<PAGE>
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
                                ---------------
 
(Mark One)
 
[ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934 (FEE REQUIRED)
 
       FOR THE SIX MONTHS ENDED JUNE 30, 1996.
 
                                       OR
 
[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
 
      FOR THE TRANSITION PERIOD FROM                  TO                  .
 
      COMMISSION FILE NUMBER 0-28622
 
                           INSIGHT HEALTH SERVICES CORP.
                (Exact name of Registrant as specified in its charter)
 
<TABLE>
<S>                              <C>
           DELAWARE                 33-0702770
 (State or other jurisdiction    (I.R.S Employer
     of incorporation or          Identification
        organization)                  No.)
</TABLE>
 
            4400 MACARTHUR BLVD., SUITE 800, NEWPORT BEACH, CA 92660
             (Address of principal executive offices)    (Zip Code)
 
                                 (714) 476-0733
              (Registrant's telephone number including area code)
 
       SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                         COMMON STOCK, $.001 PAR VALUE
                                (Title of Class)
 
    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes _X_  No __
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein.
 
    The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of September 25, 1996 (based on the closing price on the NASDAQ
Small Cap Market on that date) was $11,353,866.
 
    The number of shares outstanding of the Registrant's Common Stock as of
September 25, 1996 was 2,710,240.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
                                      NONE
 
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<PAGE>



                                        PART I

ITEM 1.  BUSINESS

MERGER

    InSight Health Services Corp. ("InSight" or the "Company") is a Delaware 
corporation formed on February 23, 1996 in connection with the Agreement and 
Plan of Merger, dated as of February 26, 1996 (the "Merger Agreement"), among 
American Health Services Corp., a Delaware corporation ("AHS"), Maxum Health 
Corp., a Delaware corporation ("MHC" or "Maxum"), InSight and two wholly 
owned subsidiaries of InSight, AHSC Acquisition Company, a Delaware 
corporation ("AHSC Acquisition"), and MXHC Acquisition Company, a Delaware 
corporation ("MXHC Acquisition").  Each of AHS and MHC were publicly held 
providers of diagnostic imaging, treatment and related management services. 
Pursuant to the terms of the Merger Agreement, (i) AHSC Acquisition merged 
with and into AHS and MXHC Acquisition merged with and into Maxum 
(collectively, the "Merger"), (ii) each outstanding share of common stock, 
par value $.03 per share, of AHS ("AHS Common Stock") was converted into the 
right to receive one-tenth of a share of common stock, par value $.001 per 
share, of InSight ("InSight Common Stock"), (iii) each outstanding share of 
Series B Senior Convertible Preferred Stock, par value $.03 per share, of AHS 
("AHS Series B Preferred Stock") which was convertible into 100 shares of AHS 
Common Stock was  converted into the right to receive 10 shares of InSight 
Common Stock, (iv) each outstanding share of Series C Preferred Stock, par 
value $.03 per share, of AHS (the "AHS Series C Preferred Stock"), which was 
issued immediately prior to the consummation of the Merger, was converted 
into the right to receive 1.25088 shares of Series A Preferred Stock, par 
value $.001 per share, of InSight (the "InSight Series A Preferred Stock"), 
(v) each outstanding share of common stock, par value $.01 per share, of 
Maxum ("Maxum Common Stock") was converted into the right to receive .598 of 
a share of InSight Common Stock, (vi) each outstanding share of Series B 
Preferred Stock, par value $.01 per share, of Maxum (the "Maxum Series B 
Preferred Stock"), which was issued immediately prior to the consummation of 
the Merger, was converted into the right to receive 83.392 shares of InSight 
Series A Preferred Stock, and (vii) each outstanding option, warrant or other 
right to purchase AHS Common Stock and Maxum Common Stock was converted into 
the right to acquire, on the same terms and conditions, shares of InSight 
Common Stock, with the number of shares and exercise price applicable to such 
option, warrant or other right adjusted based on the applicable exchange 
ratio for the underlying AHS Common Stock or Maxum Common Stock.

    On June 25, 1996, the stockholders of both MHC and AHS approved the 
Merger. On June 26, 1996, MHC and AHS became wholly owned subsidiaries of 
InSight, and the stockholders of MHC and AHS became stockholders of InSight. 
MHC and AHS were organized in 1989 and 1982, respectively.

    The principal executive offices of InSight are located at 4400 MacArthur 
Blvd., Suite 800, Newport Beach, California 92660, and its telephone number 
is (714) 476-0733.

