701        42    1,743
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
Segment profit (loss)             (5,475)     (839)      297         5     (6,012)   (4,507) (10,519)
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
Segment assets                     65,140     4,318    6,128     2,438      78,024     1,226   79,250
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
</TABLE>
<TABLE>
<CAPTION>

                      Nine months ended September 30, 2001

------------------------------ ----------  --------  -------  --------  ----------  -------- --------
                               Emergency                                Total
                               Physician   Gov't              Divested  Reportable  All
(In Thousands)                 Management  Services  Billing  Segments  Segments    Other
                                                                                             Totals
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
<S>                               <C>        <C>      <C>         <C>      <C>          <C>   <C>
Revenue from external sources     216,309    16,609   18,364      $---     251,282      $---  251,282
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
Intersegment revenues               -----       ---   21,724       ---      21,724  (21,724)      ---
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
Interest expense                   14,527       853      ---       ---      15,380       616   15,996
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
Depreciation and amortization       4,098        19      765       ---       4,882      (29)    4,853
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
Segment profit (loss)            (25,332)     (693)    6,713      (31)    (19,343)   (6,289) (25,632)
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
Segment assets                     64,592     2,878    6,120     2,326      75,916     2,911   78,827
------------------------------ ----------  --------  -------  --------  ----------  -------- --------
</TABLE>

                                       9

<PAGE>
<TABLE>
<CAPTION>
                 Nine months ended September 30, 2000 (Restated)

----------------------------- ---------- -------- -------- ---------- ---------- ---------- ----------
                              Emergency                               Total
                              Physician  Gov't              Divested  Reportable All
(In Thousands)                Management Services  Billing  Segments  Segments   Other
                                                                                            Totals
----------------------------- ---------- --------- -------- --------- ---------- ---------- ----------
<S>                             <C>        <C>      <C>         <C>     <C>           <C>    <C>
Revenue from external sources   210,660    15,358   15,295      $---    241,313       (35)   $241,278
----------------------------- ---------- --------- -------- --------- ---------- ---------- ----------
Intersegment revenues               ---       ---   19,784       ---     19,784   (19,784)        ---
----------------------------- ---------- --------- -------- --------- ---------- ---------- ----------
Interest expense                  8,564     3,852      189       ---     12,605      (284)     12,321
----------------------------- ---------- --------- -------- --------- ---------- ---------- ----------
Depreciation and amortization     4,115        21      729         1      4,866        102      4,968
----------------------------- ---------- --------- -------- --------- ---------- ---------- ----------
Segment profit (loss)          (21,486)   (1,952)    3,403         5   (20,030)   (10,505)   (30,535)
----------------------------- ---------- --------- -------- --------- ---------- ---------- ----------
Segment assets                   65,140     4,318    6,128     2,438     78,024      1,226     79,250
----------------------------- ---------- --------- -------- --------- ---------- ---------- ----------
</TABLE>

(5)   Revenue Recognition

      On December 3, 1999, the Securities and Exchange Commission ("the
Commission") issued Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements ("SAB 101"). SAB 101 summarizes certain views of the
Commission in applying accounting principles generally accepted in the United
States of America to revenue recognition in financial statements. SAB 101
provides interpretative guidance on unbilled accounts receivable and related
revenue recognition within the Company's industry. The Commission's guidance
required the accounting change to be adopted by the Company in the quarter ended
December 31, 2000 and reflected as a cumulative effect of a change in accounting
principle as of January 1, 2000. Therefore, consistent with the Commission's
guidance and changing industry practice for services provided under a percentage
of collections basis within its billing segment, the Company began recognizing
revenue at the time of collection on January 1, 2000. The impact of this change
in accounting principle was to increase the Company's net loss for 2000 by
approximately $5.0 million. The Statements of Operations for the quarter ended
September 30, 2000 have been restated to reflect the adoption of SAB 101. The
impact of restating the Statements of Operations for the quarter ended September
30, 2000 was to increase the Company's net loss for that quarter by
approximately $0.1 million. There is no effect on cash flow resulting from this
change. The impact for the nine month period ended September 30, 2000 was less
than $0.1 million.


