<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
                                   ---------
                                   FORM 10-Q

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

                  For the Quarterly Period Ended June 30, 1997

                                       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 33-80731

                                   ---------

                        PHYSICIAN SUPPORT SYSTEMS, INC.
             (Exact name of registrant as specified in its charter)

          Delaware                                         13-3624081
(State or other jurisdiction                            (I.R.S. Employer   
    of incorporation or                               Identification No.)   
       organization)
                  
    ROUTE 230 AND EBY-CHIQUES ROAD 
       MT. JOY, PENNSYLVANIA                                 17552 
(Address of principal executive offices)                   (Zip Code)

                                 (717) 653-5340
                                 --------------

               Registrant's telephone number, including area code
                                   ---------
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                Yes      X                    No
                      -------                     ------- 

Indicate the number of shares outstanding of each of issuer's classes of common
stock, as of the latest practicable date.

   Common Stock, par value $.001 per share                9,720,033 Shares
   ---------------------------------------                ----------------
                Class                                      Outstanding at
                                                           August 10, 1997
<PAGE>
 
                Physician Support Systems, Inc. And Subsidiaries
                                     INDEX
<TABLE> 
<CAPTION> 
                                                                        Page No.
                                                                        --------
<S>                                                                     <C> 
PART I. FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
          Condensed Consolidated Balance Sheets -
                 June 30, 1997 and December 31, 1996                          2
          Condensed Consolidated Statements of Operations -
                 Three and Six Months Ended June 30, 1997 and 1996            3
          Condensed Consolidated Statements of Cash Flows -
                 Six Months Ended June 30, 1997 and 1996                      4
          Notes to Condensed Consolidated Financial Statements                5
 
Item 2. Management's Discussion and Analysis of Financial Condition 
        and Results of Operations                                             7
 
 
PART II. OTHER INFORMATION
 
Item 4. Submission of Matters to a Vote of Security Holders                  10
 
Item 6. Exhibits                                                             10
 
Signatures                                                                   11
 
Exhibit Index                                                                12
</TABLE> 

                                       1
<PAGE>
 
Part I. Financial Information
Item 1. Financial Statements

                Physician Support Systems, Inc. And Subsidiaries
                     Condensed Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                     June 30,      December 31,
                                                       1997            1996
                                                       ----            ----
                                                    (Unaudited)
<S>                                                 <C>            <C>
              ASSETS
Current assets:
   Cash and cash equivalents.....................  $    355,010    $ 3,826,018
   Accounts receivable...........................    22,673,741     17,458,338
   Accounts receivable - unbilled................    15,198,655     11,149,811
   Prepaid expenses and other current assets.....     2,349,402      1,991,689
                                                   ------------   ------------
      Total current assets.......................    40,576,808     34,425,856
Property and equipment - net.....................     9,052,539      9,092,630
Intangible assets - net..........................    59,007,843     44,556,022
Due from related parties.........................     1,179,679      1,054,038
Other assets.....................................     2,851,209      2,776,902
                                                   ------------   ------------
      Total......................................  $112,668,078   $ 91,905,448
                                                   ============   ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable..............................  $  1,844,045   $  2,135,924
   Accrued expenses..............................    14,673,343     16,805,042
   Current portion of other long-term
      liabilities................................     1,114,966        969,623
   Current portion of due to related parties.....       137,543        463,736
   Deferred income taxes.........................        31,347         31,347
                                                   ------------   ------------
      Total current liabilities..................    17,801,244     20,405,672
                                                   ------------   ------------
Long-term debt...................................    39,798,000     20,017,027
                                                   ------------   ------------
Other long-term liabilities......................     2,675,924      3,676,052
                                                   ------------   ------------
Due to related parties...........................       712,244        771,695
                                                   ------------   ------------
Deferred income taxes............................     1,322,263      1,322,263
                                                   ------------   ------------
Commitments and contingencies....................            --             --
                                                   ------------   ------------
Stockholders' equity:
   Preferred stock, par value $.01 per share:
      authorized 10,000,000 shares: none
      outstanding
   Common stock, par value $.001 per share:
      authorized 100,000,000 shares: outstanding
      9,720,033 and 9,156,101 shares at June 30,
      1997 and December 31, 1996 respectively....         9,720          9,156
Additional paid-in capital.......................    58,740,799     55,194,229
Retained earnings (accumulated deficit)..........    (8,392,116)   ( 9,490,646)
                                                   ------------   ------------
      Total stockholders' equity.................    50,358,403     45,712,739
                                                   ------------   ------------
      Total......................................  $112,668,078   $ 91,905,448
                                                   ============   ============
</TABLE>
           See notes to condensed consolidated financial statements.