CENTERS IN OPERATION

    As a result of the Merger, InSight provides diagnostic imaging, treatment
and related management services in 30 states throughout the United States.
InSight's services are provided through a network of 39 mobile magnetic
resonance imaging ("MRI") facilities ("Mobile Facilities"), 14 fixed-site MRI
facilities ("Fixed Facilities"), eight (8) multi-modality imaging centers
("Centers"), two (2) Leksell Stereotactic Gamma Unit treatment centers ("Gamma
Knife"), and one radiation oncology center.  An additional radiation oncology
center is operated by the Company as part of one of its Centers.  The Company's
operations are located throughout the United States, with a substantial presence
in southern California, primarily Los Angeles county, and northern Texas,
primarily the Dallas-Ft. Worth metroplex.

    At its Centers, InSight offers other services in addition to MRI including
diagnostic and fluoroscopic x-ray, mammography, diagnostic ultrasound, nuclear
medicine, nuclear cardiology, computed tomography ("CT") and cardiovascular
services.  The Company offers additional services through a variety of
arrangements including equipment rental, technologist services and
training/applications, marketing, radiology management services, patient
scheduling, utilization review and billing and collection services. 


                                          1

<PAGE>

DIAGNOSTIC IMAGING  AND TREATMENT TECHNOLOGY

    During approximately the last 20 years, there has been a major effort
undertaken by the medical and scientific communities to develop cost-effective
diagnostic imaging technologies and to minimize the risks associated with the
application of such technologies.  The major categories of diagnostic imaging
systems currently offered in the medical marketplace are conventional x-ray, CT
scanners, digital ultrasound systems, computer-based nuclear gamma cameras,
radiography/fluoroscopy systems and MRI systems, each of which (other than
conventional x-ray) represents the marriage of computer technology and various
medical imaging modalities. Patients exposed to x-rays and to gamma rays
employed in nuclear medicine receive potentially harmful ionizing radiation.
Much of the thrust of product development during the period has been to reduce
the hazards associated with conventional x-ray and nuclear medicine techniques
and to develop new, virtually harmless imaging technologies such as ultrasound
and MRI.

       X-RAY.   X-ray is the most common energy source used in imaging the body
and is now employed in the three following imaging modalities: (i) conventional
x-ray systems, the oldest method of imaging, are typically used to image bones
and contrast-enhanced vasculature and organs and constitute the largest number
of installed systems; (ii) CT scanners utilize computers to produce cross-
sectional images of particular organs or areas of the body; and (iii) digital
x-ray systems add computer image processing capability to conventional x-ray
systems.

       ULTRASOUND.   Ultrasound systems emit, detect and process high frequency
sound waves to generate images of soft tissues and internal body organs. The
sound waves used in ultrasound do not involve ionizing radiation and are not
known to cause any harmful effects to the patient.

       NUCLEAR MEDICINE.   Nuclear medicine gamma cameras, which are based upon
the detection of gamma radiation generated by radioactive pharmaceuticals
injected or inhaled into the body, are used to provide information about organ
function as opposed to anatomical structure.

       MRI TECHNOLOGY.  InSight believes that the introduction of MRI 
technology into the health care marketplace marked a significant advance in 
diagnostic medicine.  Magnetic resonance is a technique that utilizes low 
energy radiowaves to manipulate protons (usually hydrogen) in the body.  MRI 
systems place patients in a magnetic field.  Once in the magnetic field, the 
protons in a patient's body will tend to align with the magnetic field.  
Radio frequency ("RF") waves, produced by a radio antenna coil which 
surrounds the body part to be imaged, are "pulsed" against the magnetic 
field.  The RF energy is then turned off, and the protons are observed for 
different types of behavior, movement or "relaxation."  Different tissues 
have different relaxation times, depending on the amount of hydrogen or water 
in each proton.  The data on each proton's behavior is collected digitally by 
the system's computer and then reconstructed into cross-sectional images in 
three dimensional planes of orientation.  The resulting image reproduces soft 
tissue anatomy (as found in the brain, spinal cord and interior ligaments of 
body joints such as the knee) with superior clarity, not available by any 
other currently existing imaging modality.  A typical MRI examination takes 
from 30 to 90 minutes.  MRI systems are typically priced in the range of $0.9 
million to $2 million each, depending upon the system configuration, magnet 
design and field strength.