(6)   Shareholders' Equity (Deficit)

      In the first quarter of 2001, common stock and additional paid-in capital
increased $7,000 and $1.2 million respectively, due to the exercise of warrants.
In the second quarter of 2001, the remaining unexercised warrants expired. The
$0.4 million value ascribed to them at issuance was moved to Additional Paid-In
Capital.


(7)   Litigation

      On March 23, 2000, two (2) stockholders filed a lawsuit styled Bosco, et
al v. Scott, et al in the U.S. District Court for the District of Delaware,
individually and on behalf of all those similarly situated, and derivatively as
stockholders of the Company, alleging various class claims and derivative claims
for relief, against the directors of the Company, the Company's senior lender
and its Chairman, and against the Company itself. The case was transferred to
the U.S. District Court for the Middle District of North Carolina on August 31,
2000. On August 21, 2001, following a mediation of this matter, the parties
reached a settlement of all matters in dispute in exchange for the payment of
$4.65 million. The settlement must be approved by the court. Following notice to
the class members and subject to final approval by the court, the settlement
funds will be distributed. The Company had previously recorded an accrual for
its uninsured portion of this claim, so this settlement did not have a material
impact on the Company's results of operations for the quarter ended September
30, 2001.

                                       10

<PAGE>

(8) Offer to Acquire Outstanding Common Stock

The Company's Chairman, Chief Executive Officer and majority shareholder, Steven
M. Scott, M.D., made a proposal dated November 6, 2000 to acquire, through a
cash out merger transaction, the approximately forty-three percent (43%) of the
Company's outstanding Common Stock that is not owned or controlled by him or his
family members or affiliates. The consummation of the offer would mean that
PhyAmerica would become a privately held company. The proposed offer price is
equivalent to $0.15 per share in cash or an aggregate price of approximately
$2.76 million.

      In response to the offer by Dr. Scott, the Company's Board of Directors
appointed three (3) outside Directors to a Special Committee to review and
evaluate the terms of the proposal and make a full recommendation to the Board.
The initial members of the Special Committee were Mr. Frederick Jinks, Mr. Ernie
Bacon and Mr. Charles Potter. All were current members of the Board at the time
of their appointment. The Special Committee engaged independent legal counsel
and independent financial advisors to advise it in connection with its review
and evaluation of the proposal. Subsequent to December 31, 2000, Mr. Jinks and
Mr. Potter resigned from the Board of Directors and the Special Committee.

      Based on the report of the independent financial advisor, the Special
Committee issued their report recommending that the Board of Directors accept
the offer of Dr. Scott. The Board of Directors, on the recommendation of the
Special Committee, approved the merger and the related merger agreement on
October 15, 2001. The consummation of this proposed transaction is subject to,
among other things, the approval of the merger agreement by the holders of a
majority of outstanding shares of the Company's common stock at a special
meeting of the shareholders.

Item 2

                        PHYAMERICA PHYSICIAN GROUP, INC.
                     Management's Discussion And Analysis Of
                  Financial Condition And Results Of Operations

RESULTS OF OPERATIONS

THIRD QUARTER ENDED SEPTEMBER 30, 2001 COMPARED TO THE THIRD QUARTER ENDED
SEPTEMBER 30, 2000


Operating Revenue, Net

            Net operating revenue in the third quarter of 2001 was $84.8
million, an increase of $3.0 million, or 3.7%, from operating revenues of $81.8
million as compared to the third quarter of 2000.

            The increase in the revenue of the core businesses was due to an
increase in the number of visits processed by the billing company, an overall
increase in collections for each occasion of service rendered in the Emergency
Physician Management Business and increased net revenue in the Government
Services Group. As compared to the same period a year ago, Emergency Physician
Management experienced an increase of approximately $1.9 million or 2.7% due
primarily to an increase in the collection rate used in the revenue accrual. The
increase in the collection rate resulted from a regular re-evaluation of the
historical collection rates for the active contracts. Government Services
increased approximately $1.0 million or 21%. Billing and Business Management net
revenue was essentially flat as compared to the same period in 2000.


