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                                SECURITIES AND EXCHANGE COMMISSION

                                       Washington D.C. 20549

                                            FORM 10-K

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

                         For the fiscal year ended December 31, 1996
                                   Commission file 02-25856

                                    CRA MANAGED CARE, INC.
                   (Exact name of Registrant as specified in its charter)

         Massachusetts                                04-2658593
(State or other jurisdiction of          (I.R.S. employer identification No.)
 incorporation or organization)


        312 Union Wharf, Boston Massachusetts                      02109
        (Address of principal executive offices)                 (Zip code)
(Registrant's telephone number, including area code)

                               (617) 367-2163
      Securities registered pursuant to Section 12(b) of the Act: None

    Securities registered pursuant to Section 12(g) of the Act: Common Stock

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
the filing requirements for the past 90 days. Yes /X/ No/ /

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

The aggregate market value of the voting stock held by non-affiliates of the
Registrant totaled $313,209,000 (based on the closing price of the Company's
Common Stock on The Nasdaq National Market on March 19, 1997).

As of March 19, 1997, the Registrant had outstanding an aggregate of
8,961,985 shares of its Common Stock, $.01 par value.

                 DOCUMENTS INCORPORATED BY REFERENCE

Certain parts of the Registrant's 1996 Annual Report to Stockholders are
incorporated by reference into Part II and IV of this report.

Certain parts of the Registrant's definitive Proxy Statement dated April 4,
1997 are incorporated by reference into Part III of this report.

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                             CRA MANAGED CARE, INC.
                                   FORM 10-K
                      FISCAL YEAR ENDED DECEMBER 31, 1996
                                     INDEX

PART I                                                                 PAGE
                                                                       ----
ITEM 1.  BUSINESS                                                         3

ITEM 2.  PROPERTIES                                                      17

ITEM 3.  LEGAL PROCEEDINGS                                               17

ITEM 4.  SUBMISSIONS OF MATTERS TO A VOTE OFSECURITY HOLDERS             18

PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS                                             18

ITEM 6.  SELECTED FINANCIAL DATA                                         18

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS                                       18

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                     18

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE                             19

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE  REGISTRANT             19

ITEM 11. EXECUTIVE COMPENSATION                                          19

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL  OWNERS
         AND MANAGEMENT                                                  19

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                  19

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
         FORM 8-K                                                        20

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This document contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Reference is hereby made
to Risk Factors contained later in this document that could cause actual
results to differ materially from those contained in this document.

                                          PART I

ITEM 1. BUSINESS

CRA Managed Care, Inc. (the "Company" or "CRA") provides field case
management and specialized cost containment services designed to reduce
workers' compensation costs. The Company operates one of the largest field
case management organizations in the United States, consisting of 118 field
case management offices with approximately 1,125 field case managers who
provide medical management and return to work services in 49 states and the
District of Columbia. CRA also provides a broad range of higher margin
specialized cost containment services, including utilization management,
specialized preferred provider organization ("PPO") network management,
telephonic case management and retrospective medical bill review services,
that are designed to reduce costs associated with work-related injuries and
automobile accident-related injuries. Revenues from specialized cost
containment services comprised approximately 33.8% of revenues for 1996, up
from approximately 27.1% for 1995. The Company markets its services to
workers' compensation insurers, third-party administrators ("TPAs"),
self-insured employers, and payors of automobile accident medical claims
through a direct sales and marketing organization consisting of over 150
dedicated personnel. CRA currently has over 1,250 customers nationwide.

INDUSTRY OVERVIEW

Workers' compensation

Workers' compensation is a state-mandated, comprehensive insurance program
that requires employers to fund medical expenses, lost wages and other costs
resulting from work-related injuries and illnesses. Since their introduction
in the early 1900s, these programs have been expanded to all fifty states and
the District of Columbia. Each state is responsible for implementing and
regulating its own program. Consequently, workers' compensation benefits and
arrangements vary on a state-by-state basis and are often highly complex.
According to statistics published in the 1994 and 1996 Workers' Compensation
Year Books, employers in the United States incurred approximately $57.3
billion in total costs of workers' compensation in 1993 and approximately
$22.8 billion in 1982.

Workers' compensation plans generally require employers to fund all of an
employee's costs of medical treatment and a significant portion of lost
wages, legal fees and other associated costs. Typically, work-related
injuries are broadly defined, and injured or ill employees are entitled to
extensive benefits. Employers are required to provide first-dollar coverage
with no co-payment or deductible due from the injured or ill employee for
medical treatment and, in many states, there is no lifetime limit on
expenses. However, in exchange for providing this coverage for employees,
employers are not subject to litigation by employees for benefits in excess
of those provided by the relevant state statute. In most states, the
extensive benefits coverage (for both medical costs and lost wages) is
provided through the purchase of commercial insurance from private insurance
companies, participation in state-run insurance funds or employer
self-insurance.

Provider reimbursement methods vary on a state-by-state basis. A majority of
states have adopted fee schedules pursuant to which all health care providers
are uniformly reimbursed. The fee schedules are set by each state and
generally prescribe the maximum amounts that may be reimbursed for a
designated procedure. In states without fee schedules, health care providers
are reimbursed based on usual, customary and reasonable ("UCR") fees charged
in the particular state in which the services are provided.

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Workers' compensation managed care services

The workers' compensation managed care services market is served by the
Company and a small number of other competitors that offer a comprehensive
line of workers' compensation managed care services on a nationwide basis. A
large number of additional companies offer some managed care services on a
limited geographic basis. The result is a fragmented market with what the
Company believes is only a small number of companies offering a fully
integrated and comprehensive approach to managing workers' compensation costs
on a nationwide basis.

Workers' compensation managed care services broadly fall into two categories:
field case management services and specialized cost containment services.
Field case management services involve working on a one-on-one basis with
injured employees and their various health care professionals, employers and
insurance company adjusters. Field case management services are designed both
to assist in maximizing medical improvement and, where appropriate, to
expedite return to work. Specialized cost containment services are designed
to reduce the cost of workers' compensation claims through a variety of
techniques such as first report of injury services, utilization management
(precertification, concurrent review and retrospective bill review),
telephonic case management, PPO network access, independent medical
examinations ("IMEs"), peer reviews and hospital bill auditing.

Managed care techniques are intended to control the cost of health care
services and to measure the performance of providers through intervention and
on-going review of services proposed and actually provided. Managed care
techniques were originally developed to stem the rising costs of group health
medical care. Historically, employers were slow to apply managed care
techniques to workers' compensation costs primarily because the aggregate
costs are relatively small compared to costs associated with group health
benefits and because state-by-state regulations related to workers'
compensation are far more complex than those related to group health.
However, in recent years, employers and insurance carriers have been
increasing their focus on applying managed care techniques to control their
workers' compensation costs.

Since workers' compensation benefits are mandated by law and are subject to
extensive regulation, payors and employers do not have the same flexibility
to alter benefits as they have with other health benefit programs. In
addition, workers' compensation programs vary from state to state, making it
difficult for payors and multi-state employers to adopt uniform policies to
administer, manage and control the costs of benefits. As a result, managing
the cost of workers' compensation requires approaches that are tailored to
the specific state regulatory environment in which the employer operates.
Many states do not permit employers to restrict a claimant's choice of
provider, making it difficult for employers to utilize managed care
approaches characteristic of the group health insurance market. However,
employers in 20 states currently have the right to direct employees to a
specific primary health care provider during the onset of a workers'
compensation case, subject to the right of the employee to change physicians
after a specific period. Recently, a number of states have adopted
legislation encouraging the use of workers' compensation managed care
organizations ("MCOs") in an effort to allow employers to control their
workers' compensation costs. MCO laws generally provide employers an
opportunity to channel injured employees into provider networks. In certain
states, MCO laws require licensed MCOs to offer certain specified services,
such as utilization management, case management, peer review and provider
bill review. Most of the MCO laws adopted to date establish a framework
within which a company such as CRA can provide its customers a full range of
managed care services for greater cost control.