                                       2
<PAGE>
 
                Physician Support Systems, Inc. And Subsidiaries
                Condensed Consolidated Statements Of Operations

<TABLE>
<CAPTION>
 
 
                                          Three Months Ended June 30,      Six Months Ended June 30,
                                          ---------------------------      -------------------------
                                              1997           1996               1997             1996    
                                              ----           ----               ----             ----    
                                          (Unaudited)     (Unaudited)       (Unaudited)       (Unaudited)
<S>                                       <C>             <C>               <C>             <C>
Revenues................................  $27,346,500     $17,539,517       $52,745,824     $34,269,904
                                          -----------     -----------       -----------     -----------
Operating expenses:                                                                         
  Salaries and wages....................   13,718,450       9,206,902        26,891,844      18,039,616
  General and administrative............    9,509,257       7,148,595        18,983,960      13,233,822
  Depreciation and amortization.........    1,581,509       1,292,905         3,028,764       2,555,866
  Interest income.......................      (26,024)       (254,246)          (58,003)       (443,556)
  Interest expense......................      725,227         260,970         1,254,261         536,343
  Other (income) expense................           --         111,588                --         102,166
  Merger costs..........................           --       1,150,000                --       1,150,000
  Restructuring charge..................           --       2,500,000           750,000       2,500,000
                                          -----------     -----------       -----------     -----------
Income (loss) before income taxes                                                           
  (benefit).............................    1,838,081      (3,877,197)        1,894,998      (3,404,353)
Income taxes (benefit)..................      771,994        (630,000)          796,469        (656,000)
                                          -----------     -----------       -----------     -----------
Net income (loss).......................    1,066,087      (3,247,197)        1,098,529      (2,748,353)
Pro forma income taxes (benefit)........           --        (366,535)               --        (153,337)
                                          -----------     -----------       -----------     -----------
Pro forma net income (loss).............    1,066,087      (2,880,662)        1,098,529      (2,595,016)
Preferred stock dividends...............           --              --                --          36,320
                                          -----------     -----------       -----------     -----------
Pro forma net income (loss) applicable                                                      
  to common stock.......................  $ 1,066,087     $(2,880,662)      $ 1,098,529     $(2,631,336)
                                          ===========     ===========       ===========     ===========
Pro forma earnings (loss) per share.....  $      0.11     $     (0.33)      $      0.11     $     (0.34)
                                          ===========     ===========       ===========     ===========
Weighted average shares outstanding.....    9,736,947       8,604,323         9,577,011       7,638,138
                                          ===========     ===========       ===========     ===========
</TABLE>
           See notes to condensed consolidated financial statements.

                                       3
<PAGE>
 
                Physician Support Systems, Inc. And Subsidiaries
                Condensed Consolidated Statements Of Cash Flows