       There are no known hazards to the general population from magnetic and RF
fields of the intensity to which a patient is exposed in a clinical MRI system.
Equipment literature nonetheless recommends that, until further information is
available, pregnant women should be scanned only under limited circumstances.
Furthermore, MRI magnets may disrupt the operation of cardiac pacemakers and may
react with ferrous clips utilized in various surgical procedures, so that
individuals with such devices may be excluded from examination with MRI systems,
and access to the area surrounding the MRI facility may also be controlled to
avoid these possible hazards. Additionally, some MRI examinations require
injection of a paramagnetic contrast material. Although it is extremely unusual,
some patients may develop a significant adverse reaction to this contrast
material; however, chances of fatalities as a result of such reaction are
remote.

       Because the signals used to produce magnetic resonance images contain 
both chemical and structural information, InSight believes this technique has 
greater potential for many important diagnostic applications than any other 
imaging technology currently in use. While existing MRI systems demonstrate 
excellent portrayals of anatomical structures within the human body, of even 
greater significance is the fact that MRI is also sensitive to subtle 
differences between tissues. Thus, MRI offers not only the opportunity for 
highly effective classical diagnosis, but also the potential for future 
monitoring of chemical processes within the body.

     Recent technological advances in software and gradient coil technology 
for MRI systems have allowed equipment with lower magnetic field strength and 
open architecture design to offer significantly improved image quality. These 
systems use permanent electromagnetic technology rather than 
superconductivity magnets, substantially lowering both siting and service 
costs. The open design allows for studies not normally possible in 
conventional MRI systems, including claustrophobic patients, extremely large 
patients (from 300 to 400 pounds) and for musculoskeletal exams which require 
the patient to move or flex, such as kinematic knee studies. Manufacturers 
are marketing these open MRI systems at costs below most state Certificate of 
Need ("CON") requirements. The reduced equipment costs, combined with lower 
siting and service expense, may make MRI technology feasible at some rural 
hospitals and other new market locations where patient volume and 
reimbursement do not financially justify the expense of a conventional MRI 
system.

                                     2

<PAGE>


       CT.   CT technology consists of a doughnut-shaped gantry structure into
which a patient, resting on a remotely controlled couch assembly, is positioned
to scan the anatomical region of interest. The scanning process is performed by
the rotation of a high output x-ray tube around the patient. The x-ray tube
emits a thin fan-shaped beam of x-rays that passes through the patient and is
absorbed by an array of x-ray detectors located on the opposite side of the
patient from the x-ray tube. The detected x-rays are then converted into digital
measurements of x-ray intensity directly proportional to the density of the
portion of the patient through which the beam passes. These digital measurements
of x-ray intensity are then processed by a specialized image reconstruction
computer system into a cross-sectional image of the anatomical region of
interest. The patient is then indexed on the couch and another scan performed
and then another, creating a "stack" of cross-sectional images constituting
the complete diagnostic imaging procedure.

       Typical scanning times for a single cross-sectional image are in the one
second to six second range. A complete CT examination takes from 15 minutes to
45 minutes, depending on the complexity of the examination and number of
individual cross-sectional images required. The current selling prices of CT
systems fall in the range of $0.3 million to $1.5 million depending upon the
specific performance characteristics of the systems. Based on the fact that CT
systems have been commercially marketed for approximately 20 years, InSight
believes that CT is a relatively mature technology and, therefore, not subject
to significant risk of obsolescence.

       Certain CT examinations require the injection of an iodine-based contrast
material, allowing for better visualization of the anatomy. Although it is very
unusual, some patients may develop a significant adverse reaction to this
contrast material. Fatalities as a result of such reaction have occurred but are
rare. In an effort to scan only appropriate patients, all patients are required
to answer a questionnaire which helps to identify those patients who may suffer
an adverse reaction to this contrast material.

       GAMMA KNIFE    The Leksell Stereotactic Gamma Unit is a state-of-the-art
radiosurgical device used to treat intracranial neoplasma and vascular anomalies
which are inaccessible or unsuitable for conventional invasive surgery. The
Gamma Knife was designed to provide neurosurgeons and radiation therapists with
the ability to perform radiosurgery, using high energy gamma rays, instead of
conventional invasive techniques (open surgery), thereby generally eliminating
the risk of infection and intracerebral bleeding.