CRA'S BUSINESS STRATEGY

The Company's objective is to expand and capitalize on its presence as a
national provider of comprehensive managed care services to workers'
compensation payors and take advantage of developing opportunities in related
industries. The Company's strategy for achieving this objective is as follows:

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Focus on Workers' Compensation Managed Care

The Company intends to continue its primary focus on providing workers'
compensation managed care services to workers' compensation insurers, TPAs
and self-insured employers. The Company believes that to serve this complex
market, a core understanding of medical-related issues, a thorough
understanding of return to work issues and techniques, and an in-depth
understanding of the state-by-state regulatory environment is required. CRA
has developed such expertise through its years of serving this market. CRA
believes it can leverage its expertise as a highly skilled provider of
workers' compensation managed care services to further expand its national
market presence and increase its market share.

Increase National Accounts Penetration

The Company intends to increase its penetration of large, national payors by
leveraging its broad-based workers' compensation expertise and its experience
with its existing base of national accounts. Many large, national insurance
carriers and self-insured employers are seeking workers' compensation managed
care service providers that have the ability to provide services on a
nationwide basis. These large payors want a comprehensive solution to their
workers' compensation needs from a service provider that is adept at
understanding and working with many different and complex state legislative
environments. The Company's national organization of local service locations
enables the Company to meet the needs of these large, national payors while
maintaining the local market presence necessary to monitor changes in
state-specific regulations and to facilitate case resolution through locally
provided managed care services.

Cross-Sell Comprehensive Product Offering

The Company intends to capitalize on the relationships developed through its
118 office field case management network by aggressively cross-selling its
specialized cost containment services to its existing customer base. CRA
believes that it is one of a small number of companies with a comprehensive
offering of workers' compensation managed care services. The Company
complements its extensive field case management network with 70 service
locations nationwide that provide one or more specialized cost containment
services. Of the Company's approximately 1,250 case management customers,
only approximately 20% are also utilizing the Company's specialized cost
containment services. The Company believes that this low utilization rate
among CRA's existing customers provides a significant opportunity to expand
CRA's specialized cost containment business.

Emphasize Early Intervention

The Company intends to increase its marketing of early intervention services,
such as first report of injury, precertification, telephonic case management
and access to PPO networks. Early intervention enables the Company to
promptly identify cases that have the potential to result in significant
expenses and to take appropriate measures to control these expenses before
they are incurred. In addition, the Company believes that providing early
intervention services generally results in the Company obtaining earlier
access to claims files, thereby improving the Company's opportunity to
provide the full range of its managed care services.

Leverage Managed Care Expertise To Automobile Insurance Market

The Company intends to capitalize on the recent introduction of managed care
techniques to the automobile insurance market through the recent acquisition
of QMC3, Inc. ("QMC3"), a leading provider of managed care services to the
automobile insurance market. CRA intends to leverage its existing presence in
the automobile insurance market and its existing office infrastructure to
efficiently expand the geographic coverage of automobile managed care
services.

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Execute Strategic Acquisitions

The Company will continue to seek complementary strategic acquisitions, such
as Focus HealthCare Management, Inc. ("Focus"), QMC3 and Prompt Associates.
Inc. ("Prompt"), to further expand its product offerings and enhance its
opportunities for growth. While the Company currently maintains a broad
offering of services, the evolution of the marketplace may give rise to
opportunities in the workers' compensation and related industries.

SERVICES

CRA's services include both field case management services and specialized
cost containment services.

Field Case Management Services

CRA provides field case management services to the workers' compensation
insurance industry through case managers working at the local level on a
one-on-one basis with injured employees and their various health care
professionals, employers and insurance company adjusters. The Company's
services are designed to assist in maximizing medical improvement and, where
appropriate, to expedite the employees' return to work through medical
management and vocational rehabilitation services.

CRA's field case management services consist of one-on-one management of a
work-related injury by the Company's approximately 1,125 field case managers
serving 49 states and the District of Columbia from CRA's 118 local field
case management offices. This service typically involves a case with a
significant potential or actual amount of lost work time or a catastrophic
injury that requires detailed management and therefore is referred out by the
local adjuster to the local CRA marketer calling on that office. CRA field
case managers specialize in expediting the injured employee's return to work
through both medical management and vocational rehabilitation by working with
all the interested parties in a work-related injury. Medical management
services provided by CRA's field case managers include coordinating the
efforts of all the health care professionals involved and increasing the
effectiveness of the care being provided by encouraging compliance and active
participation on the part of the injured worker. Vocational rehabilitation
services include job analysis, work capacity assessments, labor market
assessments, job placement assistance and return to work coordination. Field
case management services represented approximately 76.0%, 72.9% and 66.2% of
the Company's revenues for the years ended December 31, 1994, 1995, and 1996,
respectively.

The Company believes that the following factors will contribute to the
continued growth of its field case management services: (i) increased
employer acceptance of field case management techniques due to greater
exposure to the workers' compensation managed care market; (ii) earlier
identification of individuals in need of field case management services due
to increased utilization of the Company's specialized cost containment
services, particularly early intervention services; and (iii) increased
market share at the expense of smaller, undercapitalized competitors.

Specialized Cost Containment Services

In 1990, as part of the Company's strategy of providing a comprehensive range
of services, CRA began broadening its business by providing a number of
additional services focused directly on helping to reduce the medical costs
associated with workers' compensation for its clients. Today, these
specialized cost containment services include first report of injury service,
utilization management (precertification, concurrent review and retrospective
bill review), telephonic case management, PPO network access, IMEs, peer
reviews and hospital bill auditing. By adding these services to CRA's
traditional strength and national breadth in field case management, the
Company now offers its clients an integrated workers' compensation managed
care program. CRA is able to offer its services on a combined basis as a full

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service managed care program, beginning with the first report of injury and
including all managed care services needed to manage aggressively the medical
costs, temporary wage replacement payments and permanent disability payments
associated with a work-related injury. CRA also offers each of its services
on an unbundled basis. CRA's comprehensive approach to managing workers'
compensation costs serves the needs of a broad range of clients, from local
adjusters to national accounts. In addition to providing specialized cost
containment services for work-related injuries and illnesses, the Company
also provides similar services to payors of automobile accident medical
claims and social security disability advocacy services to payors of long
term disability. Specialized cost containment services collectively
represented approximately 24.0%, 27.1% and 33.8% of the Company's revenues
for the fiscal years ending December 31, 1994, 1995 and 1996, respectively.

The Company believes that the demand for specialized cost containment
services will continue to increase due to a number of factors, including: (i)
the increasing payor awareness of the availability of these techniques for
managing workers' compensation costs; (ii) the perceived effectiveness of
managed care techniques at reducing costs for group health insurance plans;
(iii) the verifiable nature of the savings that can be obtained by
application of specialized cost containment techniques applicable to workers'
compensation; and (iv) the broad applicability of these techniques to all
injured employees, not just severely injured employees likely to be absent
from work.

FIRST REPORT OF INJURY SERVICE.  The Company provides a computerized first
report of injury reporting service in which an employer or claims adjuster
phones in all injuries as soon as they occur to the Company's centralized
service center. Each report is electronically transferred or mailed to the
state agency, the employer and the insurance company. This service assists in
the timely preparation and distribution of state-mandated injury reports and
also provides CRA and its customers with an early intervention tool to
maximize control over workers' compensation claims.

UTILIZATION MANAGEMENT: PRECERTIFICATION AND CONCURRENT REVIEW. CRA's
precertification and concurrent review services are used by clients to ensure
that certain medical procedures are precertified by a CRA registered nurse
and/or physician for medical necessity and appropriateness of treatment
before the medical procedure can be performed. CRA's determinations represent
only recommendations to the customer, the ultimate decision to approve or
disapprove the request is made by the claims adjuster. Precertification calls
are made by either the claimant or the provider to one of CRA's national
utilization management reporting units. Once a treatment plan has been
precertified, a CRA employee performs a follow-up call (concurrent review) at
the end of an approved time period to evaluate compliance and/or discuss
alternative plans.

UTILIZATION MANAGEMENT: RETROSPECTIVE BILL REVIEW. Through a sophisticated
software program, CRA reviews and reduces its customers' medical bills
(including hospital bills) to either the various state-mandated fee schedules
for workers' compensation claims or a percentage of the UCR rates that exist
in non-fee schedule states. Additionally, this automated retrospective bill
review service enables clients to access certain PPO pricing schedules that
represent additional savings below the fee schedules or UCR rates. The
savings that accrue to CRA's clients for this service can be significant.
Retrospective bill review also creates an important historical database for
provider practice patterns and managed care provider compliance requirements.
CRA provides retrospective bill review service from 38 service locations
throughout the country, 11 of which are operated at a client location using
CRA employees. The Company also establishes arrangements that enable
customers to run the retrospective bill review service in-house by their own
employees.