                                       11

<PAGE>

Physician and Other Provider Services Costs and Expenses

            Physician and other provider services costs and expenses consist
primarily of fees paid to physicians and other health care providers. Physician
and other provider services costs and expenses decreased by approximately $1.0
million, or 1.6%, to approximately $61.9 million in the third quarter of 2001
from approximately $62.9 million in the third quarter of 2000. This was due to
decreased expenses related to physician coverage during this quarter in the
Emergency Physician Management Business.

Medical Support Services Costs and Expenses

            Medical support services costs and expenses include all other direct
costs and expenses of practice management activities, as well as billing,
collection and Physician Business Management Services costs and expenses.
Medical support services costs and expenses increased by $0.3 million, or 2.8%,
to $12.3 million in the third quarter of 2001 from $12.0 million in the third
quarter of 2000. Expenses in this category remained level with those of this
period last year.

Selling, General and Administrative Costs and Expenses

            Selling, general and administrative costs and expenses decreased by
$1.4 million or 10.5%, to $12.3 million in the third quarter of 2001 from $13.7
million in the third quarter of 2000. The decline in this category was due to
decreases in a broad spectrum of expenses.

Related Party Income (Expense), Net

            Related party expense, net increased by $0.5 million to $1.0 million
in the third quarter of 2001 from $0.5 of expense in the third quarter of 2000.
This increase is primarily due to nonrecurring items in 2001.

Other Income (Expense)

              Other income (expense) increased $2.3 million to $5.5 million as
compared to the third quarter of 2000. The change was due primarily to a $1.0
million increase in interest expense and the receipt of a settlement of
litigation in the third quarter of 2000 that did not recur in 2001. The
increased interest expense, was due to a higher level of outstanding amounts of
debt incurred since the third quarter of 2000. The costs associated with the
sale of eligible accounts receivable in the third quarter of 2001 and 2000 have
been included in selling, general and administrative expenses.

Benefit (provision) for income taxes.

            There was no benefit (provision) for income taxes for the third
quarter of 2001 and 2000. This is due to continued net operating losses.

Net Loss

            Primarily as a result of the foregoing, the Company reported a net
loss of approximately $8.2 million in the third quarter of 2001 compared to a
net loss of $10.5 million in the third quarter of 2000.


                                       12

<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2000



Operating Revenue, Net

            Net operating revenue for the nine months ended September 30, 2001
was $251.3 million, an increase of $10.0 million, or 4.1 %, from operating
revenues of $241.3 million as compared to the nine months ended September 2000.

            The increase in the revenue of the core businesses was due to an
overall increase in visits by location, an overall increase in collections for
each occasion of service rendered in the Emergency Physician Management Business
and increased net revenue in both the Government Services Group and in Billing
and Business Management Services. As compared to the same period a year ago,
Emergency Physician Management experienced an increase of approximately $5.6
million or 2.7% due to an increase in the historical collection rate as
previously noted as well as the addition of new business. Government Services
increased approximately $1.3 million or 8.1% and Billing and Business Management
increased by approximately $3.1 million or 20.0%.

Physician and Other Provider Services Costs and Expenses

            Physician and other provider services costs and expenses consist
primarily of fees paid to physicians and other health care providers. Physician
and other provider services costs and expenses increased by approximately $1.6
million, or 0.9% to approximately $186.3 million for the nine months ended
September 30, 2001 from approximately $184.7 million for the nine months ended
September 30, 2000. This was due to increased expenses related to other
healthcare provider coverage earlier in the year in the Emergency Physician
Management Business and increased expenses in the Government Services Group that
resulted in the generation of increased revenue.

Medical Support Services Costs and Expenses

            Medical support services costs and expenses include all other direct
costs and expenses of practice management activities, as well as billing,
collection and physician business management services costs and expenses.
Medical support services costs and expenses increased by $3.6 million, or 10.6%,
to $37.7 million for the nine months ended September 30, 2001 from $34.1 million
for the nine months ended September 30, 2000. Medical malpractice expenses
contributed to the year to year increase.