       The Gamma Knife delivers a single high dose of ionizing radiation
emanating from 201 Cobalt 60 sources positioned about a hemispherical, precision
machined cavity. Each individual beam is focused on a common target producing an
intense concentration of radiation at the target site, destroying the lesion
while spreading the entry radiation dose uniformly and harmlessly over the
patient's skull. The mechanical precision of the Gamma Knife at the target site
is 1/10 of one millimeter (0.1 mm), making the Gamma Knife an ideal treatment
device for treating small or medium-sized lesions in critical locations within
the brain. However, based upon the type, size and/or location of such lesions,
not all patients are candidates for radiosurgery. The mechanical precision of
the Gamma Knife is coupled with an extremely sharp fall-off in the radiation
intensity surrounding the target, resulting in a highly localized treatment
effect, sparing surrounding tissue.

       The Gamma Knife treatment requires no open surgical intervention, no
lengthy hospital stay and no risk of post-surgical bleeding or infection. When
compared to the average length of stay and costs associated with conventional
surgery, the Gamma Knife greatly reduces the cost of neurosurgical treatment.
Typical treatment time is approximately 10 to 15 minutes per area of interest
("isocenter"). A key feature of the Gamma Knife is its ability to perform
treatments that require multiple isocenters. In addition, other applications for
the Gamma Knife are currently being developed. Investigative work is being
conducted to treat patients for chronic pain and motion disorders such as
Parkinson's disease, epilepsy and trigeminal neuralgia. These new applications
represent a significant new market for the Gamma Knife upon clinical acceptance.
The current selling price of a Gamma Knife system is approximately $3 million.

STRATEGY AND MARKETING

       InSight believes a consolidation in the diagnostic imaging industry is 
occurring and is necessary in order to provide surviving companies the 
opportunity to achieve operating and administrative efficiencies through the 
consolidation of duplicative infrastructures.

       InSight's primary objective is to provide diagnostic imaging, 
treatment and related management services to hospitals, physicians and their 
patients. The Company does not engage in the practice of medicine.  Subject 
to its ability to obtain financing on terms reasonably acceptable to the 
Company, the strategy of InSight is focused on three interrelated 
initiatives:  (i) the consolidation of the highly fragmented, diagnostic 
imaging

                                          3

<PAGE>

industry through the acquisition of organizations which either strategically 
fit into its regional networking strategy or provide significant cost savings 
through the consolidation of duplicative infrastructures, (ii) development of 
regional networks of radiology providers and physicians designed to provide 
the highest quality and most cost-effective unit of diagnostic information to 
the broadest population in a given market and (iii) new business initiatives 
focused on broadening its range of services to managed care organizations, 
hospitals and physician management companies to include radiology management 
services; information management services; billing and collections; 
technologist services and training applications; marketing; equipment rental 
and continued evaluation of opportunities with emerging technologies. InSight 
believes that long-term viability is contingent upon its ability to 
successfully participate in this industry consolidation. InSight views the 
Merger of MHC and AHS as reflective of the industry consolidation. While its 
capital resources are limited, InSight will continue to consider and pursue 
acquisition opportunities. In September 1996, InSight completed the 
acquisition of an open MRI facility in Northern California.

       Certain statements contained in this report are forward-looking 
statements that involve a number of risks and uncertainties. The factors that 
could cause actual results to differ materially include the following: 
availability of financing; limitations and delays in reimbursement by 
third-party payors; contract renewals and financial stability of customers; 
technology changes; governmental regulation; conditions within the health 
care environment; adverse utilization trends for certain diagnostic imaging 
procedures; aggressive competition; general economic factors; InSight's 
inability to carry out its business strategy due to rising purchase prices of 
imaging centers and companies; and the risk factors listed from time to time 
in InSight's filings with the Securities and Exchange Commission ("SEC").


GOVERNMENT REGULATION

       The health care industry is highly regulated and changes in laws and
regulations can be significant. Changes in the law or new interpretation of
existing laws can have a material effect on permissible activities of InSight,
the relative costs associated with doing business and the amount of
reimbursement by government and other third-party payors. The federal government
and all states in which InSight currently operates regulate various aspects of
the Company's business. Failure to comply with these laws could adversely affect
InSight's ability to receive reimbursement for its services and subject the
Company and its officers to penalties.

       Some states require hospitals and certain other health care facilities 
to obtain a CON prior to the acquisition of major medical equipment such as 
an MRI or Gamma Knife system. InSight believes that it will not be required 
to obtain CONs in most of the states in which it intends to operate since 
most states no longer require non-hospital providers to obtain CONs and those 
states that do, offer exemptions for which the Company may qualify; however, 
in those states where a CON is required, InSight has complied or will comply 
with such requirements.