ACCESS TO PREFERRED PROVIDER NETWORKS. CRA provides its clients with access
to PPO networks within all the markets CRA serves through one of its own
PPOs, including its recently acquired Focus subsidiary, or by contracting
with existing national or regional PPOs. These PPOs provide injured workers
with access to quality medical care and pre-negotiated volume discounts,
thereby offering CRA's clients the ability to influence, or in certain states
to direct, their employees into the PPO network as a means of managing their
work-related claims. In addition to providing a vehicle for managing the
workers'

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compensation process, the discounts associated with these PPO arrangements
generate additional savings through the retrospective bill review program
described above. Focus' national network includes approximately 142,000
individual providers and 2,300 hospitals covering 36 states and the District
of Columbia.

TELEPHONIC CASE MANAGEMENT.  This service provides for short-duration (30 to
60 days) telephonic management of workers' compensation claims. The
telephonic case management units accept first reports of injury, negotiate
discounts with hospitals and other providers, identify care alternatives and
work with injured employees to minimize lost time on the job. Each of the
telephonic case management units is staffed with nurses who are experienced
in medical case management. The telephonic case management units represent an
important component of early intervention and act as a referral source of
appropriate cases to CRA's local field case management offices. This service
is offered from five locations across the country.

INDEPENDENT MEDICAL EXAMS. IMEs are provided to assess independently the
extent and nature of an employee's injury or illness. CRA provides its
clients with access to independent physicians who perform the IMEs from 17 of
the Company's service locations and, upon completion, prepare reports
describing their findings.

PEER REVIEWS.  This service is provided by a physician, therapist,
chiropractor or other provider who reviews medical files to confirm that the
care being provided appears to be necessary and appropriate. The reviewer
does not meet with the patient, but merely reviews the file as presented.

HOSPITAL BILL AUDITS.  This service is provided by the Company's registered
nurses who review hospital bills for appropriateness, relatedness and medical
necessity. The nurse may subsequently negotiate fees and obtain discounts for
prompt payment or inappropriate charges. Through its recently announced
acquisition of Prompt, the Company has expanded its client base for hospital
bill audits to include the group health payor community. Prompt is a leading
provider of out-of-network bill review services to the group health payor
community. These services reduce clients' costs by utilizing the Company's
team of negotiators and proprietary data base systems to reprice inpatient
hospital and outpatient facility bills on a line-by-line basis. Such bills
are repriced to either a usual and customary rate, a PPO contract rate, or a
combination thereof. Prompt operates offices in Frederick, Maryland and Salt
Lake City, Utah, with 107 full time employees. Prompt has created a data base
over the past seven years from the details of inpatient hospital and
outpatient facility bills from across the country which has allowed it to
standardize a high percentage of hospital charge codes for a significant
number of such institutions.

AUTOMOBILE INSURANCE MANAGED CARE.  The Company, through the acquisition of
QMC3, has expanded its product line to offer an integrated service to the
automobile insurance market that permits insurers to direct automobile
accident victims into networks of medical providers. QMC3 currently provides
this integrated service in Colorado and has produced significant savings for
its insurance company clients since the initiation of its services. QMC3, in
cooperation with a third party PPO, has been in discussions for more than a
year with the State of New York Insurance Department regarding approval of
this PPO as a certified provider of fully integrated managed care services to
the New York automobile insurance market using QMC3 as its exclusive
utilization review agent. The State of New York Insurance Department has
approved this arrangement for the New York City metropolitan area and Long
Island, effective as of June 1, 1996. Such an arrangement is the first to
offer automobile insurance managed care services in New York. The Company and
QMC3, in cooperation with the third party PPO, are continuing their
discussions with the State of New York Insurance Department regarding further
approvals for offerings of managed care services to automobile insurers in
the balance of the State of New York. Services offered to the automobile
insurance market include precertification, telephonic case management,
direction of injured persons into specialized PPO networks, medical bill
review and field case management.

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CUSTOMERS

CRA has over 1,250 customers across the United States and Canada, including
most of the major underwriters of workers' compensation insurance, large TPAs
and self-insured employers. The Company's largest customer in 1996 accounted
for approximately 5% of total revenue. The Company is compensated primarily
on a fee-for-service basis. Although the Company has entered into written
agreements with certain of its customers from time to time, it has not been
the Company's historical practice to enter into  written agreements with its
customers. Accordingly, the Company's customers generally can elect to
terminate their relationships with the Company on short notice.

SALES AND MARKETING

The Company actively markets its services primarily to workers' compensation
insurance companies, TPAs and self-insured employers and groups. The Company
also markets to the automobile insurance market, group health and long-term
disability marketplaces, but to a significantly lesser degree. The Company's
marketing organization includes over 150 full-time sales and marketing
personnel. While the majority of CRA's current business is generated from
workers' compensation insurance companies, self-insured employers (often in
connection with a TPA) also have been an important source of business and the
Company believes they will likely become more important in the future as
larger corporations continue to evaluate self-insuring their workers'
compensation programs.

Marketing of CRA's services occurs at both the local insurance company
adjuster level for much of the field case management business as well as the
corporate level for national managed care accounts and self-insured
corporations where a more sophisticated sales presentation is required. The
local marketing to insurance company adjusters for field case management
referrals has been a critically important component of the Company's
marketing strategy because of the decision-making authority that resides at
the adjuster level and the relationship-driven nature of that portion of the
business. However, with the advent of comprehensive managed care legislation,
a more proactive environment for workers' compensation change and a more
sophisticated product offered by CRA, the Company will continue to focus on
the marketing of national headquarters offices of insurance companies and
self-insured companies. CRA has a dedicated staff of national accounts
salespeople responsible for marketing and coordinating a full selection of
services to corporate offices.

QUALITY ASSURANCE

The Company regularly evaluates its quality of service delivery by means of
audits of compliance with special instructions, completion of activities in a
timely fashion, quality of reporting, identification of savings, accuracy of
billing and professionalism in contacts with health care providers and the
effectiveness of the Company's services. Audits are conducted on a nationwide
basis for a particular customer or on a local office basis by selecting
random files for review. A detailed report is generated outlining the audit
findings and providing specific recommendations for service delivery
improvements. When appropriate, follow-up audits are conducted to ensure that
recommendations from the initial audit have been implemented.

COMPETITION

The workers' compensation managed care services market is fragmented, with a
large number of competitors. CRA competes with numerous companies, including
national managed care providers, insurance companies and HMOs. CRA's primary
competitors are companies that offer one or more workers' compensation
managed care services on a national basis. The Company also competes with
numerous smaller companies which generally provide unbundled services on a
local level where such companies often have a relationship with a local
adjuster. Several large workers' compensation insurance carriers offer
managed care services for their insurance customers either through the
insurance

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carrier's own personnel or by outsourcing various services to providers such
as CRA. The Company also competes to some degree with large HMOs, which, CRA
believes, have historically focused their networks primarily on controlling
health care costs rather than managing the process of returning an injured
employee to work.

The Company believes that, as managed care techniques continue to gain
acceptance in the workers' compensation marketplace, CRA's competitors will
increasingly consist of nationally focused workers' compensation managed care
service companies, insurance companies, HMOs and other significant providers
of managed care products. Many of the Company's current and potential
competitors are significantly larger and have greater financial and marketing
resources than those of the Company.

Within the past few years, several states have experienced decreases in
workers' compensation insurance premium rates. The Company believes that
managed care and return to work services will continue to be necessary in the
future to sustain and increase workers' compensation cost savings.

The Company competes on the basis of its specialized knowledge and expertise
in the workers' compensation managed care services industry, effectiveness of
services, ability to offer a range of services in multiple markets,
information systems and price.

DATA PROCESSING

The Company uses computer systems to provide certain of its services and to
provide accounting statements and financial reports. The Company uses
licensed software from national vendors to maintain its financial records and
perform other general business. The software used by the Company within its
retrospective bill review operation is licensed from an independent third
party software company pursuant to a non-exclusive license with a three-year
term expiring February 1998, that may be terminated by either party upon six
months' prior written notice.