Selling, General and Administrative Costs and Expenses

            Selling, general and administrative costs and expenses decreased by
$4.1 million or 10.2%, to $36.2 million for the nine months ended September 30,
2001 from $40.3 million for the nine months ended September 30, 2000. This is
mainly due to decreases in Selling, General and Administrative expenses in all
segments as well as a decrease in legal and consulting fees for the nine months
ended September 30, 2001 as compared to the nine months ended September 30 of
2000.

Related Party Income (Expense), Net

            Related party expense, was flat at $1.1 million, for the nine months
ended September 30, 2001 when compared to $1.3 million for the nine months ended
September 30, 2000.


                                       13

<PAGE>

Other Income  (Expense)

            Other income (expense) increased by approximately $4.1 million to
$15.6 million for the nine months ended September 30, 2001 as compared to the
same period in 2000 that did not recur in 2001. The change was due primarily to
a $3.7 million increase in interest expense, and receipt of a settlement of
litigation in the third quarter of 2000. The increased interest expense was due
to a higher level of outstanding debt incurred since the end of the third
quarter in 2000.

Benefit (provision) for income taxes.

            There was no benefit (provision) for income taxes for the third
quarter of 2001 and 2000. This is due to continued net operating losses.

Net Loss

            Primarily as a result of the foregoing, the Company reported a net
loss of approximately $25.6 million in the first nine months of 2001 compared to
a net loss of $35.5 million in the first nine months of 2000. The net loss in
2000 included $5.0 million related to the cumulative effect of a change in an
accounting principle, as further discussed in note 5.

LIQUIDITY AND CAPITAL RESOURCES

            The Company's primary financing source consists of 3 accounts
receivable sale programs with affiliates of National Century Financial
Enterprises, Inc. ("NCFE"). Under these programs, NCFE purchases qualified
receivables generated by the Company or acquired by the Company from independent
contractor physicians. The proceeds from these sales are used to fund the
Company's working capital needs. One program purchases receivables generated by
the hospital contracts of the Company other than those acquired in the Sterling
acquisition (the "Coastal Program"), one program purchases receivables generated
by the hospital contracts acquired in the Sterling acquisition (the "Sterling
Program"), and a third program purchases receivables generated in the Government
Services Business (the "Government Program"). The Emergency Physician Management
business and the Government Services business have not been able to generate
sufficient receivables to sell to the programs to finance the ongoing working
capital needs of the Company. NCFE has supported the Company by funding the
purchase of receivables billed by the Company and those to be billed in the
future by the Company. As of September 30, 2001, the Company received $74.3
million related to billed receivables (which is reflected as a reduction of
trade accounts receivable, net) and approximately $186.5 million related to
future receivables. Financing related to the purchase of future receivables in
the Coastal Program and Sterling Program totaling $151.2 million is reflected as
long-term debt in the accompanying financial statements. During the three months
ended September 30, 2001, the financing related to the purchase of future
receivables in the Government Program totaling $35.3 million was reclassified
from long-term debt to current maturities of long-term debt since the expiration
date of the program became less than 12 months into the future. The Company
expects that the Government Program will be extended to 2003. The Sterling
Program provides for the purchase of up to $95 million of receivables and
terminates on June 30, 2003. The Government Program provides for the purchase of
up to $50 million of receivables and terminates on June 30, 2002. New Sale and
Subservicing Agreements for the Coastal Program were signed effective March 30,
2001. The new agreements increase the funding availability to $150 million, fix
the interest rate at 10.5% and extend the termination date to June 30, 2004.
Including the new agreements, the purchase commitment has been increased to $295
million. Of the total purchase commitments of $295 million on these facilities,
there is approximately $34 million of remaining availability for purchases as of
September 30, 2001. As of September 30, 2001, NCFE held approximately $52
million in reserves ($15.2 million of which relates to billed receivables and
$36.8 million of which relates to debt). These reserves are account balances
maintained by a Trustee, to allow for repurchase of receivables, which may
default or be underpaid by the insurance carriers.


                                       14

<PAGE>

Pursuant to the Sale Agreement, the Company pays a program fee ranging from
10.5% to 12.50% per annum on the outstanding amount of uncollected purchased
current and rights to future receivables.

