38

                          UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                      WASHINGTON, DC  20549

                            Form 10-Q

  {X}    Quarterly Report Pursuant to Section 13 or 15(d) of the
                 Securities Exchange Act of 1934
                                
        For the quarterly period ended SEPTEMBER 30, 1998
                               OR
  { }  Transition Report Pursuant to Section 13 or 15(d) of the
                 Securities Exchange Act of 1934
                                
      For the transition period from           to _________
                                
                Commission File Number 001-13460

                  COASTAL 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  12  months
(or  for such shorter period that the registrant was required  to
file  such  reports),  and (2) has been subject  to  such  filing
requirements for the past 90 days.
                                
                     {X} Yes          { } No
                                
 As of October 31, 1998 there were outstanding 37,790,345 shares
           of common stock, par value $.01 per share.
                                
                COASTAL  PHYSICIAN  GROUP,  INC.
                              INDEX
                                
                                
                                
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
          Consolidated Balance Sheets at December
           31, 1997 and September 30, 1998 (Unaudited)
        Unaudited Consolidated Statements of
           Operations
        Unaudited Consolidated Condensed
           Statements of Cash Flows
        Notes to Consolidated Financial Statements
           (Unaudited)
Item 2.  Management's Discussion and Analysis of
           Financial Condition and Results of Operations

PART II - OTHER INFORMATION

Item 4. - Matters Voted Upon by Shareholders
Item 5. - Other Information
Item 6. - Exhibits and Reports on Form 8-K

SIGNATURES

                 COASTAL PHYSICIAN GROUP, INC.
                  Consolidated Balance Sheets
             (In thousands, except per share data)

                                          September    December
                                             30,         31,
                                            1998         1997
                 Assets                   (unaudite   
                                             d)
Current assets:                                       
 Cash and cash equivalents                     7,453        8,921
 Marketable securities                         2,028        5,735
  Trade accounts receivable, net             16,925       23,612
  Reserves held by NCFE                       6,953        6,396
 Accounts receivable, other                    5,453       12,684
  Receivables from related party               6,169        9,405
  Prepaid expenses and other current           6,988        7,923
assets
      Total current assets                    51,969       74,676
Property and equipment, at cost, less                            
    accumulated depreciation                  8,879       10,342
Excess of cost over fair value of net                            
      assets acquired, net                    2,314        2,450
Other assets                                   8,230        8,628
      Total assets                            71,392       96,096
                                                                
                                                                
  Liabilities and Shareholders' Equity                          
               (Deficit)
Current liabilities:                                             
 Current maturities and other short-term                         
      borrowings                             16,793        2,529
 Accounts payable                             19,107       31,364
  Income taxes payable                         1,147        1,359
 Accrued physicians fees and medical          18,261       31,431
costs
 Accrued expenses                             10,659       16,142
     Total current liabilities               65,967       82,825
Long-term debt, excluding current             74,695       74,698
maturities
      Total liabilities                      140,662      157,523
Deferred credit on business transferred                          
net of
  note receivable                              2,794          ---
Shareholders' deficit:                                           
  Preferred stock $.01 par value; shares                         
      authorized 10,000; issued and                             
 outstanding                                      4             
      445 and 0, respectively
     Common stock $.01 par value; shares                        
                              authorized                        
      100,000; shares issued and                377          375
 outstanding
      37,700 and 37,493, respectively
 Additional paid-in capital                  162,811      160,374
Common stock warrants                         1,582        1,582
 Retained earnings (accumulated deficit)   (237,065)    (223,912)
                                                                 
 Accumulated comprehensive income               227          154
      Total shareholders' deficit           (72,064)     (61,427)
     Total liabilities and shareholders'                         
      deficit                                71,392       96,096

  See accompanying notes to consolidated financial statements.


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

                                           Three months ended
                                              September 30,
                                           1998          1997
                                                      
Operating revenue, net                        79,392        99,595
                                                                  
Costs and expenses:                                               
                                                                  
 Physician and other provider services        63,359        84,903
 Medical support services                      8,520         8,894
 Selling, general and administrative           7,860        19,392
      Total costs and expenses                79,739       113,189
                                                                  
Operating loss                                 (347)      (13,594)
                                                                  
Other income (expense):                                           
 Interest expense                            (2,708)       (2,837)
 Interest income                                 618            83
 Other, net                                      (8)         (621)
      Total other expense                    (2,098)       (3,375)
                                                                  
Loss before income taxes                     (2,445)      (16,969)
                                                                  
Benefit for income taxes                         ---       (1,400)
                                                                  
Net loss                                     (2,445)      (15,569)
                                                                  
Basic and diluted loss per share              (0.06)        (0.64)
                                                                  
Weighted average number of shares                                 
 outstanding                                 37,700        24,415

  See accompanying notes to consolidated financial statements.

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

                                            Nine months ended
                                              September 30,
                                           1998          1997
                                                      
Operating revenue, net                       245,961       335,805
                                                                  
Costs and expenses:                                               
                                                                  
 Physician and other provider services       196,994       267,824
 Medical support services                     24,892        33,048
 Selling, general and administrative          30,549        72,842
      Total costs and expenses               252,435       373,714
                                                                  
Operating loss                               (6,474)      (37,909)
                                                                  
Other income (expense):                                           
 Interest expense                            (7,662)      (12,591)
 Interest income                                 854           545
 Other, net                                      129         (207)
      Total other expense                    (6,679)      (12,253)
                                                                  
Loss before income taxes                    (13,153)      (50,162)
                                                                  
Benefit for income taxes                         ---       (1,400)
                                                                  
Net loss                                    (13,153)      (48,762)
                                                                  
Basic and diluted loss per share              (0.35)        (2.01)
                                                                  
Weighted average number of shares                                 
 outstanding                                 37,637        24,311

  See accompanying notes to consolidated financial statements.




                 COASTAL PHYSICIAN GROUP, INC.
   Unaudited Consolidated Condensed Statements of Cash Flows
                         (In thousands)

                                            Nine months ended
                                              September 30,
                                           1998          1997
                                                                  
Net cash provided by (used in)                                    
operating activities                       (12,154)       (2,862)
                                                                  
Cash flows from investing activities:                             
Sales of marketable securities and                                 
investments, net                                930         (816)
Sales (purchases) of property and                                   
equipment, net                                (991)           456
 Divestiture of subsidiaries, net of                              
    cash divested                           (5,957)         4,890
          Net cash provided by (used                              
in)                                         (6,018)         4,530
          investing activities
                                                                  
Cash flows from financing activities:                             
 Repayments of long-term debt                (4,037)      (92,086)
 Borrowings on long-term debt                 18,298        75,585
  Proceeds from issuance of preferred          2,065        10,000
stock
 Proceeds from issuance of common                378           311
stock
          Net cash provided by (used                              
in)                                          16,704       (6,190)
          financing activities
                                                                  
                  Net increase (decrease)in                                
cash and cash equivalents                   (1,468)       (4,522)
                                                                  
Cash and cash equivalents at beginning                            
    of period                                 8,921        10,239
Cash and cash equivalents at end of                               
    period                                    7,453         5,717
                                                                  
                                                                  
Supplemental disclosures of cash flow                             
      information:
      Cash payments (refunds) during                              
    the period for:
             Interest                          7,655         8,436
             Income taxes                        212       (4,401)
                                                                  
                                                                  

  See accompanying notes to consolidated financial statements.





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

(1)  Basis of Presentation

The  accompanying  consolidated financial statements  of  Coastal
Physician  Group,  Inc. and its subsidiaries  (the  "Company"  or
"Coastal")  are  unaudited  and, in the  opinion  of  management,
include   all  adjustments  which  are  necessary  for   a   fair
presentation.   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,  1997.  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, 1998.


(2) Comprehensive Income

The   Company  has  adopted  Statement  of  Financial  Accounting
Standards  No.  130, "Reporting Comprehensive Income."  Statement
130  establishes  new  rules for the  reporting  and  display  of
comprehensive  income and its components. The  adoption  of  this
Statement  requires  that  unrealized  gains  or  losses  on  the
Company's  available-for-sale securities  be  included  in  other
comprehensive  income,  which  in  prior  periods  were  reported
separately   in   shareholders'  equity.  Prior  year   financial
statements  have been reclassified to conform to the requirements
of Statement 130.

The  components of comprehensive income, net of related tax,  for
the  quarter and nine-month periods ended September 30, 1998  and
1997 are as follows:

In thousands of       Three months ended     Nine months ended
dollars                  September 30           September 30
                        1998       1997       1998        1997
Net loss               $(2,445)  $(15,569)   $(13,153)  $(48,762)
Unrealized gains                                                 
(losses)on securities        80         19          73       (55)
Comprehensive Income   $(2,525)  $(15,550)   $(13,080)  $(48,817)
                                                                 

The components of accumulated other comprehensive income, net  of
related tax, at September 30, 1998 and December 31, 1997  are  as
follows:

In thousands of dollars    September    December
                            30,1998     31, 1997
Unrealized gains                                 
(losses)on securities          $  73        $  18
Accumulated other                                
comprehensive income           $ 227        $ 154
                                                 



(3) Subsequent events

On  October  30, 1998, the Company completed the sale  of  Health
Enterprises, Inc., ("HEI") whose primary operating subsidiary  is
Healthplan  Southeast, Inc. ("HPSE"), to Steven  M.  Scott,  M.D.
(the  "Purchaser"). The Purchaser is the Chief Executive  Officer
and  the  largest  shareholder  of  the  Company.  The  Purchaser
acquired  all  of the outstanding stock of HEI in  a  transaction
which was effective as of October 1, 1998 for financial reporting
purposes.  The Net Proceeds of $15 million were used to  decrease
debt.

For  the  three months and nine months ended September  30,  1998
HPSE's  revenues and operating losses included in  the  Company's
consolidated results of operations were:

Amounts in         Three months     Nine months
thousands             ended            ended
                  September 30,    September 30,
                       1998            1998
                                         
Net revenues           $  27,235       $  82,815
Operating losses         (2,611)         (5,182)
                                                


In  March 1998, the Company received regulatory approval  of  the
sale  of  Doctor's Health Plan ("DHP") to DHP Holdings  LLC.,  an
entity  that  is  controlled by Dr. Scott.  Under  terms  of  the
agreement, the Company received cash of $993,000 and  a  note  in
the  amount of $5,000,000, bearing interest at the rate of twelve
percent  12%  per annum until paid. For accounting purposes,  the
Company  did not treat the transaction as a sale because  of  the
purchaser's affiliation with the Company. Further, for accounting
purposes,  the  Company did not consider the  transaction  to  be
completed until the note receivable was collected. The difference
between the sales proceeds of $5,993,000 and the Company's  basis
of negative $1,801,000 is shown on the Consolidated Balance Sheet
as  of  September 30, 1998 as a Deferred credit, net of the  note
receivable of $5,000,000.

On  October  30,  1998, the note receivable was  collected.   The
proceeds  were used to decrease debt.  In the fourth  quarter  of
1998,  shareholders'  equity  will  be  increased  by  $7,794,000
accounted for as a capital contribution by the purchaser.


(4) Recently Issued Accounting Pronouncements

Issue  97-2  of  the  Emerging Issues Task Force  (EITF)  of  the
Financial  Accounting Standards Board (FASB) titled  "Application
of FASB Statement No. 94 and APB Opinion 16 to Physician Practice
Management  Entities and Certain Other Entities with  Contractual
Management   Arrangements"  applies  to  contractual   management
relationships  between  a physician practice  management  company
(PPM)  and  physician practices where the  PPM  does  not  own  a
majority  of  the  outstanding voting  equity  of  the  physician
practice.   The  absence  of majority ownership  may  be  because
certain  states' laws prohibit that ownership or because the  PPM
has elected not to own those equity instruments.

The Company is continuing to evaluate the impact of Issue 97-2 on
the accounting for its contractual management relationships.


(5)  Reclassifications

Certain   reclassifications  have  been  made  to  the  unaudited
consolidated statements of operations for the three months  ended
September 30, 1997 and the nine months ended September  30,  1997
to  conform to the 1998 presentation for the same periods.   Such
reclassifications had no impact on the net loss for  the  periods
presented.
                  COASTAL PHYSICIAN GROUP, INC.
             Management's Discussion and Analysis Of
          Financial Condition and Results of Operations


INTRODUCTION

The  following discussion provides an assessment of the Company's
results  of  operations,  liquidity and  capital  resources,  and
trends  and uncertainties and should be read in conjunction  with
the  consolidated financial statements of the Company  and  notes
thereto included elsewhere in this document.