       Beginning in late 1983, prospective payment regulations became effective
under the federal Medicare program. The Medicare program provides reimbursement
for hospitalization, physician, diagnostic and certain other services to
eligible persons 65 years of age and over and others considered disabled.
Providers of service are paid by the federal government in accordance with
regulations promulgated by the United States Department of Health and Human
Services and accept said payment, with nominal co-insurance amounts required to
be paid by the service recipient, as payment in full. In general, these
regulations provide for a specific overall fee which hospitals may charge for
inpatient treatment services based upon the diagnosis of the patient. Because
InSight mainly provides services to patients on an outpatient basis, the
prospective payment regulations do not materially affect the Company's business.
Although outpatient services are presently exempt from prospective payment
reimbursement, Congress has instructed the Prospective Payment Assessment
Commission to study alternative methods for reimbursing hospitals for outpatient
services, including prospective payment methods, and the Medicare program has
adopted fee scales for some diagnostic services. Such congressional activity 
reflects industry-wide cost containment pressures which InSight believes will 
affect all health care providers for the foreseeable future.

       Private health insurance programs generally have authorized the payment
for diagnostic imaging and Gamma Knife procedures on satisfactory terms and the
Health Care Financing Administration ("HCFA") has authorized reimbursement
under the federal Medicare program for all diagnostic imaging and Gamma Knife
services currently being provided by the Company.  However, if Medicare
reimbursement is reduced, InSight believes that private health insurance
programs will also reduce reimbursement in response to reductions in government
reimbursement which could have an adverse impact on the Company's business.

       The Medicaid program is a combined federal and state program providing
coverage for low income persons. The specific services offered and reimbursement
methods vary from state to state. In many states, Medicaid reimbursement is
patterned after the Medicare program.  Changes in Medicaid program reimbursement
are not expected to have a material adverse impact on the Company's business.


                                          4

<PAGE>

       InSight is subject to state and federal laws prohibiting payments for 
patient referrals and regulating reimbursement procedures and practices under 
Medicare, Medicaid and other governmental health care programs. The Medicare 
and Medicaid Patient and Program Protection Act of 1987 (the "1987 Act") 
prohibits financial arrangements designed to induce patient referrals to 
providers of services which are paid for by Medicare or Medicaid. Courts 
have, to date, interpreted these laws to apply to a broad range of financial 
relationships. Several states also have statutes prohibiting arrangements 
with health care providers which, while similar in many respects to the 1987 
Act, vary from state to state, are often vague and have infrequently been 
interpreted by courts or regulatory agencies. Due to the potentially broad 
proscriptions contained in these federal and state laws, there can be no 
assurance that all of InSight's business practices would be construed to 
comply with these laws in all respects. However, in the situations where 
InSight contracts with health care providers who may be in a position to 
refer to patients the Company's operations, the Company exercises care in an 
effort to structure its activities and arrangements to comply with applicable 
federal and state laws. InSight maintains an internal regulatory compliance 
review program and retains special counsel, as necessary, to monitor 
compliance with such laws and regulations.

       The U.S. Food and Drug Administration ("FDA") has issued the requisite 
premarket approval for all of the MRI, CT and Gamma Knife systems utilized by 
InSight.  The Company does not believe that any further FDA approval is 
required in connection with equipment currently in operation or proposed to 
be operated.

       The radiologists with whom InSight may enter into agreements to provide
professional services are subject to licensing and related regulations by the
states. As a result, the Company requires its radiologists to have and maintain
appropriate licensure. InSight does not believe that such laws and regulations
will either prohibit or require licensure approval of its business operations,
although no assurances can be made that such laws and regulations will not be
interpreted to extend such prohibitions or requirements to InSight's operations.

MANAGED CARE

       Health Maintenance Organizations ("HMOs") and Preferred Provider
Organizations ("PPOs") attempt to control the cost of health care services.
InSight believes that the development and expansion of HMOs, PPOs and other
managed care organizations will have a negative impact on utilization of InSight
services in certain markets and/or affect the revenue per procedure which the
Company can collect, since they will exert greater control over patients' access
to diagnostic imaging services, the selection of the provider of such services
and the reimbursement thereof.  InSight also expects that the excess capacity of
equipment in the United States may negatively impact operations because of the
competition among health care providers for contracts with all types of managed
care organizations. As a result of such competition, the length of term of any
contracts which InSight may obtain and the payment to the Company for such
services may also be negatively impacted. InSight nonetheless believes that 
as long as it is able to negotiate provider agreements with the managed care 
companies and other payors to provide productive and cost-efficient services 
with measurable outcomes, InSight's business as a whole should not be 
negatively impacted. See "Customers and Fees".