GOVERNMENT REGULATION

General

The Company's business is conducted within a regulated environment. The
Company's activities are regulated principally at the state level, which
means that the Company must comply with regulatory requirements which differ
from state to state. Although the laws affecting the Company's operations
vary widely from state to state, these laws fall into four principal
categories: (i) workers' compensation laws that restrict the methods and
procedures that the Company may employ in its workers' compensation managed
care programs or require licensor, certification or other approval of such
programs; (ii) laws that require licensing, certification or other approval
of businesses, such as the Company, that provide medical review services;
(iii) laws regulating the operation of managed care provider networks; and
(iv) proposed laws which, if adopted, would have as their objective the
reform of the health care system as a whole, such as proposals to implement
24-hour health coverage using a single insurance plan for work-related and
non-work-related health problems. Laws and regulations affecting the
Company's operations change frequently. The Company believes that it is in
material compliance with regulatory requirements applicable to its business.

Workers' Compensation Legislation

In performing workers' compensation managed care services, the Company must
comply with state workers' compensation laws. Workers' compensation laws
require employers to assume financial responsibility for medical costs, a
portion of lost wages and related legal costs of work-related illnesses and
injuries. These laws establish the rights of workers to receive benefits and
to appeal benefit denials. The workers' compensation laws also regulate the
methods and procedures which the Company may employ in its workers'
compensation managed care programs. For example, workers' compensation laws
prohibit medical co-payments and deductibles by employees. In addition,
certain states restrict employers' rights

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to select health care providers and establish maximum fee levels for
treatment of injured workers. See "-- Industry Overview."

In several states, recent workers' compensation reform legislation has eased
to some degree these regulatory restraints on managed care for injured
workers. Legislative reforms in some states permit employers to designate
health plans such as HMOs and PPOs to cover workers' compensation claimants.
In some instances, such health plans are required to obtain licensor,
certification or other approvals to cover workers' compensation claimants.
Because many health plans have the capacity to manage health care for
workers' compensation claimants, such legislation may intensify competition
in the market served by the Company.

    Within the past few years, several states have experienced decreases in
the number of workers' compensation claims and the cost per claim, which have
been reflected in workers' compensation insurance premium rate reductions in
those states. The Company believes that these declines in workers'
compensation costs are due principally to intensified efforts by payors to
manage and control claims costs, to improve risk management by employers and
to legislative reforms. If declines in workers' compensation costs occur in
many states and persist over the long-term, such declines may have an adverse
impact upon the Company's business and results of operations.

Specialized Cost Containment Services

Many of the Company's specialized cost containment services include
prospective or concurrent review of requests for medical care or therapy.
Approximately half of the states have enacted laws that require licensor,
certification or other approval of businesses, such as the Company, that
provide medical review services. Some of these laws apply to medical review
of care covered by workers' compensation. These laws typically establish
minimum standards for qualifications of personnel, confidentiality, internal
quality control, and dispute resolution procedures. These regulatory programs
may result in increased costs of operation for the Company, which may have an
adverse impact upon the Company's ability to compete with other available
alternatives for health care cost control.

Use Of Provider Networks

The Company's ability to provide comprehensive workers' compensation managed
care services depends in part on its ability to contract with or create
networks of health care providers which share the Company's objectives. For
some of its clients, the Company offers injured workers access to networks of
providers who are selected by the Company for quality of care and pricing.
New laws regulating the operation of managed care provider networks have been
adopted by a number of states. These laws may apply to managed care provider
networks having contracts with the Company or to provider networks which the
Company may organize or acquire. To the extent the Company is governed by
these regulations, it may be subject to additional licensing requirements,
financial oversight and procedural standards for beneficiaries and providers.

Automobile Insurance Legislation

The automobile insurance industry, like the workers' compensation industry,
is regulated on a state-by-state basis. While regulatory approval is not
required for the Company to offer most of its services to the automobile
insurance market, state regulatory approval is required in order to offer
automobile insurers products that permit them to direct claimants into a
network of medical providers. To date, only Colorado and New York have
legislation that permits such direction of care and QMC3 offers this managed
care service to automobile insurers in Colorado. QMC3, in cooperation with a
third party PPO, has been in discussions for more than a year with the State
of New York Insurance

                                       11

<PAGE>

Department regarding approval of this PPO as a certified provider of fully
integrated managed care services to the New York automobile insurance market
using QMC3 as its exclusive utilization review agent. The State of New York
Insurance Department has approved this arrangement for the New York City
metropolitan area and Long Island, effective as of June 1, 1996. Such an
arrangement is the first to offer automobile insurance managed care services
in New York. The Company and QMC3, in cooperation with the third party PPO,
are continuing their discussions with the State of New York Insurance
Department regarding further approvals for offerings of managed care services
to automobile insurers in the balance of the State of New York. While the
Company believes that approval from the State of New York Insurance
Department will be forthcoming with respect to the remaining portions of the
state, there can be no assurance that New York will issue such approval. In
addition, no assurance can be given that other states will adopt legislation
permitting such direction of care for automobile accident victims or, if such
legislation is adopted, that the Company will be able to obtain regulatory
approval to provide such services.

Health Care Reform

Increasing health care costs have caused the federal government and many
states to advance health care reform proposals. One of the proposals being
considered is 24-hour health coverage, in which the coverage of traditional
employer-sponsored health plans is combined with workers' compensation
coverage to provide a single insurance plan for work-related and
non-work-related health problems. Incorporating workers' compensation
coverage into conventional health plans may adversely affect the market for
the Company's services.

EMPLOYEES

As of December 31, 1996, the Company had approximately 2,725 employees. None
of CRA's employees is represented by a labor union. The Company has
experienced no work stoppages and believes that its employee relations are
good.

EXECUTIVE OFFICERS AND DIRECTORS

<TABLE>
<CAPTION>
NAME                                                       AGE                           POSITION(S)
-----------------------------------------------------      ---      -----------------------------------------------------
<S>                                                        <C>      <C>
Executive Officers
Donald J. Larson                                               46   President, Chief Executive Officer and Director
Joseph F. Pesce                                                48   Senior Vice President--Finance and Administration,
                                                                     Chief Financial Officer and Treasurer
John A. McCarthy, Jr.                                          38   Senior Vice President--Cost Containment Services and
                                                                    Corporate Development
Peter R, Gates                                                 45   Senior Vice President--Marketing and Sales
Anne E. Kirby                                                  43   Vice President--Marketing and Product Development


Directors
Lois E. Silverman                                              56   Chairman of the Board
George H. Conrades                                             58   Director
Jeffrey R. Jay, M.D.                                           38   Director
Mitchell T. Rabkin, M.D.                                       66   Director

</TABLE>

 Executive Officers

Mr. Larson, a founder of the Company, has served as President and Chief
Executive Officer of the Company since January 1, 1996 and as President and
Chief Operating Officer of the Company since 1988. Prior to founding the
Company, Mr. Larson held the position of New England Regional Manager at
IntraCorp. Inc., a division of Cigna Corporation. Mr. Larson is a graduate of
Boston College and Boston University.

                                       12

<PAGE>

Mr. Pesce has served as Senior Vice President--Finance and Administration
since August 1996 and Chief Financial Officer and Treasurer of the Company
since October 1994. Mr. Pesce served as Vice President--Finance and
Administration of the Company from October 1994 to August 1996. From October
1981 to September 1994, Mr. Pesce held various financial positions with
Computervision Corporation and its predecessor Prime Computer, Inc.,
including Director of Corporate Planning and Analysis, Director of Leasing,
Corporate Controller, Treasurer and, most recently, Vice President--Finance
and Chief Financial Officer. Prior to October 1981, Mr. Pesce held various
financial positions with Compugraphic Corporation and GCA Corporation. Mr.
Pesce is a graduate of Boston College and the Wharton School of Finance at
the University of Pennsylvania.

Mr. McCarthy has served as Senior Vice President--Cost Containment Services
and Corporate Development since August 1996. He previously served as Vice
President--Cost Containment Services and Corporate Development since August
1994. From June 1992 to July 1994, Mr. McCarthy was Senior Vice President and
Chief Financial Officer of MedChem Products, Inc., a manufacturer of
specialty medical products. From March 1989 to June 1992, Mr. McCarthy was a
Partner at Kaufman & Company, an investment banking firm. From August 1987 to
February 1989, Mr. McCarthy was an Associate at Morgan Stanley & Co.
Incorporated, an investment banking firm. Mr. McCarthy is a graduate of
Lehigh University and Harvard Business School.