<TABLE>
<CAPTION>
                                                       Six Months Ended June 30,
                                                       -------------------------  
                                                          1997           1996
                                                          ----           ----
                                                       (Unaudited)    (Unaudited)
<S>                                                  <C>            <C>
Cash flows from operating activities:               
  Net  income.......................................  $ 1,098,529    $(2,748,353)
  Adjustments to reconcile net income to net                                  
    cash provided by (used in) operating activities:                      
       Depreciation and amortization................    3,028,764      2,530,867  
       Deferred income taxes........................           --       (658,177) 
       Loss on disposal of property and equipment...           --        122,609  
       Other long-term liabilities..................      156,965       (174,854) 
       Changes in operating assets and liabilities:                               
          Accounts receivable.......................   (4,465,886)       666,250  
          Accounts receivable - unbilled............   (2,060,891)      (510,616) 
          Prepaid expenses and other current                                      
             assets and other assets................     (425,671)      (502,136) 
          Accounts payable..........................   (1,102,261)       240,174  
          Accrued expenses..........................   (2,091,386)     1,840,019  
                                                      -----------    ----------- 
    Net cash provided by (used in) operating 
      activities....................................   (5,861,837)       805,783 
                                                      -----------    ----------- 
Cash flows from investing activities:                                
  Acquisitions, net of cash acquired................  (14,139,183)   (15,581,515)
  Deferred purchase price...........................     (414,583)            --
  Capital expenditures..............................   (1,293,398)      (766,314)
                                                      ------------   ------------
    Net cash used in investing activities...........  (15,847,164)   (16,347,829)
                                                      ------------   ------------
Cash flows from financing activities:                                
  Net proceeds from sale of common stock............           --     43,556,217
  Proceeds from long-term borrowings................   19,780,973         88,636
  Repayment of short-term borrowings................           --       (600,000)
  Principal payments on long-term debt..............     (586,274)   (10,571,052)
  Principal payments on capital lease obligations...     (445,421)      (159,509)
  Due to/from related parties.......................     (511,285)    (1,233,259)
  Common stock dividends............................           --       (143,011)
  Redemption of preferred stock.....................           --     (2,932,032)
  Redeemable preferred stock distributions..........           --        (36,320)
                                                      -----------    ------------
    Net cash provided by financing activities.......   18,237,993     27,969,670
                                                      -----------    ----------- 
Net increase (decrease) in cash and                                             
  cash equivalents..................................   (3,471,008)    12,427,624
Cash and cash equivalents, beginning of                                         
  period............................................    3,826,018      1,691,758
                                                      -----------    ----------- 
Cash and cash equivalents, end of period............  $   355,010    $14,119,382 
                                                      ===========    =========== 
Supplemental investing activity:                                     
  Fair value of assets acquired.....................  $20,155,912    $19,876,748
  Stock issued in acquisitions......................   (3,547,132)      (250,000)
  Cash acquired.....................................           --       (316,877)
  Liabilities assumed...............................   (2,274,597)    (1,466,356)
  Deferred purchase price...........................     (195,000)    (2,262,000)
                                                      ------------   ------------
    Net cash paid for acquisitions..................  $14,139,183    $15,581,515
                                                      ===========    =========== 
Supplemental disclosure of cash flow information:                                       
   Cash paid for interest...........................  $ 1,103,432    $ 1,540,519
                                                      ===========    ===========
   Capital lease obligations incurred in                             
     acquisition of equipment.......................  $        --    $        --
                                                      ===========    ===========
</TABLE>

           See notes to condensed consolidated financial statements.

                                       4
<PAGE>
 
                Physician Support Systems, Inc. And Subsidiaries
              Notes To Condensed Consolidated Financial Statements
               Three and Six Months Ended June 30, 1997 and 1996

1.  Basis Of Presentation

      The unaudited condensed consolidated financial statements included herein
have been prepared by the Company in accordance with the rules and regulations
of the Securities and Exchange Commission and consequently do not include all of
the disclosures normally required by generally accepted accounting principles.
These unaudited condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and related notes
thereto included in the Company's Annual Report on Form 10-K.

      The unaudited financial information contained herein reflects all
adjustments (consisting of only normal recurring accruals) which, in the opinion
of management, are necessary for a fair presentation of the results of
operations for the three and six month periods ended June 30, 1997 and 1996.

2.  Sale of Common Stock

      On February 12, 1996, the Company authorized the issuance of up to
10,000,000 shares of preferred stock, increased the number of authorized shares
of common stock from 5,000 to 100,000,000, changed the par value of its common
stock from $.01 to $.001 per share and effected a 1,400-for-one stock split. In
addition, on February 12, 1996, the Company sold 4,025,000 shares of common
stock for $12 per share in its initial public offering of common stock. The net
proceeds of such offering of approximately $43,556,000 were used to repay all
outstanding short and long-term debt except for The Spring Anesthesia Group,
Inc. ("Spring") acquisition subordinated note, redeem all outstanding shares of
preferred stock and acquire three businesses.

3.  Business Combinations

      During 1996, the Company acquired either 100 percent of the outstanding
common stock or substantially all of the assets and liabilities of seven
businesses in transactions accounted for under the purchase method of
accounting, and merged with three businesses in transactions accounted for as
poolings of interests.

      On February 5, 1997, the Company acquired 100 percent of the outstanding
common stock of Physerv Solutions, Inc. ("Physerv") for approximately
$10,109,000 in cash plus 563,934 shares of common stock. The Company has begun
to merge the operations of Spring into Physerv, and will complete this
assimilation as soon as is practicable (see Note 5).