During 1998, the Company completed its divestiture strategy which
focuses  the  Company's future operations on  emergency  medicine
practice management, government services and medical billing  and
collections.   The  Company completed  the  divestitures  of  its
primary care clinics, certain non-hospital based contracting  and
management  operations  and its Health Maintenance  Organizations
("HMO").  The last HMO, Healthplan Southeast ("HPSE"),  was  sold
effective  October  1, 1998 and, therefore,  its  operations  are
included in the Company's consolidated results of operations  for
the three months and nine months ended September 30, 1998. In the
following  discussions, divestitures and divested entities  refer
to  the divestitures completed since the first quarter of 1997 as
follows:

                        Divested Entities

          Subsidiary            Type of operations     Date Sold
                                                    
Various clinics                 Primary care        May 1997
Better Health Plan, Inc.        Medicaid HMO        August 1997
Coastal Physician Services of                       
South Florida, Inc.             Clinic management   November 1997
Integrated Provider Networks,                       
Inc.                            Primary care        November 1997
Practice Solutions, Inc.        Clinic billing      November 1997
Sunlife OB/GYN Services of                          
Broward County, Inc.            Clinic management   November 1997
Doctors Health Plan, Inc.       HMO                 March 1998
                                                    




RESULTS OF OPERATIONS

Third  Quarter  Ended September 30, 1998 Compared  to  the  Third
Quarter Ended September 30, 1997.

Net   operating  revenue  ("operating  revenue")   decreased   by
$20,203,000,  or  20.3%,  for  the  third  quarter  of  1998   to
$79,392,000 from $99,595,000 in the third quarter of  1997.   The
decrease in operating revenue due to divestitures completed since
the  first quarter of 1997 for which prior periods' results  were
not restated was approximately $21,166,000, or 21.3%, of the 1997
third quarter revenues.

Operating  revenue not related to divested entities  or  to  HPSE
decreased approximately $1,990,000, or 3.7%, in the third quarter
of 1998 from the comparable revenue in the third quarter of 1997.
This  decline was primarily the result of a decline  in  revenues
from  the  emergency  services group of approximately  $2,699,000
primarily   due  to  contract  terminations.  This  decline   was
partially  offset by an increase in revenue of  the  billing  and
collection  operations of approximately $956,000.   Revenue  from
other  operations  not related to divested entities  or  to  HPSE
decreased approximately $247,000.

Operating revenue for HPSE increased by $2,953,000, or 12.2%,  to
$27,235,000 in the three months ended September 30, 1998 from its
comparable  revenues  of $24,282,000 in the  three  months  ended
September  30,  1997, due primarily to growth in  the  number  of
enrollees.

Operating   expenses   decreased  $33,450,000,   or   29.6%,   to
$79,739,000 in the third quarter of 1998 from $113,189,000 in the
third quarter of 1997.  The decrease in operating expenses due to
divestitures  completed,  as  detailed  above,  for  which  prior
periods' results were not restated was approximately $26,691,000,
or 23.7%, of the 1997 third quarter operating expenses.

Costs  and  expenses  not related to divested  entities  or  HPSE
decreased  approximately $11,479,000,  or  18.4%,  in  the  third
quarter of 1998 from the comparable expenses in the third quarter
of 1997.  A decrease in physician and other provider services not
related  to  divested entities or HPSE represented $5,721,000  of
this decrease and was primarily due to decreases in the number of
contracts  within the emergency services group.  Medical  support
services  not  related to divested entities or HPSE increased  by
$575,000 due primarily to increased expenses of $1,131,000 in the
billing  and  collection activities resulting from  an  increased
number  of visits processed offset by a decrease of approximately
$556,000  primarily due to decreases in the number  of  contracts
within  the  emergency  services  group.  Selling,  general   and
administrative expenses not related to divested entities or  HPSE
decreased  $6,333,000 due to decreases in the number of contracts
within  the  emergency  services group, lower  corporate  medical
malpractice  insurance  premiums  and  reductions  in   corporate
overhead.  The Company also received a credit for program fees of
approximately $765,000 relating to its accounts receivable  sales
and  subservicing  programs.  This credit  is  described  in  the
discussion below relating to interest expense.

HPSE's  expenses  increased  by  $4,720,000,  or  18.8%,  of  its
comparable  1997 third quarter operating expenses. This  increase
was  due primarily to an increase in physician and other provider
services  of $4,239,000 associated with the growth in the  number
of enrollees in HPSE and overall increased medical costs.

The changes in operating revenue and operating expenses described
above  resulted  in  operating loss of  $347,000  for  the  third
quarter of 1998, compared to an operating loss of $13,594,000 for
the  third quarter of 1997.  Operating loss in the third  quarter
of  1998  includes an operating loss of approximately  $2,611,000
attributable  to HPSE compared to an operating loss  of  $844,000
for HPSE in the third quarter of 1997.

The  Company's operating margin for the third quarter of 1998 was
negative 0.4% as compared to negative 13.6% for the third quarter
of  1997.   The Company's operating margin for the third  quarter
of  1998,  excluding the results of HPSE and divested operations,
was approximately 2.4% compared to a negative 15.2% for the third
quarter  of  1997,  excluding the results of  HPSE  and  divested
operations.

Effective  for  the third quarter of 1998, the  Company  received
certain  credits  for interest and certain selling,  general  and
administrative  fees  relating  to  its  sales  and  subservicing
agreements with National Century Financial Enterprises, Inc.  and
its  affiliates  ("NCFE").   The credits  arose  from  incentives
negotiated  by  the  Company with NCFE and  were  earned  by  the
Company's  commitment to complete its divestiture plan  with  the
sale  of  its remaining HMO. Interest expense decreased $129,000,
or  4.5%, to $2,708,000 for the three months ended September  30,
1998  from  $2,837,000  for  the  three  months  ended  September
30,1997. The decrease includes the effect of the credits received
from NCFE of approximately $1,468,000 which were accounted for as
a  reduction  of  interest  expense.  The  decrease  in  interest
expense  net of the credits was approximately $1,339,000 and  was
due  primarily to the higher outstanding amounts in the  accounts
receivable sales and subservicing programs.

Interest  income increased by $535,000 due primarily to  interest
earned on receivables from a related party.

There  was  no provision for income taxes recorded for the  third
quarter  of  1998.   In the third quarter of 1997,   the  Company
recorded  a  $1,400,000 benefit for income  taxes  based  on  the
reversal  of  a  prior  provision  for  income  taxes  given  the
continuing  operating losses and net operating loss carryforwards
available.   The  Company expects to record  no  tax  expense  or
benefit,  other than as a result of potential asset divestitures,
until  the Company utilizes federal and state net operating  loss
carryforwards ("NOL"). As of September 30, 1998, the Company  had
approximately $170,000,000 and $210,000,000 in NOLs  for  federal
and state purposes, respectively.

Overall,  the  Company incurred a net loss of $2,445,000  in  the
third quarter of 1998 as compared to a net loss of $15,569,000 in
the third quarter of 1997 for the reasons discussed above.

Weighted   average  shares  outstanding  increased   54.4%   from
24,415,000  shares  in the third quarter of  1997  to  37,700,000
shares  in  the third quarter of 1998, primarily as a  result  of
shares issued to Dr. Scott during 1997.


Nine  Months Ended September 30, 1998 Compared to the Nine Months
Ended September 30, 1997.

Net   operating  revenue  ("operating  revenue")   decreased   by
$89,844,000,  or 26.8%, for the nine months ended  September  30,
1998  to $245,961,000 from $335,805,000 in the nine months  ended
September  30,  1997.  The decrease in operating revenue  due  to
divestitures completed since the first quarter of 1997 for  which
prior  periods'  results  were  not  restated  was  approximately
$65,098,000,  or 19.4%, for the nine months ended  September  30,
1997.

Operating  revenue not related to divested entities  or  to  HPSE
decreased approximately $36,272,000 or 19.2%, for the nine months
ended September 30, 1998 from the comparable revenue in the  nine
months  ended September 30, 1997. This decline was primarily  the
result of a decline in revenues from the emergency services group
of  approximately $35,246,000, which is primarily due to contract
terminations.

Operating revenue for HPSE increased by $11,526,000, or 16.2%, to
$82,815,000 in the nine months ended September 30, 1998 from  its
comparable  revenues  of $71,289,000 in  the  nine  months  ended
September  30,  1997, due primarily to growth in  the  number  of
enrollees.

Operating   expenses  decreased  $121,279,000,   or   32.5%,   to
$252,435,000  in the nine months ended September  30,  1998  from
$373,714,000  in the nine months ended September 30,  1997.   The
decrease in operating expenses due to divestitures completed,  as
detailed  above,  for  which  prior  periods'  results  were  not
restated,  was  approximately  $80,773,000,  or  21.7%,  of   the
operating expenses for the nine months ended September 30, 1997.

Costs  and  expenses  not related to divested  entities  or  HPSE
decreased approximately $57,826,000, or 27.2%, in the nine months
ended  September 30, 1998 from comparable expenses  in  the  nine
months  ended  September 30, 1997.  Physician and other  provider
services  not  related to divested entities or HPSE decreased  by
$33,626,000 and was primarily due to decreases in the  number  of
contracts  within  the  emergency services group  and  government
services  group. Medical support services not related to divested
entities or HPSE decreased by $2,132,000.  This was primarily due
to  approximately  $3,515,000  of  decreases  in  the  number  of
contracts  within the emergency services group, partially  offset
by  increased expenses of approximately $1,039,000 in the billing
and  collection activities resulting from an increased number  of
visits  processed.  Selling, general and administrative  expenses
not  related  to divested entities or HPSE decreased $22,068,000.
Approximately $8,796,000 of this decrease was due to decreases in
the  number  of  contracts within the emergency  services  group,
reduced headcount and office closings and lower corporate medical
malpractice insurance premiums. Approximately $5,662,000 was  the
result  of decreased telecommunication and information technology
costs  and  approximately $8,448,000 of the decrease  arose  from
reductions   in   corporate  overhead  including  reductions   in
personnel  and  the  closure of certain  billing  and  collection
offices.

HPSE's  expenses  increased  by $17,320,000,  or  24.5%,  of  its
comparable operating expenses in the nine months ended  September
30,  1997.  This  increase was due primarily to  an  increase  in
physician  and other provider services of $15,870,000  associated
with  the  growth in the number of enrollees in HPSE and  overall
increased medical costs.

The changes in operating revenue and operating expenses described
above  resulted in an operating loss of $6,474,000 for  the  nine
months ended September 30, 1998, compared to an operating loss of
$37,909,000  for the nine months ended September 30,  1997.   The
operating  loss  for  the nine months ended  September  30,  1998
includes   an   operating   loss  of   approximately   $5,181,000
attributable to HPSE compared to operating income of $612,000 for
the nine months ended September 30, 1997.

The   Company's  operating  margin  for  the  nine  months  ended
September  30, 1998 was a negative 2.6% as compared  to  negative
11.3%  for  the  nine  months ended  September  30,  1997.    The
Company's  operating margin for the nine months  ended  September
30,  1998, excluding the results of HPSE and divested operations,
was  a  negative 1.2% compared to a negative 12.4% for  the  nine
months  ended September 30, 1997, excluding the results  of  HPSE
and divested operations.

Effective  for  the third quarter of 1998, the  Company  received
certain  credits  for interest and certain selling,  general  and
administrative  fees  relating  to  its  sales  and  subservicing
agreements with National Century Financial Enterprises, Inc.  and
its  affiliates  ("NCFE").   The credits  arose  from  incentives
negotiated  by  the  Company with NCFE and  were  earned  by  the
Company's  commitment to complete its divestiture plan  with  the
sale of its remaining HMO. Interest expense decreased $4,929,000,
or  39.1%, to $7,662,000 for the nine months ended September  30,
1998  from  $12,591,000  for  the  nine  months  ended  September
30,1997.  The  decrease includes credits received  from  NCFE  of
approximately $1,468,000 which were accounted for as a  reduction
of  interest expense.  The remaining decrease in interest expense
of $3,461,000 was due primarily to a change in the Company's debt
structure and lower interest rates in 1998.

There  was  no provision for income taxes recorded for  the  nine
months  ended  September  30, 1998.  In  the  nine  months  ended
September  30,  1997,  the Company recorded a $1,400,000  benefit
for  income taxes based on the reversal of a prior provision  for
income  taxes  given  the  continuing operating  losses  and  net
operating  loss carryforwards available.  The Company expects  to
record  no  tax  expense or benefit, other than as  a  result  of
potential asset divestitures, until the Company utilizes  federal
and  state  net  operating  loss  carryforwards  ("NOL").  As  of
September  30,  1998, the Company has approximately  $170,000,000
and   $210,000,000  in  NOLs  for  federal  and  state  purposes,
respectively.

Overall,  the Company incurred a net loss of $13,153,000  in  the
nine months ended September 30, 1998 as compared to a net loss of
$48,762,000 in the nine months ended September 30, 1997  for  the
reasons discussed above.

Weighted   average  shares  outstanding  increased   54.8%   from
24,311,000 shares in the nine months ended September 30, 1997  to
37,637,000  shares in the nine months ended September  30,  1998,
primarily as a result of shares issued to Dr. Scott during 1997.