Mr. Gates has served as Senior Vice President--Marketing and Sales since
August 1996. From May 1995 to July 1996, Mr. Gates was Vice President of
Mercer Management Consulting. From January 1990 to January 1995, Mr. Gates
was Manager of Business Development, and later General Manager of the x-ray
business of GE Medical Systems. From April 1988 to December 1989, Mr. Gates
was an independent management consultant and from July 1978 to April 1988,
Mr. Gates was a Consultant and Vice President with Bain & Company, a
management consulting firm. Mr. Gates is a graduate of Princeton University
and Harvard Business School.

Ms. Kirby joined the Company in July 1979 and has served as Vice President
-Marketing and Product Development since March 1990. From 1979 to 1990, Ms.
Kirby served the Company in a variety of roles on a local and regional level,
including Regional Vice President for the New England area. Prior to joining
the Company, Ms. Kirby worked as a clinical nurse for Massachusetts General
Hospital and managed a group medical practice in two different specialty
areas. Ms. Kirby is a graduate of Boston College and the St. Louis University
Accelerated Curriculum in Nursing.

Directors

Ms. Silverman, a founder of the Company, has served as the Chairman of the
Board since March 1994 and served as its Chief Executive Officer from 1988
through January 1, 1996. Prior to founding the Company, Ms. Silverman held
the position of Northeast Regional Manager at IntraCorp., a division of Cigna
Corporation. Ms. Silverman is a director of Sun Healthcare Group, Inc. and
CareGroup, Inc., parent corporation of Beth Israel Deaconess Medical Center,
and serves as a Trustee of Simmons College and Overseer of Tufts Medical
School. Ms. Silverman is a graduate of Beth Israel School of Nursing.

Mr. Conrades has served as a Director of the Company since June 1994. Mr.
Conrades has been President and Chief Executive Officer of BBN Corporation
since 1994 and has been Chairman of the Board of BBN Corporation since
November 1995. From 1992 to 1994, Mr. Conrades was a partner in
Conrades/Reilly Associates, a business consulting company. From 1961 to 1992,
Mr. Conrades held a number of management positions with International
Business Machines Corp., most recently as Senior Vice President for Corporate
Marketing and Services. Mr. Conrades is also a director of BBN Corporation,
Westinghouse Electric Corp. and Cubist Pharmaceuticals, Inc..

Dr. Jay has served as a Director of the Company since March 1994. Dr. Jay has
been a General Partner of J. H. Whitney & Co., a venture capital firm, since
September 1993. Dr. Jay has more than ten years experience in venture capital
investing. Dr. Jay is a graduate of Harvard Business School and received his

                                       13

<PAGE>

M.D. from the Boston University School of Medicine. Dr. Jay also serves as a
director of Advance ParadigM, Inc., Nitinol Medical Technologies, Inc. and
several other private companies.

Dr. Rabkin has served as a Director of the Company since February 1995. From
1966 to September 1996, Dr. Rabkin served as Chief Executive Officer of
Boston's Beth Israel Hospital, where he currently holds the rank of Professor
of Medicine. Since October 1, 1996, Dr. Rabkin has been Chief Executive
Officer of CareGroup, Inc., parent corporation of Beth Israel Deaconess
Medical Center. Dr. Rabkin is a graduate of Harvard College and received his
M.D. from Harvard Medical School.

Mr. Larson, Whitney, the Whitney Equity Fund and the Whitney Debt Fund have
agreed to vote their shares in favor of the reelection of Ms. Silverman as a
director of the Company for so long as Ms. Silverman continues to hold,
directly or indirectly, at least 407,490 shares.

RISK FACTORS

Potential Adverse Impact Of Government Regulation

Many states, including a number of those in which the Company transacts
business, have licensing and other regulatory requirements applicable to the
Company's business. Approximately half of the states have enacted laws that
require licensing of businesses which provide medical review services, such
as the Company. Some of these laws apply to medical review of care covered by
workers' compensation. These laws typically establish minimum standards for
qualifications of personnel, confidentiality, internal quality control, and
dispute resolution procedures. These regulatory programs may result in
increased costs of operation for the Company, which may have an adverse
impact upon the Company's ability to compete with other available
alternatives for health care cost control. In addition, new laws regulating
the operation of managed care provider networks have been adopted by a number
of states. These laws may apply to managed care provider networks having
contracts with the Company or to provider networks which the Company has
organized and may organize in the future. To the extent the Company is
governed by these regulations, it may be subject to additional licensing
requirements, financial oversight and procedural standards for beneficiaries
and providers. Regulation in the health care and workers' compensation fields
is constantly evolving. The Company is unable to predict what additional
government regulations, if any, affecting its business may be promulgated in
the future. The Company's business may be adversely affected by failure to
comply with existing laws and regulations, failure to obtain necessary
licenses and government approvals or failure to adapt to new or modified
regulatory requirements. In addition, the automobile insurance industry, like
the workers' compensation industry, is regulated on a state-by-state basis.
While regulatory approval is not required for the Company to offer most of
its services to the automobile insurance market, state regulatory approval is
required in order to offer automobile insurers products that permit them to
direct claimants into a network of medical providers.

Reliance On Data Processing And Licensed Software

Certain aspects of the Company's business are dependent upon its ability to
store, retrieve, process and manage data and to maintain and upgrade its data
processing capabilities. Interruption of data processing capabilities for any
extended length of time, loss of stored data, programming errors or other
computer problems could have a material adverse effect on the Company's
business and results of operations. The software used by the Company within
its medical bill review operation is licensed from an independent third party
software company pursuant to a non-exclusive license with a three-year term
expiring February 1998 that may be terminated by either party upon six
months' prior written notice. While the Company has historically maintained a
good relationship with the licensor, there can be no assurance that this
software license will not be terminated or that the licensor will renew the
license upon expiration. Although management believes that alternative
software would be available if the existing license were terminated, such
termination could be disruptive and could have a material adverse effect on
the Company's business and results of operations.

                                       14

<PAGE>

Risks Related to Growth Strategy; Fluctuations In Operating Results

The Company's strategy is to continue its internal growth and, as strategic
opportunities arise in the workers' compensation managed care industry and
other related industries, to pursue additional acquisitions of, or
relationships with, other companies. As a result, the Company is subject to
certain growth-related risks, including the risk that it will be unable to
retain personnel or acquire other resources necessary to service such growth
adequately. Expenses arising from the Company's efforts to increase its
market penetration may have a negative impact on operating results. In
addition, there can be no assurance that any suitable opportunities for
future strategic acquisitions or relationships will arise or, if they do
arise, that the transactions contemplated thereby could be completed. There
can be no assurance that the Company will be able to integrate effectively
into the Company the businesses that the Company has acquired or those that
it may acquire in the future. In addition, such transactions are subject to
various risks generally associated with the acquisition of businesses,
including the financial impact of expenses associated with the integration of
businesses and the diversion of management resources. There can be no
assurance that any recent or future acquisition or other strategic
relationship will not have an adverse impact on the Company's business or
results of operations. If suitable opportunities arise in the future, the
Company anticipates that it would finance such transactions, as well as its
internal growth, through working capital or, in certain instances, through
additional debt or equity financing. There can be no assurance, however, that
such debt or equity financing would be available to the Company on acceptable
terms when, and if, suitable strategic opportunities arise. In addition, the
Company's quarterly and annual results have varied and may vary significantly
in the future due to a number of factors, including the impact of current or
proposed governmental regulations related to the Company's businesses,
expenses associated with the Company's growth strategy, the Company's ability
to integrate strategic acquisitions with existing operations, competitive
pressures, the loss of key management personnel and customer acceptance of
current and new products and services.