      The unaudited consolidated results of operations of the Company on a pro
forma basis as if the Company had consummated on January 1, 1996 the
acquisitions of the businesses accounted for under the purchase method of
accounting since January 1, 1996 are as follows:
<TABLE>
<CAPTION>
 
                                 Six Months Ended June 30,
                                 ------------------------- 
                                1997                  1996
                                ----                  ----
 
<S>                          <C>                    <C>        
Revenues                     $53,514,129            $50,175,942
                             ===========            ===========
Net income (loss)            $ 1,174,700            $(1,962,292)
                             ===========            ===========
Earnings (loss) per share    $      0.12            $     (0.20)
                             ===========            ===========
Weighted average shares        9,720,033              9,720,033
                             ===========            =========== 
</TABLE>

                                       5
<PAGE>
 
4. Long-Term Debt

        Long-term debt consists of the following:
<TABLE> 
<CAPTION> 

                                             June 30,   December 31,
                                               1997         1996
                                               ----         ----
<S>                                        <C>          <C> 
Loan Agreement Acquisition Line
 borrowings, Overnight Market Rate
 (6.37% at June 30, 1997)...............   $30,000,000  $12,017,027
Loan Agreement Working Capital Line
 borrowings, Intermediate Market
 Rate (7.02% at June 30, 1997)..........     4,298,000    2,500,000
Spring acquisition subordinated note,
 7.6%, payable on August 12, 2003.......     5,500,000    5,500,000
                                           -----------  -----------
                                           $39,798,000  $20,017,027
                                           ===========  ===========
</TABLE>

5. Restructuring Charge

      As previously reported, results at the Company's Spring subsidiary located
in Stockton, California, in the three months ended June 30, 1996 were adversely
affected by operating inefficiencies in the processing of physician charges
which resulted in lower revenues during that period. In addition, the Company
incurred increased salary and general and administrative expenses in an attempt
to increase production. To address these operating inefficiencies, among other
actions, the Company decided to replace certain computer hardware and software
at Spring with other operating software. The Company recorded a restructuring
charge in the three months ended June 30, 1996 of approximately $1,600,000
related to the write-off of certain computer hardware and software, and costs
associated with the introduction of a new management team, some limited
severance activity and other transition items. During the three months ended
December 31, 1996, the Spring operating inefficiencies led to client
dissatisfaction. The Company incurred increased salary and general and
administrative costs in an attempt to increase client satisfaction. However,
these efforts were unsuccessful, and led to the loss of clients and loss of
related revenues. As a result, in accordance with Statement of Financial
Accounting Standards No. 121, the Company determined that certain identifiable
intangible assets (primarily customer contracts), and goodwill, were not
recoverable from future cash flows of Spring, and accordingly, an impairment
loss of approximately $6,578,000 was recorded in the year ended December 31,
1996. In addition, in conjunction with the Company's acquisition on February 5,
1997 of Physerv, which like Spring, serves only anesthesiologists, the Company
decided to fold the remaining Spring business into Physerv, in order to develop
a profitable, national approach to the anesthesia market. This entails exiting
the processing of physician charges in remote Spring locations and performing
such processing activities at more efficient central anesthesia processing
locations. As a result of this assimilation, the Company recorded a charge of
$750,000 in the three months ended March 31, 1997 primarily for severance and
lease terminations related to exiting processing activities at Spring.

6. Pro Forma Income Taxes

      The Company has acquired certain entities in merger transactions accounted
for as poolings of interests, which prior to the mergers had elected "S"
corporation status for income tax purposes. As a result of the mergers, these
acquired entities terminated their "S" corporation elections. Pro forma income
taxes represent the income tax provision (benefit) that would have been
recognized for periods prior to the mergers had the acquired entities been taxed
as "C" corporations.

7. Related Party Transactions

      Legal services provided by related parties were approximately $1,054,000
and $827,000 in the three months ended June 30, 1997 and 1996, respectively and
$1,816,000 and $1,664,000 in the six months ended June 30, 1997 and 1996,
respectively.

      Rent paid to related parties was approximately $109,000 and $9,000 for the
three months ended June 30, 1997 and 1996, respectively and $189,000 and $9,000
for the six months ended June 30, 1997 and 1996, respectively.

                                       6
<PAGE>
 
Item 2. Management's Discussion And Analysis Of Financial Condition And
        Results Of Operations

OVERVIEW

   The Company is a leading provider of business management services to
hospitals and physicians. The Company's services include preparation and follow-
up on bills for medical services provided, assisting providers in qualifying
patients for state medicaid eligibility, collecting past due accounts, and
providing other business management services on an outsource basis. The Company
is generally compensated with a management fee based upon net receipts of its
clients.