LIQUIDITY AND CAPITAL RESOURCES

Net  cash used in operating activities for the nine months  ended
September 30, 1998 was $12,154,000 arising from the net  loss  of
$13,153,000   adjusted   for  $5,000,000   of   non-cash   items,
$15,000,000 of cash provided by accounts receivable related items
offset  by  $19,000,000 cash used to reduce accounts payable  and
accrued expenses.

On  October  30, 1998, the Company completed the sale  of  Health
Enterprises, Inc., whose primary operating subsidiary is HPSE, to
Dr.  Scott (the "Purchaser"). The Purchaser acquired all  of  the
outstanding stock of HPSE in a transaction which was effective as
of  October  1,  1998 for financial reporting purposes.  The  Net
Proceeds of $15 million were used to decrease debt.

Also,  on  October 30, 1998, the Company received $5,000,000  for
payment  in  full  of a note receivable from DHP  Holdings,  Inc.
arising  from  the sale of Doctors Healthplan, Inc.  The  Company
used the proceeds to decrease debt.

The  Company's strategic business plan provides for improving the
profitability of its core businesses, reducing contract attrition
rates  and  cutting overhead costs.  The Company  has  taken  the
following actions in accordance with that plan.

Coastal  Physician  Services,  Inc.  ("CPS")  and  its  operating
subsidiaries continue to implement the Practice Partners  Program
which   is  designed  to  better  match  the  payments  made   to
independent contractor physicians to the revenue generated by the
independent contractors. Marketing activities have been increased
which  management  believes may lead to moderate  growth  in  new
contracts  in  1999, but no significant growth is anticipated  in
the fourth quarter of 1998.

Healthcare   Business  Resources,  Inc.  ("HBR")   continues   to
introduce  the  "T-Chart" system to its  clients.  The  "T-Chart"
system  affords  the  physicians a better method  of  documenting
medical  treatment, while helping HBR streamline the  process  of
coding  and billing. Management believes that the use of  the  T-
Chart system will reduce processing costs.

Although these actions are expected to have a positive effect  on
the  Company's financial performance, there can be no  assurances
that  these actions will be successful or that improved financial
results  will  be  achieved  without additional  revenue,  margin
improvements and cost reductions.

The  Company  expects  to  satisfy its  anticipated  demands  and
commitments  for cash in the next twelve months from the  amounts
available under the various agreements with NCFE discussed above,
as well as a reduction in cash used in operations.

During  the second quarter of 1998, the Company was been  advised
by  the  New  York Stock Exchange ("NYSE") that  it  was  not  in
compliance with certain of the NYSE's continued listing criteria.
Management of the Company has had discussions with, and furnished
current  and  projected financial information to, representatives
of  the  NYSE  concerning this matter. The NYSE also advised  the
Company  that  it will review on a quarterly basis the  Company's
financial performance in relation to its projected business plan,
and that continued listing in the future may be dependent on such
financial performance.

YEAR 2000 ISSUES

The  Company  places significant reliance upon  various  computer
systems  in  order to run its day to day operations. The  Company
has begun a review of its computer applications and platforms  to
determine  that they are Year 2000 compliant before December  31,
1999.  This review has not been completed, but major applications
covering  billing  and certain general ledger  applications  have
been  reviewed and are Year 2000 compliant.  The balance  of  the
systems  reviews  and  modifications, if any  are  required,  are
expected to be  completed before the Company would experience any
adverse consequences.

The  Company believes that its computer systems, upon  completion
of  the  systems reviews and modifications, if any are  required,
will not be adversely impacted.  The costs of the project to date
and  the estimated costs to complete it by the year 2000, are not
expected  to  be, nor have they been, material to  the  Company's
consolidated financial position or the results of operations.

The  Company is also working with its major suppliers of computer
and  telecommunications  services to  determine  their  state  of
readiness.  The  Company is dependent upon  those  suppliers  for
ensuring  that  their  operating  system  software  and   related
software  products, including communications  software,  will  be
Year 2000 compliant.

The  Company  believes  that Year 2000 issues,  if  not  properly
addressed  by  commercial insurance companies and other  entities
that  process medical claims for Medicare, Medicaid  and  CHAMPUS
that  reimburse the Company for medical services,  would  have  a
significant impact upon the operating results of the Company.

If  the  Company's computer and telecommunications services  were
not  available for an extended period of time or if  claims  were
not timely reimbursed by payors, the Company's cash flow could be
severely  impacted. At this time, the Company believes  that  the
major suppliers of computer and telecommunications services  will
be  Year  2000 compliant prior to December 31, 1999.  The Company
will   continue  to  monitor  progress  by  commercial  insurance
companies  and  other entities that process  medical  claims  for
Medicare, Medicaid and CHAMPUS.

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  operating  results  and  cash  flow;   the
possibility  of  poor accounts receivable generation,  collection
and/or  reimbursement  experience; the possibility  of  increased
medical  expenses due to increased utilization;  the  possibility
that the Company may not be able to improve operations or execute
its  strategy  as planned; and other important factors  disclosed
from time to time in the Company's Form 10-K, Form 10-Q and other
Securities and Exchange Commission filings.


PART II - OTHER INFORMATION


Item 4. - Matters Voted Upon By Shareholders

The  Annual  Meeting of Shareholders of the Company was  held  on
August  14,  1998.   At such meeting the following  members  were
elected to the Board of Directors.

                                     Number of Shares Voted
                                     For            Abstain

  Steven M. Scott, M.D.         34,098,327          290,629
  Bertram E. Walls, M.D.        34,084,738          301,216
  Sherman M. Podolsky, M.D.     34,097,738          288,718

The  following  directors' terms of office  continued  after  the
meeting:

  Eugene F. Dauchert, Jr.       Edward L. Suggs, Jr.
  Charles E. Potter             Mark J. Pastin


The vote taken on the proposal to amend the Company's Amended and
Restated Certificate of Incorporation was as follows:

  For  23,419,634     Against   650,774        Abstain   15,190


The vote taken on the proposal to approve the appointment of KPMG
Peat  Marwick LLP, as the Company's independent certified  public
accountants  for  the  Corporation for  the  fiscal  year  ending
December 31, 1998 was as follows:

  For  34,217,111     Against   129,939        Abstain   13,906
Item 5. - Other Information


Divestiture of Assets

On  October  30, 1998, the Company completed the sale  of  Health
Enterprises, Inc. ("HEI"), whose primary operating subsidiary  is
Healthplan  Southeast ("HPSE"), to Dr. Scott  (the  "Purchaser").
The  Purchaser acquired all of the outstanding stock of HEI in  a
transaction  which  was  effective as  of  October  1,  1998  for
financial  reporting purposes. The Purchase Price of $15  million
was used to decrease debt.

HPSE is a Health Maintenance Organization licensed to operate  in
the  State of Florida with approximately 77,000 members.  For the
nine  months  ended  September 30, 1998, HEI  reported  unaudited
consolidated revenues of approximately $82,815,000 and net losses
of  approximately  $5,181,000 million.   As  a  result  of  these
losses,  the  Company  was required to make  significant  capital
contributions to HPSE in 1998 prior to its sale, and the  Company
anticipated  that  substantial additional  capital  contributions
would be required during the balance of 1998.

The Company retained the investment banking firm of Salomon Smith
Barney,  Inc. to advise the Company, to assist in completing  the
sale  and  to  render a fairness opinion regarding the  financial
aspects  of  the  transaction. After a  thorough  review  of  the
operations of HPSE and the anticipated funding that would  likely
be  required in the balance of 1998, the Company determined  that
the best course of action was to divest the asset.   The purchase
price  was determined by negotiation between the Company and  the
Purchaser.

The  Florida  Department  of Insurance  issued  a  Consent  Order
granting   approval  of  the  Purchaser's  acquisition   of   the
outstanding voting securities of HEI.

For  a period of 12 months from the closing, the Company has  the
right  to market HEI to potential third party purchasers. If  the
Company  or the Purchaser locates a third party purchaser  before
October 31, 1999, who is willing to purchase HEI at a price  that
exceeds the Strike Price, then Coastal may elect to have the sale
take place.  If the Company elects to have the sale take place to
the third party, the Purchaser has the right to either (i) pay to
the  Company an amount equal to the amount that would  have  been
received  by  the Company as a result of the sale  to  the  third
party or (ii) agree to consummate a closing and sale to the third
party purchaser.

The  Strike Price is a price that will yield net proceeds of  the
sale  (after payment of the costs to market and sell to  a  third
party)  in  an amount equal to the Purchaser's net investment  in
HEI  plus  a  twelve percent (12%) annualized return on  the  net
investment.   Purchaser's  net  investment  shall  be  equal   to
Purchaser's purchase price plus Purchaser's contributions to  HEI
plus  Purchaser's  out-of-pocket costs to  acquire,  finance  and
operate  HEI  minus  any  distributions  or  dividends  Purchaser
receives from HEI.

If  the  sale  takes place pursuant to a letter of  intent,  term
sheet  or definitive agreement entered into on or before December
31,  1998, the proceeds of the sale in excess of the Strike Price
will be remitted to the Company. If the sale takes place pursuant
to a letter of intent, term sheet or definitive agreement entered
into  after December 31, 1998, the Purchaser will be entitled  to
receive from net proceeds (after payment of marketing expenses of
the  sale to the third party) the greater of (i) Purchaser's  net
investment plus a twelve percent (12%) annualized return on  such
amounts  or  (ii) an amount equal to Purchaser's  net  investment
plus fifty percent (50%) of the difference between (x) the amount
of the net proceeds less the Company's investment banker fees and
expenses  in  selling  HEI  to  the  Purchaser  minus   (y)   the
Purchaser's net investment, and the Company would be entitled  to
receive  the balance of the proceeds. In all potential  sales  to
third  party  purchasers, the Purchaser has the right  to  retain
ownership  of  HEI  and pay the Company an amount  equal  to  the
amount the Company would have received as a result of the sale to
the third party.

As  part  of  the transaction, the Company agreed  to  a  partial
release  of its non-compete agreement with Steven M. Scott,  M.D.
This  partial  release  allows Steven  M.  Scott,  M.D.  and  his
affiliates  to  operate  health  maintenance  organizations   and
similar organizations.
FINANCIAL STATEMENTS AND EXHIBITS

a.     Not applicable.
b.      The  pro forma financial information required is included
herein.
c.     Not applicable.


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

Exhibit
Number      Description

2.1    Stock  Purchase Agreement dated October 30, 1998,  between
       Coastal Physician Group, Inc. and HEI Holdings, LLC.  with
       Exhibit  B - Partial Release of Non-Compete Provisions  of
       Employment  Agreement between Steven M.  Scott,  M.D.  and
       Coastal Physician Group, Inc.

Reports on Form 8-K - None.

                  COASTAL PHYSICIAN GROUP, INC.
           UNAUDITED CONDENSED CONSOLIDATED PRO FORMA
                      FINANCIAL INFORMATION


The  following unaudited condensed consolidated pro forma balance
sheet  as  of  September  30, 1998, and the  unaudited  condensed
consolidated  pro  forma statements of operations  for  the  nine
month period ended September 30, 1998 and the year ended December
31, 1997 have been prepared to give effect to the sale of certain
assets  of Health Enterprises, Inc. ("HEI").  The adjustments  to
the unaudited condensed consolidated pro forma balance sheet have
been  prepared as if the transaction was consummated on September
30,  1998,  while  the  adjustments to  the  unaudited  condensed
consolidated  pro  forma  statements  of  operations  have   been
prepared  as  if  the  transaction  was  consummated  as  of  the
beginning  of  the respective periods presented.   The  unaudited
condensed consolidated pro forma financial information  has  been
adjusted  to  reflect  the effect of the  pro  forma  adjustments
described  in  the  accompanying notes  and  is  not  necessarily
indicative  of the consolidated financial position or results  of
operations had the sale transaction actually been effected as  of
the  assumed  dates.   The unaudited condensed  consolidated  pro
forma  financial  information should be read in conjunction  with
the   Company's   unaudited  condensed   consolidated   financial
statements and notes thereto as of September 30, 1998 and for the
nine months then ended included in the Company's Quarterly Report
in this Form 10-Q.