Possible Litigation And Legal Liability

The Company, through its utilization management services, makes
recommendations concerning the appropriateness of providers' proposed medical
treatment plans of patients throughout the country, and it could share in
potential liabilities for adverse medical consequences. The Company does not
grant or deny claims for payment of benefits and the Company does not believe
that it engages in the practice of medicine or the delivery of medical
services. There can be no assurance, however, that the Company will not be
subject to claims or litigation related to the grant or denial of claims for
payment of benefits or allegations that the Company engages in the practice
of medicine or the delivery of medical services. In addition, there can be no
assurance that the Company will not be subject to other litigation that may
adversely affect the Company's business or results of operations. The Company
maintains professional liability insurance and such other coverages as the
Company believes are reasonable in light of the Company's experience to date.
There can be no assurance, however, that such insurance will be sufficient or
available at reasonable cost to protect the Company from liability which
might adversely affect the Company's business or results of operations.

Competition

The Company faces competition from large insurers, HMOs, PPOs, TPAs and other
managed health care companies. The Company believes that, as managed care
techniques continue to gain acceptance in the workers' compensation
marketplace, CRA's competitors will increasingly consist of nationally
focused workers' compensation managed care service companies, insurance
companies, HMOs and other significant providers of managed care products.
Legislative reforms in some states permit employers to designate health plans
such as HMOs and PPOs to cover workers' compensation claimants. Because many
health plans have the ability to manage medical costs for worker's
compensation claimants, such legislation may intensify competition in the
market served by the Company. Many of the Company's current and potential
competitors are significantly larger and have greater financial and marketing
resources than those of

                                       15

<PAGE>

the Company, and there can be no assurance that the Company will continue to
maintain its existing performance or be successful with any new products or
in any new geographical markets it may enter.

Changes In Market Dynamics

Legislative reforms in some states permit employers to designate health plans
such as HMOs and PPOs to cover workers' compensation claimants. Because many
health plans have the capacity to manage health care for workers'
compensation claimants, such legislation may intensify competition in the
market served by the Company. Within the past few years, several states have
experienced decreases in the number of workers' compensation claims and the
average cost per claim which have been reflected in workers' compensation
insurance premium rate reductions in those states. The Company believes that
declines in workers' compensation costs in these states are due principally
to intensified efforts by payors to manage and control claim costs, to
improved risk management by employers and to legislative reforms. If declines
in workers' compensation costs occur in many states and persist over the
long-term, they may have an adverse impact on the Company's business and
results of operations.

Importance Of Intellectual Property Rights

The Company has made significant investments in the development and
maintenance of its proprietary data, including proprietary data base
information acquired through the acquisition of Prompt. The Company does not
own any patents or federally-registered copyrights relating to its databases.
The Company relies largely on its own security systems, confidentiality
procedures and employee nondisclosure agreements to maintain the
confidentiality and trade secrecy of its proprietary data. Misappropriation
of the Company's proprietary information or independent development of
similar products may have a material adverse effect on the Company's
competitive position.

Possible Volatility Of Stock Price

There have been significant fluctuations in the market price for the
Company's Common Stock. Factors such as variations in the Company's revenues,
earnings and cash flow, general market trends in the workers' compensation
managed care market, and announcements of innovations or acquisitions by the
Company or its competitors could cause the market price of the Common Stock
to fluctuate substantially. In addition, the stock market has experienced
price and volume fluctuations that have particularly affected companies in
the health care and managed care markets, resulting in changes in the market
price of the stock of many companies which may not have been directly related
to the operating performance of those companies. Such broad market
fluctuations may adversely affect the market price of the Common Stock.

Dependence Upon Key Personnel

The Company is dependent to a substantial extent upon the continuing efforts
and abilities of certain key management personnel. In addition, the Company
faces competition for experienced employees with professional expertise in
the workers' compensation managed care area. The loss of, or the inability to
attract, qualified employees could have a material adverse effect on the
Company's business and results of operations.

Concentration Of Ownership

At February 28, 1997, the Company's officers, directors, principal
stockholders and their respective affiliates own approximately 16.3% of the
outstanding Common Stock. As a result, these stockholders, if acting
together, would be able to exert substantial influence over the Company and
matters requiring approval by the stockholders of the Company, including the
election of directors. The voting power of these stockholders under certain
circumstances could have the effect of delaying or preventing a change in
control of the Company.

                                       16

<PAGE>

Company Does Not Anticipate Paying Dividends

The Company does not anticipate paying any cash dividends in the foreseeable
future. In addition, the Credit Facility limits the payment of dividends.
Accordingly, it is not anticipated that holders of the Common Stock will
receive any current income with respect to their shares of Common Stock for
the foreseeable future.

Anti-Takeover Effect Of Charter Provisions, By-Laws And State Laws; Possible
Adverse Effects  Of Issuance Of Preferred Stock

The Company's Amended and Restated Articles of Organization and By-Laws, as
well as Massachusetts law, contain provisions that could discourage a proxy
contest, make more difficult the acquisition of a substantial block of the
Company's Common Stock, which could make the payment of a premium to
shareholders in connection with a change in control less likely, and increase
the difficulty of removing incumbent management and board members. In
addition, such provisions could limit the price that investors might be
willing to pay in the future for shares of the Company's Common Stock. The
Board of Directors is authorized to issue, without stockholder approval,
Preferred Stock with voting, conversion and other rights and preferences that
could adversely affect the voting power or other rights of the holders of
Common Stock. Although the Company has no current plans to issue any shares
of Preferred Stock, the issuance of Preferred Stock or rights to purchase
Preferred Stock could be used to discourage an unsolicited acquisition
proposal. The Board of Directors is divided into three "staggered" classes,
with each class serving for a term of three years. Dividing the Board of
Directors in this manner increases the difficulty of removing incumbent
members and could discourage a proxy contest or the acquisition of a
substantial block of the Company's Common Stock. Massachusetts law contains
certain anti-takeover provisions, including a so-called Business Combination
Statute that restricts certain stockholders that own (together with their
affiliates) 5.0% or more of the outstanding voting stock of a Massachusetts
corporation from engaging in certain business combinations with such
corporation and a so-called Control Share Statute that limits any person or
entity that has acquired 20% or more of a corporation's stock from voting
such shares unless the corporation's stockholders, other than such acquiring
person or entity, authorize such voting rights by a vote of the holders of
the majority of stock of the corporation entitled to vote on such matters.
Such provisions of Massachusetts law could have the effect of discouraging a
potential acquiror from making an offer for the Common Stock, which would
make the payment of a premium to stockholders in connection with a change in
control less likely, and could increase the difficulty of removing incumbent
management and board members.

ITEM 2. PROPERTIES

The Company's principal corporate office is located in Boston, Massachusetts.
The Company leases the 11,000 square feet of space in this site pursuant to a
lease agreement expiring in 2003. The Company also leases all of its offices
located in 49 states and three Canadian provinces. Thirteen of the Company's
offices are leased from Colonial Realty Trust, of which Ms. Silverman and Mr.
Larson are the trustees and beneficiaries. The Company believes that its
facilities are adequate for its current needs and that suitable additional
space will be available as required.

ITEM 3. LEGAL PROCEEDINGS

The Company is party to certain claims and litigation in the ordinary course
of business. The Company is not involved in any legal proceeding that it
believes will result, individually or in the aggregate, in a material adverse
effect upon its financial condition or results of operations.

                                       17

<PAGE>

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

During the fourth quarter of 1996, no matter was submitted to a vote of
security holders.

                                    PART II

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

The Nasdaq National Market is the principal market in which the Company's
Common Stock is traded under the symbol "CRAA". At March 14, 1997, there were
approximately 700 stockholders of record of the Company's Common Stock. The
quarterly market prices subsequent to the Company's initial public offering
on May 3, 1995 were as follows:


<TABLE>
<CAPTION>
                                                                               HIGH        LOW
                                                                             ---------  ---------
<S>                                                                          <C>        <C>
1995
Second Quarter                                                               $   25.00  $   16.50
Third Quarter                                                                $   24.50  $   19.00
Fourth Quarter                                                               $   24.50  $   20.75
1996
First Quarter                                                                $   36.75  $   22.13
Second Quarter                                                               $   47.00  $   34.00
Third Quarter                                                                $   56.75  $   33.00
Fourth Quarter                                                               $   58.38  $   42.50

</TABLE>


The Company has neither declared nor paid cash dividends on its Common Stock
during 1996. The Company intends to retain all of its earnings to finance the
development and expansion of its business and therefore does not intend to
pay dividends on its Common Stock in the foreseeable future. Any future
declaration of dividends will be subject to the discretion of the Board of
Directors of the Company, will be subject to applicable law and will depend
upon the Company's results of operations, earnings, financial condition,
contractual limitations, cash requirements, future prospects and other
factors deemed relevant by the Company's Board of Directors. In addition, the
Company's existing credit facility limits the payment of dividends on the
Company's Common Stock to 25% of the Company's consolidated net income each
fiscal year, subject to continued compliance with the financial covenants
contained in the credit facility.