   On February 12, 1996, the Company sold 4,025,000 shares of common stock for
$12 per share in its initial public offering of common stock. The net proceeds
of such offering of approximately $43,556,000 were used to repay all outstanding
short and long-term debt except for the Spring acquisition subordinated note,
redeem all outstanding shares of preferred stock and acquire three businesses.
See "ACQUISITIONS."

   This Management's Discussion and Analysis of Financial Condition and Results
of Operations should be read in conjunction with the Company's latest Annual
Report on Form 10-K.

ACQUISITIONS

   During 1996, the Company acquired either 100 percent of the outstanding
common stock or substantially all the assets and liabilities of seven businesses
in transactions accounted for under the purchase method of accounting, and
merged with three businesses in transactions accounted for as poolings of
interests.

   On February 5, 1997, the Company acquired 100 percent of the outstanding
common stock of Physerv for approximately $10,109,000 in cash plus 563,934
shares of common stock. The Company has begun to merge the operations of Spring
into Physerv, and will complete this assimilation as soon as is practicable.


RESULTS OF OPERATIONS

    The following table sets forth, for the periods presented, the percentages
of net revenue represented by certain items reflected in the Company's statement
of operations.

<TABLE>
<CAPTION>
                                                                                       
                                    Three Months Ended June 30,     Six Months Ended June 30,
                                    ---------------------------    --------------------------
                                     1997             1996                1997        1996
                                     ----             ----                ----        ----
<S>                                 <C>              <C>                 <C>         <C>
Revenues                            100.0%           100.0%              100.0%      100.0%
Salaries and wages                   50.2%            52.5%               51.0%       52.6%
General and administrative           34.8%            40.8%               36.0%       38.6%
Depreciation and amortization         5.8%             7.4%                5.7%        7.5%
Interest expense (income), net        2.5%             0.0%                2.3%        0.2%
Other expense (income), net           0.0%             0.6%                0.0%        0.3%
Merger costs                          0.0%             6.6%                0.0%        3.4%
Restructuring charge                  0.0%            14.2%                1.4%        7.3%
                                     -----           ------               -----      ------
Income (loss) before income taxes                                                         
   (benefit)                          6.7%           (22.1)%               3.6%       (9.9)%
Income taxes (benefit)                2.8%            (3.6)%               1.5%       (1.9)%
                                     -----           -------              -----      -------
Net income (loss)                     3.9%           (18.5)%               2.1%       (8.0)%
Pro forma income taxes (benefit)      0.0%            (2.1)%               0.0%       (0.4)%
                                     -----           ------               -----      ------ 
Pro forma net income (loss)           3.9%           (16.4)%               2.1%       (7.6)%
                                     =====           =======              =====      ======
</TABLE>

                                       7
<PAGE>
 
Revenues

    Revenues increased 55.9% from $17,539,517 for the three months ended June
30, 1996 to $27,346,500 for the three months ended June 30, 1997 and 53.9% from
$34,269,904 for the six months ended June 30, 1996 to $52,745,824 for the six
months ended June 30, 1997. Such increases resulted primarily from businesses
acquired during 1996 and 1997 plus increased revenues from the addition of new
clients, offset, in part, by decreased revenues from lost clients. In addition,
the Company's revenues during the three months ended March 31, 1997 were
adversely affected by operating inefficiencies in the processing of physician
charges at Spring, the Company's subsidiary located in Stockton, California. See
"Restructuring Charge."

Salaries and Wages

    Salaries and wages increased 49.0% from $9,206,902 for the three months
ended June 30, 1996 to $13,718,450 for the three months ended June 30, 1997 and
49.1% from $18,039,616 for the six months ended June 30, 1996 to $26,891,844 for
the six months ended June 30, 1997. Such increases resulted primarily from
businesses acquired during 1996 and 1997 and increases in the number of clients
served by the Company. As a percentage of revenues, salaries and wages were
lower in the three and six months ended June 30, 1997 compared to the three and
six months ended June 30, 1996 primarily due to efficiencies at businesses
acquired in mergers accounted for as poolings of interest subsequent to June 30,
1996 but prior to December 31, 1996.