            Under a separate loan and security agreement, an affiliate of NCFE
has agreed to provide the Company with a revolving line of credit of up to $20
million through July 31, 2002. Interest on outstanding amounts under this line
of credit is payable monthly at prime plus 3%. The line of credit is secured by
substantially all of the Company's assets, including pledges of the Common stock
of each of its subsidiaries. There is no outstanding balance as of September 30,
2001.

            The Company has met its cash requirements during the periods covered
by the accompanying consolidated financial statements through the sale of
certain existing and future accounts receivable, as more fully discussed below.
The Company's principal uses of cash have been to support operating activities.
Net cash used in operating activities decreased by $9.3 million, or 38.8%, for
the nine months ended September 30, 2001, to $14.7 million as compared to $24.0
million for the nine months ended September 30, 2000. The Company's net use of
cash to support operating activities resulted primarily from operating losses,
including medical costs of providers, administrative expenses, legal and
professional fees and information technology initiatives. Net cash used in
investing activities was $1.7 million for the nine months ended September 30,
2001. Net cash provided by financing activities decreased by $5.3 million, or
21.4%, to $19.4 million for the nine months ended September 30, 2001, from $24.7
million for the nine months ended September 30, 2000. During the nine months
ended September 30, 2001, the Company had net borrowings of $19.4 million as
compared to $24.6 million for the nine months ended September 30, 2000.

            The Company expects to satisfy its anticipated demands and
commitments for cash in the next six months from the amounts available under the
various agreements with NCFE discussed above, as well as a reduction in cash
used in operations. As part of its ongoing effort to improve cash flow, the
Company undertook a comprehensive review of all hospital contracts and operating
units. Underperforming contracts and operations were renegotiated or terminated.
The Company also remains committed to increasing the implementation of the
Practice Partners Program(C) for compensating the independent contract
physicians. Practice Partners links the compensation of the participants to the
profitability of the hospital contract. The Company implemented new budgeting
and financial control systems to better monitor performance by its various
departments. New business development continues to be a focal point of the
organization. The primary objectives of these programs are to improve cash flow
and slow the growth of our dependence on outside cash sources. If the Company is
unable to achieve these objectives, it will likely experience a material
decrease in liquidity which would cause the Company to increase its reliance on
financing under the revolving line of credit provided by an affiliate of NCFE.
Until the Company significantly improves cash flow, it will be dependent upon
the continued weekly purchases of eligible and rights to future accounts
receivable by NCFE and the line of credit provided by an affiliate of NCFE in
order to meet its obligations.

            For the foreseeable future, to continue as a going concern, the
Company will depend upon NCFE to fund its working capital needs either by
purchases of current and future accounts receivable or through the line of
credit. The Company's accounts receivables sales programs with NCFE have been
extended to June 30, 2002 and beyond. Management believes that NCFE will be able
to fulfill the Company's needs. The consolidated financial statements do not
include any adjustments to the financial statements that might be necessary
should NCFE not provide the necessary working capital or should the Company be
unable to continue as a going concern.

OTHER TRENDS AND UNCERTAINIES

            The healthcare industry has seen numerous consolidations and
combinations led by a number of major healthcare companies that continue to
experience financial difficulties. Many of those companies have embarked on
divestiture programs to eliminate unprofitable operations. The Company divested
its non-core businesses during 1997 and 1998, expanded its core business through
the acquisition of Sterling in 1999 and in 2000 focused its efforts on improving
operations, increasing revenue and decreasing costs. While there have been
improvements in operations within the Company's core business, the Company
continues to incur significant losses.


                                       15

<PAGE>

            Although the Company has continued its marketing efforts, the number
of new contracts obtained has been lower than that historically experienced by
the Company. Management attributes the reduced rate of new business development
to several factors, including increased competition from local and regional
groups, increased payment and reimbursement pressures on hospitals,
consolidation and closures involving client hospitals and the Company's
financial condition. Since the beginning of 2001, the Company has had a net
decrease of ten contracts. While the Company believes it has an excellent record
in providing services, it believes that its financial condition has been an
impediment to the awarding of new contracts that it would otherwise have
received. Hospital administrators have expressed concerns about awarding and
renewing contracts both as to operational ability and financial viability of
companies operating in the Company's industry. The Company believes its success
is dependent upon retaining and renewing existing contracts, terminating poorly
performing contracts and obtaining new hospital contracts.