LIABILITY INSURANCE

       InSight does not provide medical services, although it has obtained
professional liability insurance as well as general liability insurance. In
addition, the radiologists or other health care professionals with whom the
Company contracts are required by such contracts to carry adequate medical
malpractice insurance. InSight believes that its insurance is adequate for its
business of providing diagnostic imaging, treatment and related management
services.

COMPETITION

       The health care industry in general, and the market for diagnostic 
imaging services in particular, are highly competitive. InSight's operations 
must compete with groups of radiologists, established hospitals and certain 
other independent organizations, including equipment manufacturers and leasing
companies, that own and operate imaging equipment. InSight will continue to
encounter substantial competition from hospitals and independent organizations.
Certain hospitals, particularly the larger hospitals, may be expected to
directly acquire and operate imaging and treatment equipment on-site as part of
their overall inpatient servicing capability. In the past, however, the
reluctance of hospitals to purchase imaging and treatment equipment encouraged
the entry of start-up ventures and more established business operations into 
the diagnostic and treatment services business. As a result, there is 
significant excess capacity in the

                                          5

<PAGE>

diagnostic imaging business in the United States which negatively affects
utilization and reimbursement.  Many of these competitors have substantially
greater resources than InSight; however, the Company competes principally on the
basis of its reputation for productive and cost-effective quality services.

CUSTOMERS AND FEES

       InSight's revenues are primarily generated from contract services and 
patient services.  Contract services revenues are generally earned from 
services billed to a hospital or other health care provider which include:  
(i) fee-for-service arrangements in which revenues are based upon a 
contractual rate per procedure, (ii) equipment rental in which revenues are 
generally based upon a fixed monthly rental, and (iii) management fees.  
Contract services revenues are primarily earned through Mobile Facilities and 
certain Fixed Facilities. Patient services revenues are services billed 
directly to patients or third party payors (generally managed care 
organizations and commercial insurance carriers), and are primarily earned 
through Centers and certain Fixed Facilities.

       InSight's operations are principally dependent on its ability (either 
directly or indirectly through its hospital customers) to attract referrals 
from physicians and other health care providers representing a variety of 
specialties.  The Company's eligibility to provide service in response to a 
referral is often dependent on the existence of a contractual arrangement 
with the referred patient's insurance carrier (primarily if the insurance is 
provided by a managed care organization).  Managed care contracting has 
become very competitive and reimbursement schedules are nearing Medicare 
reimbursement levels.  A decline in referrals and/or reimbursement rates 
would adversely affect InSight's revenues and profits. See "Managed Care".

       InSight's fee-for-service revenues, primarily earned by its Mobile
Facilities, are expected to represent approximately 43% of total annual
revenues.  Each year approximately one-quarter to one-third of the service
agreements, which produce the Company's fee-for-service revenues, come up for
renewal.  It is expected that some high volume accounts will elect not to renew
their contracts.  If such contracts are not replaced with new accounts or with
the expansion of services on existing accounts, InSight's revenues and profits
would be adversely affected.

       No single source accounts for more than 10% of InSight's revenues.  
The Company, through a subsidiary, has six individual contracts with the 
county of Los Angeles (the "County") covering six separate sites.  In the 
aggregate, these sites earn revenues which represent approximately 10% of 
InSight's annual revenues.  From time to time, the County has experienced 
financial difficulties. If such difficulties caused the County to curtail or
terminate InSight's services, the Company's business would be adversely 
affected.

SUPPLY OF DIAGNOSTIC IMAGING AND GAMMA KNIFE SYSTEMS

       InSight continues to evaluate the mix of its MRI equipment in response to
changes in technology and to the surplus capacity in the marketplace.  The
overall technological competitiveness of InSight's equipment continues to
improve through upgrades, disposal and/or trade-in of older equipment and
execution of leases for new equipment.  Subsequent to June 30, 1996, InSight
returned four older Mobile Facilities to its primary creditor.