General and Administrative Expenses

    General and administrative expenses increased 33.0% from $7,148,595 for the
three months ended June 30, 1996 to $9,509,258 for the three months ended June
30, 1997 and 43.5% from $13,233,822 for the six months ended June 30, 1996 to
$18,983,960 for the six months ended June 30, 1997. Such increases resulted
primarily from businesses acquired during 1996 and 1997 and increases in the
number of clients served by the Company. As a percentage of revenues, general
and administrative expenses were lower in the three and six months ended June
30, 1997 compared to the three and six months ended June 30, 1996 primarily due
to efficiencies at businesses acquired in mergers accounted for as poolings of
interests subsequent to June 30, 1996 but prior to December 31, 1996, offset by
increased administrative costs associated with being a publicly traded company.

Depreciation and Amortization

    Depreciation and amortization increased 22.3% from $1,292,905 for the three
months ended June 30, 1996 to $1,581,509 for the three months ended June 30,
1997 and 18.5% from $2,555,866 for the six months ended June 30, 1996 to
$3,028,764 for the six months ended June 30, 1997. Such increases resulted
primarily from businesses acquired during 1996 and 1997, offset, in part, by
reductions in depreciation and amortization expense due to the write off of
Spring fixed and intangible assets. See "Restructuring Charge."

Interest Income

    Interest income decreased from $254,246 for the three months ended June 30,
1996 to $26,024 for the three months ended June 30, 1997 and from $443,556 for
the six months ended June 30, 1996 to $58,003 for the six months ended June 30,
1997 primarily as a result of lower levels of excess cash invested in 1997
compared to 1996.

Interest Expense

    Interest expense increased from $260,970 for the three months ended June 30,
1996 to $725,227 for the three months ended June 30, 1997 and from $536,343 for
the six months ended June 30, 1996 to $1,254,261 for the six months ended June
30, 1997. Such increases resulted primarily from increased levels of borrowings
in 1997 resulting from businesses acquired during 1996 and 1997.

Restructuring Charge

    As previously reported, results at the Company's Spring subsidiary located
in Stockton, California in the three months ended June 30, 1996 were adversely
affected by operating inefficiencies in the processing of physician charges
which resulted in lower revenues during that period. In addition, the Company
incurred increased salary and general and administrative expenses in an attempt
to increase production. To address these operating inefficiencies, among other
actions, the Company decided to replace certain computer hardware and software
at Spring with other operating software. The Company recorded a restructuring
charge in the three months ended June 30, 1996 of approximately $1,600,000
related to the write-off of certain computer hardware and software, and 

                                       8
<PAGE>
 
costs associated with the introduction of a new management team, some limited
severance activity and other transition items. During the three months ended
December 31, 1996, the Spring operating inefficiencies led to client
dissatisfaction. The Company incurred increased salary and general and
administrative costs in an attempt to increase client satisfaction. However,
these efforts were unsuccessful, and led to the loss of clients and loss of
related revenues. As a result, in accordance with Statement of Financial
Accounting Standards No. 121, the Company determined that certain identifiable
intangible assets (primarily customer contracts) and goodwill were not
recoverable from future cash flows of Spring, and accordingly, an impairment
loss of approximately $6,578,000 was recorded in the year ended December 31,
1996. In addition, in conjunction with the Company's acquisition on February 5,
1997 of Physerv, which like Spring, serves only anesthesiologists, the Company
decided to fold the remaining Spring business into Physerv, in order to develop
a profitable, national approach to the anesthesia market. This entails exiting
the processing of physician charges in remote Spring locations and performing
such processing activities at more efficient central anesthesia processing
locations. As a result of this assimilation, the Company recorded a charge of
$750,000 in the three months ended March 31, 1997 primarily for severance and
lease terminations related to exiting processing activities at Spring.

Income Taxes (Benefit) and Pro Forma Income Taxes

    The Company's historical effective rates for income taxes (benefit) changed
from (16.2%) for the three months ended June 30, 1996 to 42.0% for the three
months ended June 30, 1997 and from (19.3%) for the six months ended June 30,
1996 to 42.0% for the six months ended June 30, 1997. Such changes were
primarily attributable to mergers with two companies subsequent to June 30,
1996, but prior to December 31, 1996, that were accounted for as poolings of
interests. Both companies had been taxed as "S" Corporations, and their
historical financial statements, which are now included in the Company's
consolidated financial statements, did not include provisions for income taxes.
Pro forma income taxes are presented for the three and six months ended June 30,
1996 to show what income taxes would have been had these two companies been
taxed as "C" Corporations at that time. In addition, changes in the effective
income tax rate also resulted from differing levels in each year of projected
annual pretax income and the effect on such projected levels of items not
deductible for Federal and State income tax purposes.