                  COASTAL PHYSICIAN GROUP, INC.
     UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
                        September 30, 1998
                          (IN THOUSANDS)

                                         PRO FORMA            
                               HISTORIC  ADJUSTMEN           PRO
                                  AL         TS             FORMA
                                                           
            ASSETS                                         
Current assets:                                            
                                                      (a,b         
Cash and cash equivalents          7,453    (9,330)  ,d)   (1,877)
 Marketable securities              2,028    (2,028)  (a)          
 Trade accounts receivable, net    16,925    (1,452)  (a)    15,473
  Reserves held by NCFE             6,953                     6,953
 Accounts receivable, other         5,453    (1,258)  (a)     4,195
  Receivables from related          6,169                     6,169
party
 Prepaid expenses and other                                        
current assets                     6,988      (142)  (a)     6,846
      Total current assets         51,969   (14,210)         37,759
Property and equipment, at                                         
cost,                              8,879    (1,055)  (a)     7,824
    less accumulated
 depreciation
Excess of cost over fair value                                     
of                                 2,314                     2,314
      net assets acquired,
 net
Other assets                        8,230    (1,281)  (a)     6,949
      Total assets                 71,392   (16,546)         54,846
                                                                  
LIABILITIES AND SHAREHOLDERS'                                     
            EQUITY
          (DEFICIT)
Current liabilities:                                               
 Current maturities and other                                      
      short-term borrowings       16,793                    16,793
 Accounts payable                  19,107      (203)  (a)    18,904
  Income taxes payable              1,147                     1,147
  Accrued physician fees                                           
      and medical costs           18,261    (9,168)  (a)     9,093
 Accrued expenses                  10,659      (593)  (a)    10,066
     Total current liabilities    65,967    (9,964)         56,003
Long-term debt, excluding                                          
  current maturities              74,695   (15,000)  (d)    59,695
      Total liabilities           140,662   (24,964)        115,698
                                                                   
Deferred credit on business                                        
transferred, net of note                                          
receivable                         2,794                     2,794
                                                                   
Shareholders' deficit:                                             
 Preferred stock $.01 par                                          
value; shares authorized                                          
10,000; issued and outstanding                                    
445 and 0 respectively                 4                         4
   Common stock $.01 par value;                                    
shares authorized 100,000;                                        
shares issued and outstanding                                     
37,700 and 37,493,                   377                       377
respectively
 Additional paid-in capital       162,811      8,635  (c)   171,446
Common stock warrants              1,582                     1,582
 Retained earnings (accumulated                                    
deficit)                        (237,065                   (237,06
                                       )                        5)
  Accumulated comprehensive           227      (217)  (a)        10
income
      Total shareholders'                                          
deficit                         (72,064)      8,418        (63,646
           (deficit)                                             )
      Total liabilities and                                        
share-                            71,392   (16,546)         54,846
       holders deficit

                                
                  COASTAL PHYSICIAN GROUP, INC.
            NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                     PRO FORMA BALANCE SHEET
                       September 30, 1998
                                


DETAILS OF PRO FORMA ADJUSTMENTS

(a)  To record the disposition of the assets and liabilities of
HEI.

(b)  To record the proceeds from sale of $15.0 million.

(c)  To record the difference in net book value and the net
proceeds accounted for as a capital contribution and credited
directly to additional paid-in-capital.

(d)  To record the reduction of obligations to NCFE.


                     COASTAL PHYSICIAN GROUP, INC.
  UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
                 NINE MONTHS ENDED SEPTEMBER 30, 1998
                 (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                             PRO FORMA             
                                   HISTORICA ADJUSTMENT          PRO
                                       L         S              FORMA
                                                               
Operating revenue, net                245,961   (82,815)  (a)    163,146
                                                                        
Costs and expenses:                                                     
 Physician and other provider         196,994   (78,155)  (a)    118,839
services
 Medical support services              24,892                     24,892
  Selling, general and                 30,549    (9,842)  (a)     20,707
administrative
      Total costs and expenses        252,435   (87,997)         164,438
                                                                        
Operating loss                        (6,474)      5,182         (1,292)
                                                                        
Other income (expense):                                                 
   Interest expense                   (7,662)                    (7,662)
   Interest income                        854                        854
  Other, net                              129                        129
     Total other expense              (6,679)                    (6,679)
                                                                        
     Loss before income taxes        (13,153)      5,182         (7,971)
                                                                        
   Benefit for income taxes               ---                           
                                                                        
Net loss                             (13,153)      5,182         (7,971)
                                                                        
Basic and diluted loss per share       (0.35)                     (0.21)
                                                                        
Weighted average number of shares                                       
 outstanding                          37,637                     37,637



                    COASTAL PHYSICIAN GROUP, INC.
 UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
                    YEAR ENDED DECEMBER 31, 1997
                (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                              PRO FORMA            
                                    HISTORIC  ADJUSTMEN          PRO
                                       AL         TS            FORMA
                                                               
Operating revenue, net                 424,841   (97,336)  (a)   327,505
                                                                        
Costs and expenses:                                                     
 Physician and other provider          359,165   (89,550)  (a)   269,615
services
 Medical support services               40,720                          
 Selling, general and administrative    90,691   (11,867)  (a)    78,824
      Total costs and expenses         490,576  (101,417)        389,159
                                                                        
Loss on divested assets, net           (1,453)                   (1,453)
                                                                        
Operating loss                        (67,188)      4,081        (63,107
                                                                      )
                                                                        
Other income (expense):                                                 
 Interest expense                     (15,536)                   (15,536
                                                                      )
  Interest income                          628                       628
 Other, net                            (1,285)                   (1,285)
     Total other expense              (16,193)                   (16,193
                                                                      )
                                                                        
     Loss before income taxes and                                       
        extraordinary item           (83,381)      4,081        (79,300
                                                                      )
                                                                        
  Benefit for income taxes               1,400                     1,400
                                                                        
     Net loss                         (81,981)      4,081        (77,900
                                                                      )
                                                                        
Basic and diluted loss per share        (3.08)                    (2.93)
                                                                        
Shares used to compute loss per                                         
share, basic and diluted               26,623                    26,623
                  COASTAL PHYSICIAN GROUP, INC.
            NOTES TO UNAUDITED CONDENSED CONSOLIDATED
               PRO FORMA STATEMENTS OF OPERATIONS
          FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
              AND THE YEAR ENDED DECEMBER 31, 1997
                                


DETAILS OF PRO FORMA ADJUSTMENTS

(a)  To record the direct reduction in operating revenue, net,
costs and expenses and other income/expense directly related
to HEI for the periods presented.












SIGNATURES



Pursuant  to the requirements of the Securities Exchange  Act  of
1934, the Registrant has duly caused this report to be signed  on
its behalf by the undersigned thereunto duly authorized.


  COASTAL PHYSICIAN GROUP, INC.
  (Registrant)


Date:  November 16, 1998   By: /S/STEVEN M. SCOTT, M.D.
                                Steven M. Scott, M.D.
                                President and Chief
                                Executive Officer

Date:  November 16, 1998   By: /S/W. RANDALL DICKERSON
                                W. Randall Dickerson
                                Executive Vice President
                                and Chief Financial Officer
                    STOCK PURCHASE AGREEMENT


      THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and
entered  into  as  of  October ___, 1998  by  and  among  COASTAL
PHYSICIAN GROUP, INC., a Delaware Corporation ("Coastal"  or  the
"Seller") and STEVEN M. SCOTT, M.D. ("Purchaser").

                      W I T N E S S E T H:

      WHEREAS,  the Seller owns all of the issued and outstanding
stock of Health Enterprises, Inc., a Florida corporation ("HEI"),
and  HEI  owns  all of the issued and outstanding  stock  of  (i)
Healthplan Southeast, Inc., a Florida corporation licensed  as  a
health  maintenance organization under the laws of the  State  of
Florida  ("HPSE"),  (ii)  Health  Management  Southeast,  Inc.  a
Florida  corporation which has entered into a Management Services
Agreement  to  provide management services to HPSE  ("HMS"),  and
(iii) Medical Data Solutions, Inc., a Florida corporation ("MDS";
HEI, HPSE, HMS and MDS are sometimes collectively referred to  as
the "Company" or the "Companies");

      WHEREAS, Steven M. Scott, M.D. and his affiliates  own  the
majority interest of Seller and all of the ownership interests of
Purchaser, and in order to effectively acquire the balance of the
ownership  interests  of  the Companies,  concurrently  with  the
execution  and delivery of this Agreement, the Seller is  selling
and the Purchaser is purchasing all of the issued and outstanding
stock  of  HEI (the "HEI Stock"), all pursuant to the  terms  and
conditions more fully set forth herein.

      NOW,  THEREFORE, in consideration of the premises  and  the
mutual  covenants herein contained, the parties hereto  agree  as
follows:

                            ARTICLE I
                        PURCHASE AND SALE

      Section 1.1    Purchase and Sale of HEI Stock.  Subject  to
the  terms  and conditions contained herein, at a Closing  taking
place  concurrently  with  the execution  and  delivery  of  this
Agreement,  the Purchaser is purchasing from the Seller  and  the
Seller  is  selling, assigning and transferring to the Purchaser,
the HEI Stock, which is all of the issued and outstanding capital
stock of HEI.

       Section  1.2     Closing  Date.    The  closing  of   this
transaction (the "Closing") shall be held at the offices of Moore
&  Van  Allen,  PLLC, 2200 West Main Street, Suite  800,  Durham,
North  Carolina  27705, or such other place as  the  parties  may
agree  on  or before October 30, 1998 or such other time  as  the
parties may agree; provided, the transactions contemplated herein
shall  be  effective  as of 12:01 a.m. on October  1,  1998  (the
"Effective Date").

     Section 1.3    Purchase Price and Payment of Purchase Price.
The purchase price, subject to adjustments described below, to be
paid  by Purchaser (the "Purchase Price") will be an amount equal
to  $15,000,000.   The Purchaser will pay the Purchase  Price  at
Closing  in cash or immediately available funds.  Seller  may  be
entitled  to receive additional amounts under Section 5.6,  which
amounts shall be treated as an adjustment to the Purchase Price.

     Section 1.4    Post Effective Date Cooperation.  The parties
acknowledge  that after the Effective Date, cash may be  received
by  one  party but belong to another party and/or trade  payables
may  be  paid by one party yet be the responsibility  of  another
party.   The parties agree to cooperate to reconcile in a  timely
manner   all  post  Effective  Date  transactions.    Upon   such
reconciliation, any party owing money to another party shall  pay
the amount owed within thirty (30) days of said reconciliation.

      Section  1.5     Responsibility for Tax Liability.   Seller
shall  be  responsible  for and shall indemnify  Purchaser  from,
against and in respect of any liability for taxes imposed on  the
Companies with respect to any taxable period, or portion thereof,
ending  on  or  prior to or which includes the  date  immediately
prior  to  the  Effective  Date (including  any  liability  under
Section   1.1502-6  of  the  Treasury  Regulations   or   similar
provisions of state law).  Purchaser shall be responsible for and
shall  indemnify  Seller from, against  and  in  respect  of  any
liability for taxes imposed on the Companies with respect to  any
taxable  period,  or  portion thereof, for which  Seller  is  not
liable  to  Purchaser pursuant to the terms  of  the  immediately
preceding sentence (other than any liability under Section 1.1502-
6 of the Treasury Regulations or similar provision of state law).

                           ARTICLE II
          REPRESENTATIONS AND WARRANTIES OF THE SELLER
                                
      In  order to induce the Purchaser to enter into this  Agree
ment  and the transactions contemplated hereby, the Seller hereby
represents and warrants to the Purchaser as follows:

      Section  2.1    Corporate Organization and Authority.   The
Seller  is a corporation duly organized, validly existing and  in
good  standing under the laws of the State of Florida, with  full
corporate  power  and authority to conduct its  business  as  now
conducted,  own its assets, own or lease and operate  its  proper
ties,  and  enter  into  and perform its obligations  under  this
Agreement.   This  Agreement constitutes,  and  all  assignments,
agreements and other instruments and documents to be executed and
delivered  by  the Seller in connection with this Agreement  will
constitute,  the  Seller's legal, valid and binding  obligations,
enforceable  against the Seller in accordance with  their  respec
tive terms.

      The  Seller, by all appropriate corporate action, has  duly
authorized  the  execution and delivery of  this  Agreement,  the
documents  of  transfer  and assignment  contemplated  hereby  in
consummation of all the transactions contemplated herein and  the
performance  of  all obligations of the Seller pursuant  to  this
Agreement.

      Each  of  the  Companies is a corporation  duly  organized,
validly existing and in good standing under the laws of the State
of  Florida, with full corporate power and authority  to  conduct
its  business as now conducted, own its assets, own or lease  and
operate its properties.

      Section  2.2     Title to Stock.  Except  as  disclosed  on
Schedule  2.2,  (i) the Seller is the true and lawful  beneficial
and record owner of all the HEI Stock and has good and marketable
title thereto, free and clear of claims, pledges, liens, security
interests,  charges or other encumbrances, and (ii)  HEI  is  the
true and lawful beneficial and record owner of all the issued and
outstanding  stock of HPSE, HMS and MDS, and  HEI  has  good  and
marketable  title  thereto, free and clear  of  claims,  pledges,
liens,   security  interests,  charges  or  other   encumbrances.
Subject  to obtaining all required consents disclosed on Schedule
2.14,  the Seller has full right and power and authority to sell,
transfer  and deliver the HEI Stock.  Upon delivery  of  the  HEI
Stock as contemplated in this Agreement, the Seller will transfer
to the Purchaser valid and marketable title thereto including all
voting  and other rights to the HEI Stock free and clear  of  all
claims,  pledges,  liens, security interests, charges,  or  other
encumbrances.