ITEM 6. SELECTED FINANCIAL DATA

Selected Financial Data appears on page 38 of the Company's 1996 Annual
Report to Stockholders is incorporated herein by reference.

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

"Management Discussion and Analysis of Financial Condition and Results of
Operations" on pages 17 through 20 of the Company's 1996 Annual Report to
Stockholders is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Financial Statements and Notes to the Consolidated Financial
Statements, which are included on pages 22 through 39 of the 1996 Annual
Report to Stockholders, together with the "Report of

                                       18

<PAGE>

Independent Accountants" on page 21 of the 1996 Annual Report to Stockholders
and unaudited supplementary data that is included in Note 14--Selected
Quarterly Operating Results (Unaudited) on page 39 of the 1996 Annual Report
to Stockholders are incorporated herein by reference.

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

Upon the recommendation of the Company's Board of Directors, effective
December 5, 1994, the Company engaged Arthur Andersen LLP to serve as the
Company's independent accountants, dismissing KPMG Peat Marwick LLP. KPMG
Peat Marwick LLP's report on the Company's financial statements for the years
ended December 31, 1992 and 1993 did not contain an adverse opinion or
disclaimer of opinion nor were any reports qualified or modified as to
uncertainty, audit scope or accounting principles. The change in independent
accountants did not result from any disagreement between the Company and KPMG
Peat Marwick LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information contained under the captions "Election of Directors" and
"Information Concerning the Board of Directors" in the Company's definitive
Proxy Statement, which will be filed with the Commission on or about April 4,
1997, is incorporated herein by reference. See ITEM 1 "Executive Officers and
Directors" for information concerning the Company's executive officers and
Directors.

ITEM 11. EXECUTIVE COMPENSATION

Information contained under the captions "Executive Compensation" in the
Company's definitive Proxy Statement, which will be filed with the Commission
on or about April 4, 1997, is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND
OFFICERS

Information contained under the captions "Security Ownership of Certain
Beneficial Owners, Directors And Officers" in the Company's definitive Proxy
Statement, which will be filed with the Commission on or about April 4, 1997,
is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information contained under the captions "Compensation Committee Interlocks
and Insider Participation" in the Company's definitive Proxy Statement, which
will be filed with the Commission on or about April 4, 1997, is incorporated
herein by reference.
                                       19

<PAGE>

                                    PART IV

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

(a) (1) Consolidated Financial Statements

The following Consolidated Financial Statements of CRA Managed Care, Inc.
included in the Company's 1996 Annual Report to Stockholders, are
incorporated herein by reference in Item 8 of Part II of this report.

*  Consolidated Balance Sheets for the years ended December 31, 1995 and 1996
on page 22 of the 1996 Annual report to Stockholders

*  Consolidated Statements of Operations for the years ended December 31,
1994, 1995, and 1996, on page 23 of the 1996 Annual Report to Stockholders

*  Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996, on page 24 of the 1996 Annual Report to Stockholders

*  Consolidated Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1994, 1995, and 1996 on page 25 of the 1996 Annual Report
to Stockholders

*  Report of Independent Accountants on page 21 of the 1996 Annual Report to
Stockholders

(2) Financial Statement Schedule

The financial statement schedule, Supplemental Schedule II--Allowance for
Doubtful Accounts, is filed with this report and appears on page 24.

The Report of Independent Accountants on Financial Statement Schedules is
filed with this report and appears on page 25.

All other schedules for which provision is made in Regulation S-X of the
Securities and Exchange Commission, are not required under the related
instructions or are not applicable and, therefore, have been omitted.

(3) Exhibits

The following is a list of exhibits filed as part of the Form 10-K:

  EXHIBIT
  NUMBER                                 TITLE
-----------        --------------------------------------------------------

    #2.1           Stock Purchase Agreement, dated as of March 19, 1996, by
                   and between the Company and United Healthcare Services,
                   Inc.
    *2.2           Agreement and Plan of Merger, dated as of October 28,
                   1996, by and among the Company, PAI Acquisition Corp.,
                   Prompt Associates, Inc., and certain other signatories
                   thereto.
    *3.1           Restated Articles of Organization of the Company.
    *3.2           Form of Articles of Amendment to the Articles of
                   Organization of the Company.
    *3.3           By-Laws of the Company, as amended and restated.
    **3.1          Articles of Organization of the Company, as amended.
    **3.2          Form of Amended and Restated Articles of Organization of
                   the Company.
    **3.3          By-Laws of the Company.

                                       20

<PAGE>

    **3.4          Form of By-Laws of the Company, as amended and restated.
    **4.1          Specimen stock certificate representing the shares of
                   Common Stock.
    **4.2          Subordinated Note and Common Stock Purchase Agreement,
                   dated as of March 8, 1994, among the Company, Whitney
                   Subordinated Debt Fund, L.P., J.H. Whitney & Co., Lois
                   E. Silverman and Donald J. Larson.
    **4.3          Subordinated Note and Common Stock Purchase Agreement,
                   dated as of March 8, 1994, among the Company, First
                   Union Corporation, Lois E. Silverman and Donald J.
                   Larson.
    **10.1         Employment Agreement, dated as of March 8, 1994, between
                   the Company and Lois E. Silverman.
    **10.2         Employment Agreement, dated as of March 8, 1994, between
                   the Company and Donald J. Larson.
    **10.3         1994 Non-Qualified Stock Option Plan for Non-Employee
                   Directors.
    **10.4         Form of Non-Qualified Stock Option Agreement pursuant to
                   the 1994 Non-Qualified Option Plan for Non-Employee
                   Directors.
    **10.5         1994 Non-Qualified Time Accelerated Restricted Stock
                   Option Plan.
    **10.6         Form of Non-Qualified Stock Option Agreement pursuant to
                   the 1994 Non-Qualified Time Accelerated Restricted Stock
                   Option Plan.
    **10.7         Registration Rights Agreement, dated as of March 8,
                   1994, among the Company, J.H. Whitney & Co., Whitney
                   1990 Equity Fund, L.P., Whitney Subordinated Debt Fund,
                   L.P., First Union Corporation, Lois E. Silverman and
                   Donald J. Larson.
    **+10.8        Software License Agreement between CompReview, Inc. and
                   the Company, dated February 10, 1995.
    **10.9         Lease Agreement, dated January 1, 1994, by and between
                   Colonial Realty Trust and the Company for office space
                   located at 168 U.S. Route 1, Falmouth, ME 04105.
    **10.10        Lease Agreement, dated January 1, 1994, by and between
                   Colonial Realty Trust and the Company for office space
                   located at 46 Austin Street, Newtonville, MA 02160.
    **10.11        Lease Agreement, dated January 1, 1994, by and between
                   Colonial Realty Trust and the Company for office space
                   located at 46 Austin Street, Newtonville, MA 02160.
    **10.12        Lease Agreement, dated January 1, 1994, by and between
                   Colonial Realty Trust and the Company for office space
                   located at 46 Austin Street, Newtonville, MA 02160.
    **10.13        Lease Agreement, dated January 1, 1994, by and between
                   Colonial Realty Trust and the Company for office space
                   located at 46 Austin Street, Newtonville, MA 02160.
    **10.14        Lease Agreement, dated January 1, 1994, by and between
                   Colonial Realty Trust and the Company for office space
                   located at 46 Austin Street, Newtonville, MA 02160.
    **10.15        Lease Agreement, dated January 1, 1994, by and between
                   Colonial Realty Trust and the Company for office space
                   located at 46 Austin Street, Newtonville, MA 02160.
    **10.16        Lease Agreement, dated January 1, 1994, by and between
                   Colonial Realty Trust and the Company for office space
                   located at 312 Union Wharf, Boston, MA 02109.
    **10.17        Lease Agreement, dated January 1, 1994, by and between
                   Colonial Realty Trust and the Company for office space
                   located at 565 Turnpike Street, North Andover, MA 01845.
    **10.18        Lease Agreement, dated January 1, 1994, by and between
                   Colonial Realty Trust and the Company for office space
                   located at 15A Riverway Place, Bedford, NH 03110.
    **10.19        Lease Agreement, dated January 1, 1994, by and between
                   Colonial Realty Trust and the Company for office space
                   located at 509 Stillwells Corner Road, Freehold, NJ
                   07728.
    **10.20        Lease Agreement, dated January 1, 1994, by and between
                   Colonial Realty Trust and the Company for office space
                   located at 732 Thimble Shoals Blvd., Newport News, VA
                   23606.
    **10.21        Lease Agreement, dated January 1, 1994, by and between
                   Colonial Realty Trust and the Company for office space
                   located at 10132 Colvin Run Road, Suite A, Great Falls,
                   VA 22066.
    **10.22        Waiver of Registration Rights and Participation Notice,
                   dated as of March 17, 1995, among the Company and the
                   other parties to the Registration Rights Agreement.