Pro Forma Net Income and Pro Forma Earnings Per Share

    Pro forma net income and pro forma earnings per share result from the
accumulation of the items described above and the increase in the weighted
average number of shares outstanding in the three and six months ended June 30,
1997 compared to the three and six months ended June 30, 1996 resulting from
shares issued in the Company's initial public offering of common stock and
additional shares of common stock issued as consideration in acquisitions
accounted for as purchases in 1996 and 1997.

LIQUIDITY AND CAPITAL RESOURCES

    The Company's working capital and cash and cash equivalents were $22,776,000
and $355,000, respectively, at June 30, 1997 compared to $14,020,000 and
$3,826,000, respectively, at December 31, 1996.

    The Company's total long-term debt, including current portion and amounts
due to related parties was $40,648,000 at June 30, 1997 compared to $21,252,000
at December 31, 1996. Such increase at June 30, 1997 was primarily attributable
to increased borrowings resulting from the acquisition of PhyServ on February 5,
1997, plus borrowings during the six months ended June 30, 1997 to pay
transaction fees associated with the PhyServ acquisition and other acquisitions
that were consummated in the second half of 1996 and borrowings to fund changes
in working capital items, primarily increases in billed and unbilled accounts
receivable associated with increases in revenues and increases in days of billed
accounts receivable outstanding.

    As of July 30, 1997, the Company had received commitments from its banks for
a $55 million credit facility to support its future acquisition program and
working capital needs. Subsequent to July 30, 1997, the Company received
commitments for an additional $10 million for that facility. The Company
anticipates that the facility will be secured by a pledge of the capital stock
of all its subsidiaries.

    The Company believes anticipated cash flow from operations, cash and cash
equivalents on hand and borrowing capacity from its Loan Agreement and credit
facility commitment are adequate for its anticipated operating needs.

                                       9
<PAGE>
 
Part II.  Other Information

Item 4.  Submission of Matters to a Vote of Security Holders

   The Company held its 1997 annual meeting of stockholders on June 4, 1997.  In
addition to re-electing all of the Company's directors, stockholders ratified
the election of Deloitte & Touche LLP as the Company's independent auditors for
1997 and approved a change in the Company's corporate name to "Physician &
Hospital Support Services, Inc." A total of 5,477,029 votes were cast for,
60,901 votes were cast against or withheld, and there were 385,798 abstentions
with respect to, the election of each of the directors. A total of 5,701,420
votes were cast for, 162,401 votes were cast against or withheld, and there were
59,907 abstentions with respect to, the ratification of Deloitte & Touche LLP as
the Company's independent auditors for 1997. A total of 5,254,223 votes were
cast for, 628,538 votes were cast against or withheld, and there were 2,120
abstentions with respect to, changing the Company's corporate name to "Physician
& Hospital Support Services, Inc."

Item 6. Exhibits

(a) Exhibits
<TABLE> 
<CAPTION> 

    Exhibit
    Number                      Description
    ------                      -----------
    <C>                         <S> 

      3.1                       Amended and Restated By-laws, as amended June 2, 1997

     10.1                       Employment Agreement as of June 2, 1997 between Physician Support
                                Systems, Inc., and James M. Drinkwater

     27                         Financial Data Schedule
</TABLE> 

                                       10
<PAGE>
 
                                   SIGNATURES


      Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on August 13, 1997.

                                     PHYSICIAN SUPPORT SYSTEMS, INC.

                                     By: /s/ DAVID S. GELLER
                                     ------------------------------
                                     DAVID S. GELLER
                                     SENIOR VICE PRESIDENT
                                     CHIEF FINANCIAL OFFICER

                                     (Duly Authorized Officer and
                                     Principal Financial Officer)

                                       11
<PAGE>
 
                                 EXHIBIT INDEX
<TABLE> 
<CAPTION> 

Exhibit
Number                         Description
------                         -----------
<C>                            <S> 
    3.1                        Amended and Restated By-laws, as amended June 2, 1997

   10.1                        Employment Agreement as of June 2, 1997 between Physician Support
                               Systems, Inc., and James M. Drinkwater

   27                          Financial Data Schedule
</TABLE> 

                                       12