       Several substantial companies are presently engaged in the manufacture of
MRI, CT and other diagnostic imaging equipment, including GE Medical, Hitachi
Medical Systems, Picker International, Philips Medical Systems, Siemens Medical
Systems, Inc. and Toshiba Medical Systems. InSight maintains good working
relationships with many of the major manufacturers to better ensure an adequacy
of supply as well as access to those types of diagnostic imaging systems which
appear most appropriate for the specific diagnostic or treatment center to be
established. Currently only one company, Elekta Instruments, Inc., a subsidiary
of AB Elekta headquartered in Stockholm, Sweden ("Elekta"), is engaged in the
business of manufacturing the Gamma Knife.

EMPLOYEES

       As of September 25, 1996, InSight had approximately 669 full-time and 107
part-time employees.  None of the Company's employees are covered by a
collective bargaining agreement. Management believes its employee relations to
be satisfactory.

                                          6

<PAGE>

ITEM 2.     PROPERTIES

       The following table includes the primary properties utilized by InSight 
as of September 25, 1996:
<TABLE>
<CAPTION>

                                              APPROXIMATE
NAME OF FACILITY                              SQUARE FEET       LOCATION
----------------                              -----------       --------
<S>                                            <C>               <C>
OWNED:
Berwyn Magnetic Resonance Center                  3,800          Berwyn, Illinois
Northern Indiana Oncology Center                  3,500          Valparaiso, Indiana
Garfield Imaging Center                           4,500          Monterey Park, California
LAC/USC Imaging Sciences Center                   8,500          Los Angeles, California
Diagnostic Outpatient Center                      3,800          Hobart, Indiana
Harbor/UCLA Diagnostic Imaging Center            15,000          Torrance, California

LEASED:
InSight Corporate Headquarters                   12,300          Newport Beach, California
MHC former Corporate Headquarters                10,300(a)       Dallas, Texas
Maxum Diagnostic Center - Forest Lane            14,100          Dallas, Texas
Maxum Diagnostic Center - Eighth Avenue          10,000          Ft. Worth, Texas
Maxum Diagnostic Center - Preston Road            5,800          Dallas/Plano, Texas
Ocean Medical Imaging Center                      8,700          Tom's River, New Jersey
Northwest Magnetic Imaging Center                 2,400          Seattle, Washington
Northwest Gamma Knife Center                      3,400          Seattle, Washington
Washington Magnetic Resonance Center              4,100          Whittier, California
Central Maine Imaging Center                      7,250          Lewiston, Maine
Training/Applications/Fleet Services             20,000          Winston-Salem, North Carolina
</TABLE>


(a) Lease expires March 31, 1997, by which time substantially all activities
will have been transferred to InSight's corporate headquarters.

ITEM 3.  LEGAL PROCEEDINGS

MAXUM  STOCKHOLDER LITIGATION

       In May and June 1993, MHC was named a defendant in two lawsuits filed 
on behalf of a purported class of stockholders in the U.S. District Court for 
the Southern District of New York (the "Court").  Also named as defendants 
were the underwriting firms that led MHC's initial public offering in 
September 1991, a former stockholder and senior creditor of MHC, and certain 
executives and members of MHC's Board of Directors.  These two actions were 
consolidated into one action.  In February 1994, the plaintiffs filed a 
second consolidated amended complaint, which superseded the previously filed 
complaints.  The plaintiffs alleged that misstatements and omissions were 
made by MHC and the other defendants in connection with MHC's initial public 
offering and in subsequent public disclosures  from September 19, 1991 until 
March 1, 1993 when MHC announced that it would write down assets and 
establish reserves related to the restructuring of its mobile MRI business.  
The plaintiffs sought monetary damages under various provisions of the federal
securities laws and state law in an unspecified amount, as well as other 
relief. In March 1994, MHC and all other defendants moved to dismiss the 
second amended complaint for, among other things, failure to state a claim.  
In November 1994, the Court granted the motions to dismiss and gave the 
plaintiffs permission to file a third amended complaint.  In January 1995,
the plaintiffs served their third consolidated amended complaint.  At 
approximately the same time, the plaintiffs agreed to dismiss without 
prejudice their claims against the two underwriter defendants.  In June 1995, 
MHC and the other defendants moved to dismiss the third amended complaint for 
failure to state a claim and failure to plead fraud with particularity.

       On February 23, 1996, while the motions to dismiss were still under
consideration by the Court, the defendants, plaintiffs and other interested
parties (acting through their respective counsel) entered into a Stipulation of
Settlement


                                          7

<PAGE>

pursuant to which, subject to certain conditions, the action would be
settled and all claims dismissed on the merits.  In anticipation of this
settlement, MHC recorded a charge of $1.5 million in the fourth quarter of 1995.
MHC had arranged to borrow approximately $1.9 million to finance the litigation
settlement.