                                       21


<PAGE>

    **10.23        Termination of Management Fee and Amendment to Executive
                   Bonus Plan among the Company, J.H. Whitney & Co.,
                   Whitney 1990 Equity Fund, L.P., Ms. Silverman and Mr.
                   Larson.
    **10.24        1995 Employee Stock Purchase Plan.
    **10.25        Letter dated September 9, 1994 from the Company to
                   Joseph F. Pesce regarding terms of employment.
    #10.26         Letter dated June 30, 1995 from the Company to Joseph F.
                   Pesce regarding continuation of compensation.
    #10.27         Letter dated June 30, 1995 from the Company to John A.
                   McCarthy Jr. regarding continuation of compensation.
    #10.28         Letter dated June 30, 1995 from the Company to Anne E.
                   Kirby regarding continuation of compensation.
    #10.29         Amendment to Employment Agreement, dated as of January
                   24, 1996, between the Company and Lois E. Silverman.
    #10.30         Definitive agreement to acquire Focus HealthCare
                   Management, Inc., dated March 19, 1996, between the
                   Company and United HealthCare Corporation.
    #10.31         Amendment, dated as of March 29, 1996, to Loan
                   Agreement, by and among the Company, First Union
                   National Bank of North Carolina and certain other
                   Lenders, and the First Union National Bank of North
                   Carolina, as Agent.
    **10.32        Landlord Agreement, dated as of March 8, 1994, between
                   Lois E. Silverman and Donald J. Larson, Trustees of
                   Colonial Realty Trust and the Company in favor of First
                   Union National Bank of North Carolina (previously filed as
                   exhibit 4.12).
    **10.33        Loan Agreement, dated as of April 28, 1995, by and among
                   the Company, First Union National Bank of North Carolina
                   and certain other Lenders, and the First Union National
                   Bank of North Carolina, as Agent (previously filed as
                   exhibit 4.23).
    **10.34        Form of Revolving Credit Note issued by the Company to
                   First Union National Bank of North Carolina (previously
                   filed as exhibit 4.24).
    **10.35        Form of Security Agreement between the Company and First
                   Union National Bank of North Carolina (previously filed
                   as exhibit 4.25).
    **10.36        Form of Collateral Assignment of Leases between the
                   Company and First Union National Bank of North Carolina
                   (previously filed as exhibit 4.26).
    **10.37        Form of Trademark Security Agreement between the Company
                   and First Union National Bank of North Carolina
                   (previously filed as exhibit 4.27).
    **10.38        Form of Landlord Agreement between Lois E. Silverman and
                   Donald J. Larson, Trustees of Colonial Realty Trust and
                   the Company in favor of First Union National Bank of
                   North Carolina (previously filed as exhibit 4.28).
    11.1           Statement regarding computation of earnings per share.
    13.1           Excerpts from the Company's 1996 Annual Report to
                   stockholders.
    **16.1         Letter from KPMG Peat Marwick LLP regarding change in
                   principal accountant.
    21.1           List of Subsidiaries.
    23.1           Consent of Arthur Andersen LLP.
    29.1           Financial Data Schedule



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


*   Incorporated by reference to the Company's Registration Statement on Form
    S-3 (No. 33-90426), as filed on November 7, 1996.


**  Incorporated by reference to the Company's Registration Statement on Form
    S-1 (No. 33-90426), as filed on March 17, 1995, as amended.


+   Confidential treatment granted.


#   Incorporated by reference to the Annual Report on Form
    10-K for the year ended December 31, 1995, as filed on March 29, 1996.


                                       22


<PAGE>


(b)  Reports on Form 8-K.

Form 8-K, dated January 7, 1997, regarding the acquisition of Prompt
Associates, Inc. including audited financial statements for the three years
ended December 31, 1995, consolidated pro forma statements of operations of
the Company and Prompt for the year ended December 31, 1995 and the nine
months ended September 30, 1996.

                             SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, therunto duly authorized, on the 28th day
of March, 1997.

                                   CRA MANAGED CARE, INC.

                                   By:/s/ JOSEPH F. PESCE
                                   --------------------------
                                   Jospeph F. Pesce
                                   Senior Vice President-Finance and
                                   Administration, Chief Financial
                                   Officer and Treasurer
                                   (Principal Financial and Accounting Officer)

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

       Signature                       Title                      Date
       ---------                       -----                      ----

/s/    DONALD J. LARSON     President, Chief Executive        March 28, 1997
-----------------------     Officer and Director
       Donald J. Larson     (Principal Executive Officer

/s/     JOSEPH F. PESCE     Senior Vice President-Finance     March 28, 1997
-----------------------     and Administration, Chief
                             Financial Officer and
                             Treasurer
                             (Principal Financial and
                             Accounting Officer)

/s/ LOIS E. SILVERMAN        Chairman of the Board of          March 28, 1997
-----------------------      Directors
   Lois E. Silverman

/s/ JEFFREY R. JAY           Director                          March 28, 1997
-----------------------
    Jeffrey R. Jay

/s/ GEORGE H. CONRADES       Director                          March 28, 1997
-----------------------
   George H. Conrades

/s/ MITCHELL T. RABKIN       Director                          March 28, 1997
-----------------------
   Mitchell T. Rabkin

                                       23


<PAGE>
                             CRA MANAGED CARE, INC.
                      Allowance for Doubtful Accounts
          for the Years Ended December 31, 1994, 1995 and 1996

                                                                    SCHEDULE II

<TABLE>
<CAPTION>
                                                                                                      BALANCE
                                                   BALANCE                                              THE
                                                     THE        ADDITIONS    ADDITIONS                   AT
                                                     AT        CHARGED TO    ACQUIRED    DEDUCTIONS     END
                                                  BEGINNING     COSTS AND     THROUGH       FROM       OF THE
                                                 OF THE YEAR    EXPENSES    ACQUISITIONS  RESERVES      YEAR
                                                -------------  -----------  -----------  ----------  ----------
<S>                                             <C>            <C>          <C>          <C>         <C>
Allowance for Doubtful Accounts:
1994                                              $  80,000    $ 353,000   $   --      $   53,000  $  380,000
1995                                                380,000      186,000       --         136,000     430,000
1996                                                430,000    1,213,000    1,735,000   1,211,000   2,167,000
</TABLE>


                                       24

 <PAGE>


            REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES

To CRA Managed Care, Inc.:

We have audited in accordance with generally accepted auditing standards, the
financial statements of CRA Managed Care, Inc. incorporated by reference in
this Form 10-K and have issued our report thereon dated January 27, 1997. Our
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index of the
financial statement schedules is presented for the purpose of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required
to be set forth therein in relation to the basic financial statements taken
as a whole.


Arthur Andersen LLP
Boston, Massachusetts
January 27, 1997

                                       25

<PAGE>

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
  EXHIBIT                                                                                                                    PAGE
  NUMBER                                                                                                                    NUMBER
-----------                                                                                                                 ------
<C>          <S>
      11.1   Statement regarding calculation of shares used in determining earnings per share and pro forma earnings
             per share.
      13.1   Excerpts from the Company's 1996 Annual Report to Stockholders.
      21.1   List of Subsidiaries.
      23.1   Consent of Arthur Andersen LLP.
      27.1   Financial Data Schedule
</TABLE>




                                       26