      Section 2.3    Financial Statements.  The audited financial
statements for HPSE for the year ended December 31, 1997, and all
financial  statements filed with the State of Florida  Department
of  Insurance (the "DOI") since December 31, 1997 for HPSE, which
have been prepared on the statutory basis of accounting, and  the
unaudited  financial statements of the Company for  the  year-to-
date period ended September 30, 1998, prepared in accordance with
GAAP (except for the lack of footnotes and year end adjustments),
are attached hereto as Exhibit A. Since the date of the financial
statements, management believes that the Companies have  incurred
continuing  substantial  operating  losses.   Additional  matters
regarding  the  Companies  and  their  financial  statements  are
disclosed on Schedule 2.14.  Other than as set forth above and as
disclosed  on  Schedule 2.14, the Seller make no  representations
regarding  the  financial condition, business or affairs  of  the
Companies.

     Section 2.4    Subsidiaries.  HEI owns all of the issued and
outstanding  shares of HPSE, HMS and MDS.  Other than  HPSE,  HMS
and MDS, HEI does not own, either directly or indirectly, or have
any investment in, own, or otherwise control, any corporation  or
other  entity, or is a party to any partnership agreement,  joint
venture, or similar agreement.

      Section  2.5     Other Business Names.  The  Companies  and
their  predecessors and any companies acquired by or merged  into
them  have  not  used any business names other  than  "Healthplan
Southeast" and "Discovery Healthplan."

      Section  2.6    Compliance with Laws Applicable  to  Sites.
The  Companies  have complied in all material respects  with  all
municipal,  state  and  federal statutes, ordinances,  rules  and
regulations  applicable to its respective business, included  but
not limited to, zoning, building, environmental and occupational,
safety and health regulations.

      Section  2.7    Leases.  Schedule 2.7 contains an  accurate
and  complete  list  of all space leases with  respect  to  space
leased  by  the Companies.  Other than as disclosed  on  Schedule
2.7,  the Companies are not in default under any lease or subject
to obtaining necessary consents nor will they be in default as  a
result  of  the  execution of this Agreement or  closing  of  the
transactions contemplated hereby.

      Section  2.8     Tangible Personal Property.  Schedule  2.8
contains  an  accurate and complete list of all equipment  leases
and equipment leased by the Companies.  The Companies are not  in
default  under any such equipment leases and neither  the  Seller
nor  the Companies is aware of any fact which, with notice and/or
passage of time, would constitute such a default.

      Section  2.9     Intangible Personal  Properties;  Computer
Programs.   Set forth on Schedule 2.9 is a list of  any  and  all
franchises  or  licenses,  any registered  trademarks,  trademark
applications, service marks, copyrights, trade names and computer
programs held or used by the Companies.  Other than as set  forth
on  Schedule  2.14,  neither the Seller  nor  the  Companies  has
received written notice of any claims or demands with respect  to
such  items of intangible personal property and, to the  Seller's
and the Companies' best knowledge, there are no claims or demands
against  the any of such parties respect to any of such items  of
intangible   personal   property.   No  proceedings   have   been
instituted,  or are pending against the Seller or the  Companies,
or  to  the knowledge of the Seller and the Companies, have  been
threatened  against the Seller or the Companies to challenge  the
rights  of the Seller or the Companies with respect to  any  such
assets.   The Companies have not received written notice  of  any
claims or demands relating to their right to use all trade names,
trade secrets, patient records and patient lists which they  have
used  or  which  they  are  now using in  connection  with  their
respective businesses.  The Companies have the unrestricted right
to  use,  free  from  any rights or claims of others,  all  trade
names,  trade  secrets, patient records and patient  lists  which
they  have  used  or which they are now using in connection  with
their respective businesses.

      Section  2.10    Assets.  Except as set forth  on  Schedule
2.10,  as  of  the  Closing  Date the  Companies  have  good  and
marketable title in and to all of their respective assets,  which
property   is   free   and  clear  of  any  security   interests,
consignments,  liens, judgments, encumbrances,  restrictions,  or
claims  of  any  kind, other than as expressly provided  in  this
Agreement.

      Section  2.11   Current Employees and Employment Practices.
The  Companies  are obligated to pay employees of  the  Companies
under  certain  circumstances pursuant to the "stay  bonus"  plan
described  on  Schedule  2.11(a).   Other  than  the  bonus  plan
described on Schedule 2.11(a), all employees of the Companies are
employees  at  will  who  may  be terminated  by  the  respective
employers  at any time, with or without cause, with no obligation
to  make any payment other than salary and wages through the date
of termination, plus any notice period, and severance payments in
accordance  with  such  employer's  standard  corporate   policy.
Except   as   described  on  Schedule  2.11(b),   no   employment
discrimination  or  unfair labor practice,  charge  or  complaint
against the Companies has been filed, nor to the knowledge of the
Seller  or the Companies, threatened to be filed with any  court,
agency  or  other entity having jurisdiction over the  Companies.
Other than as disclosed on Schedule 2.11(b), to the knowledge  of
the  Seller  and  the  Companies, the  Companies  have  not  been
threatened by any former employee with any suit alleging wrongful
termination or other discriminatory wrongful or tortuous  conduct
in connection with the employment relationship.  Schedule 2.11(a)
attached  hereto  and  made a part hereof  lists  all  employment
agreements  of  the  Companies.  None of  the  employees  of  the
Companies are represented by any labor organization, nor  to  the
knowledge  of the Seller or the Companies is there currently  any
union  organizing activities with respect to such employees,  nor
has there been any such organizing activity within the past three
years.    The  Companies  have  not  engaged  in  any  collective
bargaining or similar agreement with any labor organization.

      Section  2.12    ERISA.  All "employee benefit  plans,"  as
defined  in  Section  3(3)  of  the  Employee  Retirement  Income
Security  Act  of  1974,  as  amended  ("ERISA"),  maintained  or
contributed  to  by  the  Companies are in  compliance  with  all
applicable provisions of ERISA and the Internal Revenue  Code  of
1986, as amended, (the "Code"), and the Companies do not have any
liabilities  or  obligations with respect to  any  such  employee
benefit  plan,  whether or not accrued, contingent or  otherwise,
except   for   instances  of  noncompliance  or  liabilities   or
obligations  that  would not, individually or in  the  aggregate,
have  a material adverse effect on the business of the Companies.
No  employee of the Companies will be entitled to any  additional
benefits or any acceleration of the time of payment or vesting of
any  benefits  under  any  employee incentive  or  benefit  plan,
program   or   arrangement  as  a  result  of  the   transactions
contemplated  by this Agreement, either alone or  in  combination
with another event.  The Companies do not separately maintain any
plans  or  other compensation arrangements which provide deferred
or incentive compensation or severance benefits.

     Section 2.13   Insurance.  The Companies shall deliver prior
to  closing  copies  of the originals of any  and  all  insurance
policies  which  any  of the Companies have  in  effect  covering
itself  or its employees, officers or directors, including  error
and omissions policies.  The Companies have had general liability
insurance  and  HPSE  has  had  errors  and  omissions  liability
insurance policies in full force and effect from the date HEI was
acquired  by the Seller through the Closing Date as part  of  the
coverage afforded under a policy written to Coastal.

      Section 2.14   Compliance with Applicable Laws.  Except  as
set  forth  on Schedule 2.14, the Companies are in compliance  in
all  material  respects  with  all  federal,  state,  county  and
municipal  laws,  ordinances, regulations, judgments,  orders  or
decrees  applicable  to the conduct of its  business  or  to  the
assets owned, used, or occupied by the Companies, and neither the
Seller  nor  the Companies has received notice or advice  to  the
contrary.   Except  as set forth on Schedule 2.14,  neither  this
Agreement  nor the consummation of the transactions  contemplated
herein will (a) violate an order, writ, injunction, statute, rule
or  regulation  applicable to the Companies or  (b)  require  the
consent, approval, authorization or permission of, or the  filing
with   or  the  notification  of  any  federal,  state  or  local
government agency.

     Section 2.15   Environmental and Medical Waste Compliance.

      (a)   The  Companies are not in violation of  any  federal,
state   or  local  laws,  statutes,  codes,  ordinances,   rules,
regulations,  permits  or orders relating to  or  addressing  the
environment,  health,  medical  waste  or  safety  (collectively,
"Environmental  Laws"), which shall include, but not  be  limited
to,  the  use,  handling or disposal of or  the  record  keeping,
notification and recording requirements respecting any pollutant,
hazardous  substance,  radioactive  substance,  toxic  substance,
solid  waste, hazardous waste, medical waste, radioactive  waste,
special waste, petroleum or petroleum derived substance or waste,
asbestos,   or   any  hazardous  or  toxic  constituent   thereof
(collectively  "Hazardous Substances") or work  place  or  worker
safety  and  health, nor have they received any  written  notices
alleging  that  they  are in violation of any such  Environmental
Laws;  nor  are  they subject to any administrative  or  judicial
proceeding alleging any violation of any such Environmental Laws,
federal, state or local laws, statutes, codes, ordinances, rules,
regulations, permits relating to the environment, health, medical
waste or safety.

       (b)    There  is  no  pending  lawsuit  or  administrative
proceeding  or,  to  the  Seller's or the  Companies'  knowledge,
threatened claim alleging that the Companies are liable under any
Environmental    Law,   including,   without   limitation,    any
Environmental Law related to the on-site or off-site disposal  of
Hazardous  Substances.  The Companies have not  received  written
notice from any person, including but not limited to any federal,
state,  or local governmental agency, alleging that the Companies
are  is  liable under any applicable Environmental Law, including
without  limitation, any Environmental Law related to the on-site
or off-site disposal of Hazardous Substances.

      (c)   To  the Seller's and the Companies' knowledge,  there
have   been  no  releases,  spills  or  discharges  of  Hazardous
Substances  on or underneath any of the real property  leased  by
the  Companies and the Companies have not disposed  of  Hazardous
Substances on, at or under such properties.

      Section  2.16    Taxes.  No assessments or  additional  tax
liabilities  (including  all  federal,  state  and  local  taxes,
charges,  penalties and interest) have been proposed  or  to  the
best  of  the  Seller's  and the Companies' knowledge  threatened
against  the  Companies or any of their assets,  and,  except  as
disclosed  on Schedule 2.16, none of the Seller nor the Companies
has  executed  any  waiver of the statute of limitations  on  the
assessment or collection of such tax liabilities.  There  are  no
federal,  state  or  local tax liens upon any of  the  Companies'
assets  other  than  inchoate liens for taxes  not  yet  due  and
payable.  There are no past, pending or to the Seller's  and  the
Companies'  knowledge, threatened audits against  the  Companies,
except  that  the  Seller  is subject to  a  federal  income  tax
examination for 1992 through and including 1996.  Except  as  set
forth  on  Schedule 2.16, all tax returns for the Companies  have
been  timely  filed and are complete and accurate.  All  returns,
declarations,   reports,  estimates,  information   returns   and
statements  ("Returns") required to be filed under  any  federal,
state,  local or foreign authority by the Seller or the Companies
or  the  affiliated, combined or unitary group of which any  such
corporation  is or was a member have been filed and were  in  all
material  respects (and, as to Returns not yet due and  filed  on
the date hereof, will be) true, complete, correct and filed on  a
timely basis.  All taxes due and owing or required to be withheld
or collected by the Seller and the Companies have been fully paid
and the Seller or the Companies have adequate reserves to pay all
taxes  not  yet  due,  including any  taxes  resulting  from  the
transactions contemplated hereunder.  The Seller has included the
Companies as members of its consolidated group for federal income
tax  purposes  for all taxable years in which the Companies  were
properly so includable and will include the Companies as  members
of  its  consolidated  group  for the  taxable  period  beginning
January 1, 1998 and ending on the Closing Date.

      Except  as may be required by the Internal Revenue  Service
(or state taxing authority) to clearly reflect the income or loss
of  the  Seller  or  any members of its consolidated  group,  the
Seller  will not take any action or fail to take any action  that
could have the effect of reducing the amount of any net operating
loss  or  other  tax  attribute  attributable  to  the  Companies
pursuant  to  the  Code or any similar law of  any  other  taxing
jurisdiction,  including, without limitation, the filing  of  any
amended  return or the reattribution of any net operating  losses
or  similar  items  from the Companies, or any affiliate  of  the
Seller under Treas. Reg. Section 1.1502-20 or any similar law  of
any  other  taxing  jurisdiction.  If the  Coastal  "consolidated
group" is subject to a "consolidated section 382 limitation" as a
result  of  transactions  prior to  those  contemplated  in  this
Agreement,  Coastal  will  file an  election  under  Treas.  Reg.
Section 1.1502-95T(c) apportioning to the Companies an amount  of
the   "consolidated  section  382  limitation"  of  the   Coastal
"consolidated  group" equal to $50,000 per year.   Such  election
will  be  timely  and  properly filed under Treas.  Reg.  Section
1.1502-95T(e).  For purposes of this Section 2.16, the term  "net
operating loss" shall have the meaning ascribed to such  term  in
section 172 of the Code, and the terms "consolidated section  382
limitation"  and  "consolidated group"  shall  have  the  meaning
ascribed  to  such terms in the Treasury Regulations  to  Section
1502 of the Code.