            The Emergency Physician Management Business is under pressure
industry-wide as government reimbursement programs and private insurance
programs seek to contain and reduce medical costs at the same time that the
costs of delivering those services continue to rise. In late March 1997, the
Health Care Financing Administration ("HCFA") indicated that it would no longer
allow companies to obtain group provider numbers to bill Medicare claims for
services rendered by their independent contractor physicians. The Company took
steps to individually enroll the independent contractor physicians and to modify
the contractual arrangement with independent contractor physicians in order to
comply with HCFA's interpretation of the reimbursement regulations. Efforts to
individually enroll the independent contractor physicians depend upon their
cooperation.

            Prior to July 1999, Sterling Healthcare Group, Inc. was also subject
to these enrollment requirements, but had not completed the individual
enrollment of its independent contractor physicians. Effective with the
Company's acquisition of certain of the contracts and assets used in the
operations of Sterling Healthcare Group, Inc. ("Sterling Acquisition"), the US
Bankruptcy Court issued orders that allowed the Company additional time to
individually enroll the physicians, to continue to bill and collect using group
provider numbers and to enter into new contractual arrangements with the former
Sterling independent contractor physicians in order to comply with HCFA's
interpretation of the reimbursement regulations. The Company continues to make
progress in the re-enrollment process for the former Sterling independent
contractors in order to bring their enrollment into compliance with HCFA's
requirements. Although the Court Orders have provided the Company some
assurances that the independent contractors will be reimbursed for their
services, some delays in reimbursement may occur and the Company may incur
additional costs to complete this process; however, the full financial impact is
not known at this time.

            In certain states, the interpretation of laws prohibiting a
corporation from providing medical care may apply to the Company's business.
This affects the ability to contract directly with a hospital to provide
services. In those states, the Company forms a professional corporation or
professional association ("PC/PA") to contract with the hospital. Generally, the
PC/PA has a sole shareholder who is a physician and, in most cases, is a Company
shareholder, employee or officer. The PC/PA, as well as the sole shareholder of
the PC/PA, enters into a share transfer agreement with the Company that allows
the Company, among other things, to change the sole shareholder at the Company's
will with no more than a nominal cost and no significant adverse impact on the
Company or the PC/PA. The PC/PA also contracts with the Company via a services
agreement for various management services such as physician scheduling, making
disbursements to physicians and vendors, or providing accounting and tax
services, etc. In exchange for these services, the PC/PA assigns all accounts
receivable to the Company. The Company has evaluated these standardized
agreements including their provisions as to the 10-year term of the contractual
relationship and termination provisions. Based on these provisions, as well as
the Company's control established through the share transfer agreements, and the
Company's ability to reset the financial terms of the services agreements at
will, the Company believes that these standardized agreements meet the criteria
contained in Emerging Issues Task Force Consensus 97-2 "Application of APB
Opinion No. 16, Business Combinations, and FASB Statement No. 94, Consolidation
of All Majority-Owned Subsidiaries, to Physician Practice Management Entities
and Certain Other Entities with Contractual Arrangements" that require
consolidation.

            Successful competition in the industry will increasingly require
better information systems to rapidly provide more data and analysis related to
the practice of emergency medicine. The Company continues to evaluate
statistical analysis software, scanning technology and expanded electronic
claims submission and remittance processing to reduce use of paper charts and
claims and to speed up the claims reimbursement process. Increased


                                       16

<PAGE>

use of information technology may result in increased costs as the Company
continues to evaluate and implement technology products available in the market.