      Section 2.17   Litigation.  Except as set forth on Schedule
2.17,  there are no actions, suits or proceedings pending  or  to
their  knowledge threatened against the Seller or  the  Companies
which  materially  affect the ability of the  Seller  to  perform
under this Agreement.

     Section 2.18   Jurisdictions Doing Business.  Florida is the
only  jurisdiction  in which the Companies  have  done  business.
"Healthplan  Southeast" and "Discovery Healthplan" are  the  only
trade  names  or other names they have used in that jurisdiction.
Each  of  the  Companies is duly qualified or  registered  to  do
business as a foreign corporation and is in good standing in each
jurisdiction in which the character of the business conducted  by
it  or the location of the properties owned or leased by it makes
such  qualification necessary and where the failure to so qualify
would   have  a  material  adverse  effect  upon  its  respective
business.

                          ARTICLE III
          LIMITATIONS ON REPRESENTATIONS AND WARRANTIES

     Section 3.1    Limitation on Representations and Warranties.
The  Seller  shall  not be deemed to have made to  Purchaser  any
representation or warranty other than those expressly made by the
Seller in Article II hereof.  Without limiting the generality  of
the   foregoing,   and  notwithstanding  any  otherwise   express
representations and warranties made by the Seller in  Article  II
hereof,  Seller makes no representation or warranty to  Purchaser
with respect to:

      (a)   any  projections,  estimates, or  budgets  heretofore
delivered  to or made available to Purchaser of future  revenues,
expenses or expenditures or future results of operations; or

      (b)   except  as expressly covered by a representation  and
warranty contained in Article II hereof, any other information or
documents (financial or otherwise) made available to Purchaser or
its   counsel,  accountants  or  advisors  with  respect  to  the
Companies;  notwithstanding the foregoing, the  Seller  shall  be
liable   if   the  Seller  has  knowingly  furnished  any   other
information  or  documents  to  Purchaser  which  is   materially
incomplete or materially false.

      Section  3.2     Due  Diligence  Investigation.   Purchaser
acknowledges that:

      (a)  it has had the opportunity to visit with the Companies
and  meet  with representatives of the Companies to  discuss  the
business  and the assets, liabilities, financial condition,  cash
flow and operations of the business; and

      (b)   all  materials and information requested by Purchaser
have   been  provided  to  Purchaser  to  Purchaser's  reasonable
satisfaction.

      Purchaser acknowledges that it has made its own independent
examination,  investigation,  analysis  and  evaluation  of   the
Companies.   Purchaser acknowledges that  it  has  had  full  and
complete  access to all of the books, records and assets  of  the
Companies  and has had the opportunity to personally inspect  the
assets,  operations and talk with the personnel employed  by  the
Companies  to the extent it has desired to do so with respect  to
this transaction.

      Purchaser  acknowledges  that it has  undertaken  such  due
diligence (including a review of the assets, liabilities,  books,
records  and  contracts  of  the Companies)  as  Purchaser  deems
adequate, including that described above.

      The  Purchaser  is  the Chairman, Chief Executive  Officer,
President and majority shareholder of the Seller and, as such, is
aware  of  and  has had access to all financial  and  operational
information concerning the Companies.

                           ARTICLE IV
           REPRESENTATIONS AND WARRANTIES OF PURCHASER
                                
      In  order to induce the Seller to enter into this Agreement
and   the  transactions  contemplated  hereby,  Purchaser  hereby
represents and warrants to Seller as follows:

       Section   4.1      BINDING  AGREEMENT.    This   Agreement
constitutes,  and  all  agreements  and  other  instruments   and
documents  to  be  executed  and  delivered  by  Purchaser   will
constitute,  Purchaser's  legal, valid and  binding  obligations,
enforceable against Purchaser in accordance with their respective
terms.

                            ARTICLE V
        COVENANTS AND AGREEMENTS OF SELLER AND PURCHASER

     Section 5.1    Assignment of Leases.  To the extent any real
estate  leases  for  facilities  utilized  by  the  Companies  or
equipment  leases  for equipment used by the  Companies  are  not
currently  in  the  name of the Companies, at  the  Closing  such
leases  shall  be assigned to and assumed by Purchaser,  and  the
Seller and Purchaser agree to cooperate to obtain releases of the
Seller  or  any  affiliates  of  the  Seller  for  liability   in
connection  with  such  leases.  All rent and  any  pass  through
expenses  payable by the tenant under any such  leases  shall  be
prorated  as  of  the  Effective  Date  between  the  Seller  and
Purchaser.   Security deposits on all real estate  and  equipment
leases shall remain on deposit pursuant to the leases and, to the
extent  not currently held in the name of the Companies shall  be
transferred  to  Purchaser  or the  Companies  at  Closing.   Any
expenses  chargeable to the tenant or lessee  under  such  leases
(such  as taxes, insurance and maintenance) shall be prorated  as
of  the Effective Date and adjusted between the Purchaser and the
Seller.

      Section 5.2    Accounting Services; Cooperation of Parties.
Purchaser  shall be entitled to continue to have  access  to  and
utilize  the accounting and general ledger systems of the Seller,
including use of hardware and related software, through  the  end
of  1999 for no charge other than reimbursement of out of  pocket
costs,  including telecommunications expenses.  The out-of-pocket
costs  shall  be billed by the Seller to Purchaser  monthly,  and
Purchaser  shall timely pay said invoices.  The Seller shall  not
be  obligated  to  provide  any special  programming  or  support
services to Purchaser in connection with Purchaser's use of these
systems.   The Seller shall not be obligated to continue  to  use
the  present accounting systems through 1999 and the Seller  will
not  be in breach of this Agreement if it discontinues use of the
present  systems or modifies them so as to make continued  access
and  utilization  by  Purchaser impractical;  provided,  in  such
event,  the  Seller shall provide Purchaser with at least  ninety
(90)  days  advance notice of any change in its  present  systems
which  will  make continued access and utilization  by  Purchaser
impractical  and  the  Seller  shall  assist  Purchaser  in   the
transition to another system.

     In consideration of the aforesaid, Purchaser will assist the
Seller  in  the production of information for the preparation  of
financial statements and tax returns of the Seller.

      Section 5.3    Employees.  For a transition period  through
and  including December 31, 1998, the employees of the  Companies
will  continue  to  participate in all Coastal sponsored  benefit
plans  in  which  they  participated  immediately  prior  to  the
Closing,  and  will  be paid through the Coastal  master  payroll
services.  The  Purchaser will offer employment  to  all  current
employees of the Companies at their current rate of pay, although
Purchaser  shall not be obligated to employ any such persons  for
any  specific length of time. Purchaser will be obligated to  pay
to  Coastal  all  direct  costs of the  payroll  (salary,  bonus,
overtime,   shift  differential)  paid  by  Coastal  during   the
transition  period,  plus 17.5% to cover  the  cost  of  employee
benefits and payroll processing and benefit administration.   The
Purchaser shall remit these amounts to Coastal immediately  prior
to each payroll period.

     Section 5.4    Insurance.  The Seller shall bear the risk of
loss  from fire or other casualty through the Closing  Date.   In
the  event  of  any  fire or casualty through  the  Closing  Date
causing  any  material  loss  of the  assets  of  the  Companies,
Purchaser  shall have the right to terminate this  Agreement  and
all of Purchaser's obligations hereunder.  Upon such termination,
the Seller will reimburse Purchaser for Purchaser's actual out-of-
pocket  expenses (up to a maximum of $50,000) in connection  with
the  negotiation  and  preparation  of  this  Agreement  and   in
connection  with advice relating to the transactions contemplated
hereby,   provided   that  Purchaser  shall  provide   reasonable
documentation of such expenses.

      The  Seller will exercise reasonable efforts to  cause  the
businesses  being  purchased by Purchaser  to  be  covered  under
Seller's  insurance  policies  through  December  31,  1998  with
respect  to  (i) general liability insurance and  (ii)  fire  and
casualty  insurance.   The Seller will  bill  Purchaser  for  the
incremental  cost of such insurance and Purchaser shall  promptly
pay  such costs.  Such insurance shall be subject to such  terms,
conditions,  limitations and exclusions as the Seller's  insurers
may impose.

     Section 5.5    Reserved.

      Section 5.6    Marketing of the Companies.  For a period of
twelve  (12) months following the Closing, the Seller shall  have
the  right to market the Companies for sale.  During this period,
Purchaser agrees that it will not do anything to impede the right
of  Coastal to market the Companies; provided that Purchaser  may
bring  in  investors  owning up to fifty  percent  (50%)  of  the
Companies, so long as such investors are notified of the terms of
this  Section  5.6  and  agree to be bound thereby;  and  further
provided  that  this  sentence shall  not  require  Purchaser  to
maintain  any  particular  level  of  funding  of  the  Companies
operations or prevent Purchaser from selling the Companies for  a
price  less  than  the Strike Price (defined  below)  during  the
period  when  Coastal  has  a  right  to  market  the  Companies.
Following  the Closing, the parties agree to undertake an  effort
to market the Companies for sale to a third party purchaser.  The
timing and logistics of such a sale shall be discussed and agreed
to  by the parties.  Purchaser agrees to give the Seller and  its
representatives  (including investment bankers,  accountants  and
legal  counsel)  full and complete access to the books,  records,
facilities  and  personnel of the Companies and full  cooperation
that  in  either case is necessary or appropriate to  market  the
Companies  for  sale.   Such  access shall  also  be  granted  to
potential purchasers for due diligence purposes (subject  to  the
execution    of   appropriate   and   customary   confidentiality
agreements).  In the event that the Seller or Purchaser locates a
third party purchaser for the Companies during this period  at  a
price that exceeds the Strike Price, then the Seller may elect to
have  the  sale  take  place.   If the  Seller  elects  to  sell,
Purchaser  shall have the right to pay an amount  to  the  Seller
that  equals the amount that would have been received by  Coastal
hereunder as a result of a sale to such third party purchaser  or
to  agree  to  consummate a closing and sale to such third  party
purchaser.  If Purchaser elects to pay such amount to the Seller,
the  right to market under this Section 5.6 shall terminate  upon
such  payment.   In  addition, if a definitive agreement  with  a
third party purchaser is not entered into within the twelve  (12)
month  period, the right to market under this Section  5.6  shall
terminate.

      The  following definitions shall apply for purposes of this
Section 5.6:

           (i)   "Purchaser's Base Cost" shall be an amount equal
     to  (i) the purchase price Purchaser paid for the HEI  Stock
     pursuant  to  this  Agreement plus (ii) Purchaser's  out-of-
     pocket  costs  relating to the acquisition and financing  of
     the  HEI  Stock  and  the operations of the  business  being
     acquired,  including  interest  and  finance  fees  relating
     thereto plus (iii) any additional capital contributed to the
     Companies  by  Purchaser after the Effective  Date  and  any
     additional  capital contributed to finance the operation  of
     the Companies, minus (iv) the amount of any distributions in
     the  nature  of  dividends, redemption of capital  stock  or
     similar payments made to shareholders of HEI.
     
           (ii) "Purchaser's Total Cost" shall be an amount equal
     to  Purchaser's Base Cost plus an amount calculated to be  a
     twelve  percent (12%) per annum return on the contributions,
     payments  or costs that make up the Purchaser's  Base  Cost,
     taking  into account any reduction in the outstanding amount
     as  a  result of the receipt of distributions, dividends  or
     net proceeds by Purchaser.
     
           (iii)      "Seller's  Selling Expenses"  shall  be  an
     amount  equal to the investment banker fees and any and  all
     expenses  paid by Seller relating to the sale  to  Purchaser
     hereunder.
     
           (iv)  "Marketing Expenses" shall be the  out-of-pocket
     costs  and expenses of the Seller and Purchaser incurred  or
     reasonably  expected to be incurred in connection  with  the
     sale  of  the  Companies  to  a third  party  purchaser  (or
     incurred  in  preparing  for such sale),  including  without
     limitation investment banker fees and expenses.
     
           (v)   "Strike  Price"  shall be  an  amount  equal  to
     Purchaser's Total Cost plus Marketing Expenses.

      Upon  a  sale  to  a  third party,  the  parties  agree  to
distribute the proceeds of sale as follows:

           (i)  For all sales, Marketing Expenses shall first  be
     paid or reimbursed.  The remaining proceeds shall be paid as
     follows:
     
                (A)   For  any sale made pursuant to a letter  of
          intent,  term sheet or purchase agreement entered  into
          on  or  prior to December 31, 1998, Purchaser shall  be
          entitled  to receive Purchaser's Total Cost.   For  any
          sale made pursuant to a purchase agreement entered into
          after December 31, 1998, Purchaser shall be entitled to
          receive  the greater of (A) Purchaser's Total  Cost  or
          (B)  the  amount  equal to Purchaser's Base  Cost  plus
          fifty  percent (50%) of the difference between (x)  the
          amount  of the remaining proceeds less Seller's Selling
          Expenses minus (y) Purchaser's Base Cost.
          
               (B)  Any portion of the sales proceeds not paid as
          Marketing Expenses or paid to Purchaser under (A) above
          shall be paid to the Seller.
          
      If  there is income tax liability to Purchaser arising from
the  receipt  by the Seller of the amounts Seller is entitled  to
receive  under  this Section, the Seller agrees to indemnify  and
hold  harmless  Purchaser  from any  such  income  tax  liability
(grossed  up  to account for the tax liabilities associated  with
such indemnification).

     The parties acknowledge that any subsequent transfer of HPSE
or  substantially all of its assets will require the consent  and
approval of the DOI.

      Section  5.7     Financial Information.  For  a  period  of
twelve  (12)  months following the Closing, or  so  long  as  the
Seller  has  the  right to market the Companies, Purchaser  shall
cause  the Companies to deliver monthly financial statements  and
reports  to  the Seller and shall provide such other  information
concerning  the  financial  condition,  business  operations  and
prospects of the Companies as the Seller may reasonably request.

      Section 5.8    Release of Scott from Non-Compete.  As  part
of the Closing, the Seller and Dr. Steven M. Scott agree to enter
into the Partial Release of Non-Compete Agreement attached hereto
as Exhibit B.

                           ARTICLE VI
                 DELIVERIES OF SELLER AT CLOSING

     The Seller shall deliver the following at the Closing:

      Section 6.1    Stock Certificates.  The Seller will deliver
to   the  Purchaser  duly  endorsed  stock  transfer  powers  and
certificate(s) with respect to the HEI Stock.

      Section  6.2     Consents and Approvals.  The Seller  shall
have  obtained  all  consents  and  approvals  required  for  the
transfer of the HEI Stock to the Purchaser.

      Section  6.3    Seller's Documents.  The Seller shall  have
caused  to  be  delivered  to  Purchaser,  at  the  Closing,  the
following:

     (a)  Good Standing Certificates.  Good standing certificates
issued by the appropriate official of the states of incorporation
of the Seller and the Companies;

      (b)   Articles of Incorporation and Bylaws.   Each  of  the
Companies  shall have delivered to Purchaser a true and  complete
copy of its Articles of Incorporation and Bylaws;

      (c)   Corporate  Resolutions.  True and correct  copies  of
resolutions  of the board of directors of the Seller  authorizing
the execution, delivery and performance of this Agreement and the
transactions contemplated hereby; and

      (d)   Assignment  of  Leases.   Assignments  of  leases  as
provided in Section 5.1.

      Section  6.4     Other Assurances.  The Seller  shall  have
delivered  to  the Purchaser such other and further certificates,
assurances  and documents as Purchaser may reasonably request  in
order  to  evidence  the  accuracy  of  the  representations  and
warranties  made  pursuant to Articles  II,  the  performance  of
covenants and agreements to be performed pursuant to Article V at
or prior to the Closing, and the fulfillment of the conditions to
Purchaser's obligations.

                           ARTICLE VII
               DELIVERIES OF PURCHASER AT CLOSING

     The Purchaser shall deliver the following at Closing:

      Section  7.1     Payment of Purchase Price.  The  Purchaser
shall  have  paid the Purchase Price in the manner  described  in
Section  1.3 hereof.  If the Purchaser elects to pay the Purchase
Price by assumption of debt or other obligations of the Seller or
its  affiliates  in  an amount equal to the Purchase  Price,  the
Purchaser  shall  provide a written release  from  the  lender(s)
releasing  the  Seller and all affiliates from the  debt  in  the
amount of the Purchase Price.

      Section 7.2    Purchaser's Documents. Purchaser shall  have
caused  to be delivered to Seller, at or before the Closing,  the
following:

      (a)   Good  Standing  Certificate.   Purchaser  shall  have
delivered  to  Seller a good standing certificate issued  by  the
State in which Purchaser is organized.

      (b)   Company  Resolutions.  True and  complete  copies  of
resolutions  of  the  Board  of  Directors  or  Managers  of  the
Purchaser authorizing the execution, delivery and performance  of
this Agreement and the transactions contemplated hereby.

      Section 7.3    Other Assurances.  The Purchaser shall  have
delivered  to  the  Seller such other and  further  certificates,
assurances  and  documents as Seller may  reasonably  request  in
order  to  evidence  the  accuracy  of  the  representations  and
warranties  made pursuant to Article IV, and, the performance  of
covenants and agreements to be performed pursuant to Article V at
or prior to the Closing, and the fulfillment of the conditions to
Seller's obligations.

                          ARTICLE VIII
                         INDEMNIFICATION

      In  addition to the indemnities included elsewhere in  this
Agreement,  the parties hereto agree to indemnify and  hold  each
other harmless as follows:

      Section  8.1    Indemnification by the Seller.  The  Seller
agrees to indemnify and hold the Purchaser harmless at all  times
after the date of this Agreement from, against and in respect of:

      (a)   Any  and  all loss, liability, damage  or  deficiency
resulting  from  any  misrepresentation, breach  of  warranty  or
nonfulfillment of any covenants or agreements on the part of  the
Seller  contained  herein  or  in  any  certificate  or  document
furnished  by the Seller pursuant hereto and any loss  or  damage
resulting   from   any   claims,  litigation,   actions,   suits,
proceedings, judgments, counsel fees, costs and expenses incident
to such misrepresentation, breach or nonfulfillment;

      (b)   Any fines and penalties levied on HPSE for operations
prior  to the Closing Date by the Florida Department of Insurance
or  other  regulatory  authorities  (not  including  any  capital
contributions which Purchaser has agreed to be responsible for);

     (c)  Any tax or other obligation or liability, contingent or
otherwise,  of  the Seller in respect of the sale or  any  profit
derived from the sale of the HEI Stock;

provided,  however, that the indemnification obligations  of  the
Seller shall be limited to the amount of the Purchase Price.

      Section  8.2     Indemnification  by  the  Purchaser.   The
Purchaser agrees to indemnify and hold the Seller harmless at all
times  after the date of this Agreement from and against any  and
all  loss, liability, damage or deficiency resulting from (i) any
misrepresentation,  breach of warranty or nonfulfillment  of  any
covenants  or  agreements on the part of the Purchaser  contained
herein  or  in  any  certificate or  document  furnished  by  the
Purchaser  pursuant hereto and any loss or damage resulting  from
any  claims, litigation, actions, suits, proceedings,  judgments,
counsel  fees,  costs and expenses incident to such misrepresenta
tion,  breach or nonfulfillment; and (ii) all liabilities arising
out  of  or  in  connection with the operations of the  Companies
subsequent to the Effective Date.

     Section 8.3    Third Party Claims.  Should any claim be made
by  a  person not a party to this Agreement with respect  to  any
matter  to  which  the  foregoing indemnity  relates,  the  party
against  whom  such claim is asserted (the "Indemnified  Party"),
within a reasonable period of time, shall give written notice  to
the other party (the "Indemnifying Party") of any such claim, and
the Indemnifying Party shall thereafter defend or settle any such
claim, at its sole expense, on its own behalf and with counsel of
its  selection.  In such defense or settlement of any claims, the
Indemnified Party shall cooperate with the Indemnifying Party  to
the  maximum  extent reasonably possible.  Any payment  resulting
from  such defense or settlement, together with the total expense
thereof, shall be binding on Seller and Purchaser for the purpose
of this Article VIII.

      Section  8.4    Settlement.  Notwithstanding the foregoing,
should  any  claim be made by a person not a party to this  Agree
ment  with respect to any matter to which the foregoing indemnity
relates,  the  Indemnified Party, on not less  than  thirty  (30)
days'  notice  to the Indemnifying Party, may make settlement  of
such  claim,  and  such  settlement  shall  be  binding  on   the
Indemnifying Party and the Indemnified Party for the purposes  of
this  Article VIII; provided, however, that if within said thirty
(30)  day period the Indemnifying Party shall have requested  the
Indemnified Party not to settle such claim and to deny such claim
at  the expense of the Indemnifying Party, the Indemnified  Party
will  promptly comply and the Indemnifying Party shall  have  the
right to defense on its own behalf with counsel of its selection.
Any  payment  or  settlement resulting from such claim,  together
with  the  total expense thereof, shall be binding on Seller  and
Purchaser for the purposes of this Article VIII.

      Section 8.5    Mediation/Arbitration.  In the event of  any
claim  or  dispute  between  the  parties  arising  out  of  this
Agreement,  the  parties agree to resolve  any  such  dispute  or
disagreement  by submitting such dispute first to  mediation  and
second to arbitration pursuant to the following procedures:

      (a)   Mediation.  The parties shall mediate any dispute  or
disagreement  upon  the  written demand of  any  party  with  the
mediator  appointed  by  the  Judicial  Arbitration  &  Mediation
Services, Inc. ("JAMS") or another party upon mutual agreement of
all  parties in disagreement, pursuant to the following terms and
conditions.

          (1)  Best Efforts.  The parties agree to use their best
efforts  to  resolve their dispute by mediation before proceeding
to binding arbitration.

           (2)   Hearings, Scheduling and Parties Present.  After
the mediator has been appointed, the parties shall promptly agree
upon  a  date  and  time  for  the initial  conference  with  the
mediator, but no later than thirty (30) days after the  date  the
mediator was selected.  The location of the mediation shall be in
Durham,  North Carolina.  The parties understand and agree  that,
besides  counsel,  a  representative from  each  side  with  full
settlement   authority  shall  be  present   at   all   mediation
conferences unless excused by the mediator.  Each party may  have
other  representatives,  agents  or  witnesses  present  at   the
mediation  to  respond to questions, contribute  information  and
participate  in the mediation.  The number of additional  parties
may  be agreed upon in advance with the assistance and advice  of
the mediator.

           (3)   Discovery.   In the event that  a  party  has  a
substantial  need  for information in the possession  of  another
party  to prepare for the mediation conference, the parties shall
use   their  best  efforts  to  agree  upon  the  procedure   for
expeditious  exchange  of  information  and,  if  required,   the
mediator shall assist in such efforts.

           (4)  Position Papers.  Each party shall deliver to the
mediator  and  each  party  to the mediation  a  concise  written
summary  of its position together with any appropriate  documents
supporting such position no later than seven (7) days before  the
scheduled mediation session, including a proposed solution to the
matters in controversy.

           (5)   Mediator's Role.  Once familiar with the  issues
involved  in  the mediation, the mediator shall, if requested  by
both  of the parties, give an opinion of the probable outcome  of
the  case and a range of settlement value and trial value if  the
case  were  litigated.  The mediator shall,  in  the  absence  of
instructions   from   the   parties   to   the   contrary,   give
recommendations  regarding  the  possible  settlement  terms  and
conditions.  The opinions and recommendations of the mediator are
not binding on the parties.

           (6)   Fees  and  Costs.  The fees  and  costs  of  the
mediation shall conform to the then current fee schedule of JAMS.
Fees  and  costs  of  the mediation shall  be  borne  equally  by
Purchaser  and  the  Seller and each  party  shall  pay  its  own
professional fees and costs.

           (7)   Confidentiality of Proceedings.   The  mediation
shall  be  considered settlement negotiations for the purpose  of
all  state and federal rules and laws protecting disclosures made
during  such conferences from later discovery or use in evidence.
The  mediation shall be confidential and no stenographic or other
written  records shall be made except the memorialized settlement
record.   All  conduct,  promises,  offers,  views,  opinions  or
statements,  whether oral or written, by any party,  the  party's
agent,  employee, or representative are confidential  and,  where
appropriate, considered work product and privileged and the  same
shall  not  be  subject to discovery or voluntary  disclosure  or
admissible  for any purpose, including impeachment in  litigation
between  the parties, provided, however, that evidence  otherwise
subject to discovery or admissible is not excluded from discovery
or  admission in evidence as a result of the same being  used  in
connection with the mediation.

          (8)  Termination of the Mediation.  The mediation shall
continue  until  the matter is resolved or the mediator  makes  a
good  faith finding that all settlement possibilities  have  been
exhausted  and  there is no reasonable likelihood  of  resolution
through mediation.

      (b)  Binding Arbitration.  After attempting to resolve  the
dispute in good faith through mediation, the parties shall,  upon
written  request of either or all parties, submit any dispute  or
disagreement  to  binding arbitration by JAMS in accordance  with
the  foregoing rules and procedures regarding mediation specified
above in paragraph (a), with the following exceptions:

          (1)  Selection of the Arbitrator.  The arbitrator shall
be  selected  by JAMS and a single arbitrator shall  conduct  the
arbitration.