            The Company has attempted to stabilize its labor force, limit the
use of temporary personnel and non-physician independent contractors and
minimize professional fees. Sterling's headquarters office in Miami, FL was
closed in January 2000 and functions were transferred to the Corporate Office in
Durham, NC. During 2000 and during the first nine months of 2001, some regional
offices were closed, consolidated or reduced in size. Various administrative and
support functions historically provided by the Corporate Office in Durham, NC
have been significantly reduced, eliminated completely or redeployed to the
operating companies requiring those functions.

            Developments in the healthcare industry are also expected to
continue to impact the Company's financial performance and operating strategy.
These developments include trends of medical expenses in HMOs and other
businesses where the risk of higher medical costs is assumed, as well as
changing levels of utilization in hospital-based and clinic operations. The
Company may experience a reduction in visits as a result of utilization policies
of managed care plans. Additionally, the Company will continue to be subject to
changes in premiums and levels of reimbursement from payers including HMOs,
insurance companies, Medicare and Medicaid.

            Because the Company bills for a large number of emergency medicine
visits, it will always be subject to changes in premiums and levels of
reimbursement from payers including HMOs, insurance companies, Medicare and
Medicaid. Efforts by Medicare and Medicaid to reduce costs, including costs
incurred due to inaccurate or fraudulent billing practices, continue to be an
area of exposure to all organizations that render medical services reimbursed
under these programs. The Company maintains compliance programs and procedures
in order to help discover and address any billing practices that may not comply
with Medicare regulations. However, the Company may undergo audits similar to
those that have been initiated against other healthcare providers and billing
companies. While no audits have been initiated against the Company, there can be
no assurance that the Company's billing procedures, if subjected to such an
audit, would be found to comply with all applicable regulatory requirements.


Item 3


Quantitative and Qualitative Disclosures About Market Risk.

The table below provides quantitative disclosure information about the Company's
market risk sensitive instruments as of September 30, 2001 and December 31,
2000. The market risk sensitive instruments are categorized as instruments
entered into for other than trading purposes. The Company's primary market risk
exposure is associated with debt obligations arising from 3 accounts receivable
sale programs with affiliates of NCFE. These debt obligations are maintained at
fixed interest rates. The details on how these programs are managed are
described in the preceding section on Liquidity and Capital Resources. The
information is presented in U.S. dollar equivalents, which is the Company's
reporting currency.

<TABLE>
<CAPTION>

                                                                                     Liabilities
                                                             ---------------------------------------------------------------------
                                                             September 30, 2001                   December 31, 2000
                                                             ---------------------------------------------------------------------
        <S>                                                     <C>                                  <C>
      Short-term Debt                                        $45,156                              ---

      Long-term Debt

        Fixed Rate                                           $151,318                             $175,352

      Weighted Average Interest Rate                         11.00%                               11.29%

</TABLE>


                                       17

<PAGE>



     Forward-looking Information or Statements: Except for statements of
historical fact, statements made herein are forward-looking in nature and are
inherently subject to uncertainties. The actual results of the Company may
differ materially from those reflected in the forward-looking statements based
on a number of important risk factors, including, but not limited to: the level
and timing of improvements in the operations of the Company's businesses; the
possibility that the Company may not be able to improve operations as planned;
the inability to obtain continued and/or additional necessary working capital
financing as needed; and other important factors discussed above under "Other
Trends and Uncertainties" and disclosed from time to time in the Company's Form
10-K, Form 10-Q's and other periodic reports filed with the Securities and
Exchange Commission.



                                       18

<PAGE>

SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report amendment has been signed by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
<S>                                                            <C>                                             <C>

PHYAMERICA PHYSICIAN GROUP, INC.
--------------------------------
     (Registrant)

Name                                                                  Title                                     Date
------------------------------------------------------------------------------------------------------------------------------------


/S/ Steven M. Scott, M.D.
---------------------------------------------------
---------------------------------------------------
 Steven M. Scott, M.D.                              Chairman of the Board of Directors                   November 30, 2001
                                                    President and Chief Executive Officer


/S/ Stanley K. Haines

---------------------------------------------------
---------------------------------------------------
 Stanley K. Haines                                  Executive Vice President,                            November 30, 2001
                                                    Chief Financial Officer
</TABLE>


                                       19