           (2)  Position Papers.  Each party shall be entitled to
submit  a  reply  to  the  other party's position  paper  to  the
arbitrator.

          (3)  Arbitrator's Role.  The decision of the arbitrator
shall  be  final  and  binding  on  the  parties,  and  shall  be
enforceable  under the Uniform Arbitration Act of  the  state  in
which  the  arbitration is conducted and the terms  of  that  Act
shall apply.

           (4)  Fees and Costs.  The arbitrator shall be allowed,
in  his or her discretion, to require the losing party to pay the
reasonable  attorney's  fees and costs of  the  prevailing  party
provided  the arbitrator finds that the assessment of  such  fees
and  costs serves substantial justice; such fees and costs  shall
not  otherwise be awardable in any mediation between the  parties
The  award  of  the  arbitrator,  including  the  assessment   of
reasonable attorney's fees and costs, if any, shall bear interest
at the legal rate until the date when the awarded fees and costs,
if any, are paid in full.

      (c)   Except where specifically modified above,  all  other
terms and procedures specified for the mediation in paragraph (a)
shall apply in the arbitration.

      Section 8.6    Adjustment to the Purchase Price.   For  all
tax  purposes,  any  payment by Purchaser or  Seller  under  this
Agreement will be an adjustment to the Purchase Price.

                           ARTICLE IX
                            BROKERAGE

      The  Seller and the Purchaser represent and warrant to  the
other that the negotiations relative to this Agreement have  been
carried on by the Seller directly with the Purchaser and  by  the
Purchaser  directly with the Seller, without the intervention  of
any person other than Salomon Smith Barney and Ascendant Capital,
Inc.;  the  Seller shall be responsible for compensating  Salomon
Smith Barney and Ascendant Capital, Inc. and shall indemnify  and
hold Purchaser harmless from and against all such obligations  to
Salomon  Smith  Barney and Ascendant Capital,  Inc.   The  Seller
shall  indemnify the Purchaser and the Purchaser shall  indemnify
the  Seller and hold the other party or parties harmless  against
and  in  respect of any claim for brokerage or other  commissions
relative  to  this  Agreement (other than the  aforesaid  Salomon
Smith Barney and Ascendant Capital, Inc. compensation), or to the
transactions  contemplated hereby, and also  in  respect  of  all
expenses of any character incurred by the Purchaser, on  the  one
hand,  and  by the Seller, on the other hand, in connection  with
this Agreement or such transactions, arising out of any claim for
any  such brokerage or other commissions alleged to be due  as  a
result of the actions or conduct of the indemnifying party.

                            ARTICLE X
FURTHER ASSURANCES; ACCESS AND INFORMATION; CONDITIONS PRECEDENT

     Section 10.1   Further Assurances.  The Seller and Purchaser
all  hereby covenant and agree that at any time and from time  to
time  they  will promptly execute and deliver to the others  such
further instruments and documents and take such further action as
the parties may from time to time reasonably request in order  to
further carry out the intent and purpose of this Agreement.

      Section 10.2   Access and Information.  Purchaser  and  its
agents, attorneys, accountants and representatives have had  full
access  to  the  respective properties, affairs, books,  records,
contracts  and  documents  of the Companies,  including,  without
limitation,  all contracts, leases, evidence of indebtedness  and
audit  work  papers  of the internal auditors of  the  respective
businesses,  as  Purchaser has reasonably requested.   Until  the
Closing, Purchaser shall not disclose and shall cause its agents,
attorneys, accountants and representatives not to disclose to any
other party any confidential data or information secured, and, if
the  Closing  does not occur as herein provided,  Purchaser  will
promptly  return at Purchaser's expense, all books,  records  and
other documents and papers obtained and all copies thereof.

     Section 10.3   Conditions Precedent.  The obligations of the
Seller  and Purchaser to consummate the transactions contemplated
by  this  Agreement  are  subject  to  the  following  conditions
precedent:

      (a)   approval  of  the transactions contemplated  by  this
Agreement by the DOI;

     (b)  approval of the material terms of this Agreement by the
Board of Directors of the Seller;

     (c)  the obtaining of financing satisfactory to Purchaser to
consummate  the  transactions contemplated under this  Agreement;
and

      (d)  completion and approval by the Seller and Purchaser of
all Exhibits and Schedules to this Agreement.

                           ARTICLE XI
             NATURE AND SURVIVAL OF REPRESENTATIONS

      All representations, warranties, and agreements made by the
Seller  in this Agreement, except as otherwise expressly  stated,
shall survive the Closing and any investigation at any time  made
by or on behalf of the Seller as follows:

     (a)  The representations, warranties and covenants contained
in Sections 2.1, 2.2 and 5.11 hereof shall survive forever;

     (b)  The representations, warranties and covenants contained
in  Section 2.16 hereof shall survive for a period of six  months
following the expiration of the relevant statue of limitations;

      (c)   The representation, warranties and covenants relating
to all liabilities retained by Seller or not specifically assumed
by Purchaser shall survive forever; and

      (d)   All  other representations, warranties, and covenants
made  hereunder  by Seller shall be effective  for  a  period  of
twelve  (12)  months  following the Closing  Date.   Within  said
twelve month period, Purchaser must provide written notice to the
Seller of the breach of any representation, warranty or covenant,
pursuant  to  which  Purchaser  asserts  a  claim  stating   with
particularity all material facts then known to Purchaser relating
to such claim.

                           ARTICLE XII
                          MISCELLANEOUS

      Section  12.1   Notices; Addresses.  All notices, requests,
demands,  and other communications hereunder shall be in writing,
and  shall  be  deemed to have been duly given  if  delivered  or
mailed, first class postage prepaid, addressed as follows:

     SELLER:        Coastal Physician Group, Inc.
                    2828 Croasdaile Drive
                    Durham, North Carolina  27704
                    Attention: President

     PURCHASER:     Steven M. Scott, M.D.
                    2828 Croasdaile Drive
                    Durham, North Carolina  27704

      Section  12.2    Expenses.  Except  as  otherwise  provided
herein,  the  parties hereto shall pay all of their own  expenses
relating  to  the  transactions contemplated by  this  Agreement,
including,  without limitation, the fees and  expenses  of  their
respective legal counsel and financial advisors.

     Section 12.3   Counterparts.  This Agreement may be executed
simultaneously in two or more counterparts, each of  which  shall
be deemed an original, but all of which together shall constitute
one and the same instrument.

       Section  12.4    Severability.   Any  provision  of   this
Agreement   which   is   prohibited  or  unenforceable   in   any
jurisdiction,  shall as to such jurisdiction, be  ineffective  to
the  extent  of  such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and  any  such
prohibition  or  unenforceability in any jurisdiction  shall  not
invalidate  or render unenforceable such provision in  any  other
jurisdiction.

     Section 12.5   Assigns/Assignments.  This Agreement shall be
binding  upon and inure to the benefit of the parties hereto  any
and  all successors, assigns, or other successors in interest  of
the  Purchaser  and  the  Seller.  Neither  the  Seller  nor  the
Purchaser  shall  be  entitled to assign this  Agreement  or  any
rights hereunder without the written consent of the other party.

      Section  12.6   Public Announcement.  Prior to Closing,  no
party  will  make any public announcements with respect  to  this
transaction without the approval of the other parties, except  as
otherwise  required  by  law,  by  the  Securities  and  Exchange
Commission, or that are recommended by legal counsel.

      Section  12.7   Confidentiality.  Except to the extent  the
parties  agree or are required by law to make information  public
pursuant to Section 12.7, the parties agree to keep the terms  of
this  Agreement confidential and not to disclose the contents  of
this  Agreement to any party other than employees of a party  who
agree  to  maintain  such confidentiality  and  the  professional
advisors and representatives of the parties.

      Section  12.8    Remedies.  In the  event  that  any  party
defaults or fails to perform any of the conditions or obligations
of  such  party  under  this Agreement or  any  other  agreement,
document  or  instrument executed in connection with  this  Agree
ment,  or  in the event that any such party's representations  or
warranties  contained  herein or in  any  such  other  agreement,
document  or instrument are not true and correct as of  the  date
hereof and as of the Closing, the other parties shall be entitled
to  exercise any and all rights and remedies available to them by
or pursuant to this Agreement or at law or in equity.

      Section  12.9    Captions.  The captions and  headings  set
forth in this Agreement are for convenience of reference only and
shall not be construed as a part of this Agreement.

      Section 12.10  Merger Clause.  This Agreement contains  the
final,  complete and exclusive statement of the agreement between
the  parties with respect to the transactions contemplated herein
and  all prior or contemporaneous written or oral agreements with
respect to the subject matter hereof are merged herein.

      Section 12.11  Amendments.  No change, amendment, qualifica
tion  or cancellation hereof shall be effective unless in writing
and  executed  by all of the parties hereto by their  duly  autho
rized officers.

      Section  12.12   Governing Law.  This  Agreement  shall  be
governed  by  and construed in accordance with the  laws  of  the
State of North Carolina.

      IN  WITNESS  WHEREOF, the parties have duly  executed  this
Agreement as of the _____ day of October, 1998, effective  as  of
October 1, 1998.

                                SELLER:

                                COASTAL PHYSICIAN GROUP, INC.



                                By:
                                Its:

ATTEST:


By:______________________________
     Secretary

     [Corporate Seal]


                                PURCHASER:



                                Steven M. Scott, M.D.



                            EXHIBIT B
                                

Partial Release of Non-Compete Provisions of Employment Agreement
                  between Steven M. Scott, M.D.
                               and
                  Coastal Physician Group, Inc.

       This   Partial   Release  of  Non-Compete  Provisions   of
Employment Agreement is made and entered into this the  ____  day
of  October, 1998, by and between Steven M. Scott, M.D. ("Scott")
and Coastal Physician Group, Inc. ("Coastal").

      Scott  and  Coastal are parties to an Employment  Agreement
dated  April  1, 1991, ("Agreement") pursuant to which  Scott  is
employed by Coastal as its President and Chief Executive Officer;
and

       The  Agreement  contains  certain  provisions  restricting
Scott's  activities that are in competition with Coastal  or  its
subsidiaries; and

     Scott, Coastal and certain of its subsidiaries, have entered
into   an   agreement  dated  the  date  hereof  (the   "Purchase
Agreement")  pursuant to which Scott will purchase the  stock  of
Health Enterprises, Inc. ("HEI"); and

      The parties are desirous of amending the Agreement in order
that  the ownership, operation and potential expansion of HEI  by
Scott  or  any  of his affiliates shall not be  deemed  to  be  a
violation of the non-competition or any other provisions  of  the
Agreement.

      NOW,  THEREFORE, in consideration of the  purchase  of  the
stock of HEI referred to above, the parties agree as follows:

        1.     Partial   Release   of   Non-Compete   Provisions.
Notwithstanding  the non-compete or any other provisions  of  the
Agreement,  and  notwithstanding  any  provisions  of  any  other
agreement  between  Scott  or any of his  affiliates  other  than
Coastal  or its subsidiaries (collectively, the "Scott Entities")
and  Coastal  or  any  of  its  subsidiaries  (collectively,  the
"Coastal Entities"),

           a.    the Scott Entities may hereafter enter into  the
business  of  owning, managing, operating or otherwise  providing
services  to health maintenance organizations, preferred provider
organizations or similar organizations (collectively "HMOs");

           b.   the Scott Entities shall be permitted to increase
and  expand their ownership, management, and operation  of  HMOs,
including  without  limitation creating  start  up  locations  or
acquiring additional HMOs in any geographic location.

      The Scott Entities shall not be required to first offer the
Coastal  Entities any opportunities which the Scott Entities  may
have  to  increase  or  expand  their  ownership,  management  or
operation of, or other business relationships with HMOs; provided
that  if  any opportunities to own, operate, manage or  otherwise
provide  services to HMOs are made available to Scott or  any  of
the  other  Scott Entities by reason of Scott's  position  as  an
officer, employee, director or shareholder of Coastal, then Scott
shall  first make reasonable efforts to determine whether Coastal
desires  to avail itself of such opportunity.  If Coastal informs
Scott  that it intends to avail itself of such opportunity,  then
Scott  and  the  other  Scott  Entities  shall  not  pursue  such
opportunity  or enter into any transaction with respect  to  such
opportunity unless and until Coastal shall advise Scott  that  no
Coastal  Entity  has  any  further  interest  in  pursuing   such
opportunity.

      2.    Ratification  of Remainder of Agreement.   Except  as
specifically  modified  herein,  the  remaining  terms   of   the
Agreement are hereby specifically ratified and confirmed  in  all
respects.

     IN WITNESS WHEREOF, the parties have executed this agreement
as of the day and year first above written.

                         COASTAL PHYSICIAN GROUP, INC.


                         By:______________________________
                         Title:_____________________________


                         _________________________________
                         Steven M. Scott, M.D.