       On April 8, 1996, the Court entered an order that, among other things,
approved the proposed settlement on a preliminary basis, set May 27, 1996 as the
deadline for interested persons to object to the settlement and to opt-out of
the settlement, and scheduled a hearing on June 21, 1996 to determine, among
other things, whether to grant final approval to the settlement.

       The Final Judgment of Dismissal became final on July 26, 1996.  Pursuant 
to the parties' Stipulation of Settlement, and as a result of all conditions to
effectiveness having been met, including MHC's having financing available to it
for its contribution, the settlement became effective on July 27, 1996.  On July
29, 1996, MHC and other parties collectively paid to the plaintiffs in the class
action the balance of the agreed upon settlement amount, including accrued
interest, thereby completing the remaining obligations of MHC.

       AHS SAN JUAN HEALTH CENTRE LITIGATION

       In September 1992, a complaint was filed in the United States District
Court for the District of Puerto Rico by PRF, Inc. d/b/a San Juan Health Centre,
Inc., Drs. Pablo Rodriguez Millan and Rafael Rodriquez Sepulveda and their
spouses against Philips Credit Corporation ("Philips"), AHS, Clarke J.
Underwood, Margaret van Gilse d/b/a Berkshire Consulting Group, et al (Case No.
92-2266).  The complaint alleged against all defendants violations of the
Racketeer Influenced and Corrupt Organizations Act ("RICO"), mail fraud, wire
fraud, misrepresentation and fraud, infliction of emotional distress and
tortious misconduct upon Drs. Millan and Sepulveda and their spouses, and loss
of consortium by Dr. Millan.  The complaint alleged against AHS breach of
management agreement, breach of voting trust agreement and breach of fiduciary
duty, tortious interference with contractual relations, and breach of fiduciary
duty to Drs. Millan and Sepulveda and their spouses.  The complaint sought
compensatory damages in excess of $400,000,000, punitive damages, costs,
injunctive relief and attorneys' fees.  Mr. Underwood and Ms. van Gilse are
former officers/employees of AHS.

       San Juan Health Centre ("SJHC"), a freestanding health care clinic, 
was created by Drs. Millan and Sepulveda and Mr. Amezquita, who are the three 
shareholders of PRF, Inc., the surviving entity of a merger of PRF, Inc. and 
San Juan Health Centre, Inc. ("SJ Inc.").  Prior to AHS's involvement with 
SJHC, Philips was a large creditor of PRF, Inc., having made sizable loans 
for medical equipment purchases and operations.  Philips was at the time and, 
until February 1993, continued to be AHS's primary lender.  In January 1990, 
in connection with Philips making another large loan to PRF, Inc. and SJ 
Inc., Philips requested AHS to manage SJHC, which it agreed to do.  In 
connection with the loan, PRF, Inc. and SJ Inc. entered into a management 
agreement with AHS on January 12, 1990, with a two-year term, pursuant to 
which AHS was to provide SJHC with general management services.  In October 
1991, PRF, Inc. notified AHS that it would not be extending the management 
agreement beyond the initial two-year term.  As of January 1992, AHS was no 
longer the manager of SJHC. Berkshire Consulting Group became the manager of 
SJHC.  Also, in connection with the loan, on January 13, 1990, Drs. Millan 
and Sepulveda placed their PRF, Inc. and SJ Inc. stock into a voting trust.  
In the voting trust agreement, AHS was named the trustee of the voting trust 
with broad powers with respect to the stock.  AHS resigned as trustee on June 
24, 1992.

       In July 1993, one of the plaintiffs, PRF, Inc., filed a voluntary 
petition under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy 
Court, District of Puerto Rico (Case No. 93-03880 SEK).  In the context of 
this proceeding, all of the claims of PRF, Inc. have been resolved.  The 
defendants subsequently moved to dismiss the individual and conjugal 
partnership claims on the basis that they were derivative of the resolved 
claims of PRF, Inc.  On March 11, 1996, the District Court issued an Opinion 
and Order and Partial Judgment dismissing with prejudice all claims brought 
by the individual plaintiffs and conjugal partnership plaintiffs based on 
alleged violations of the RICO statute, mail fraud, wire fraud, 
misrepresentation and fraud, intentional infliction of emotional distress, 
tortious misconduct, and loss of consortium.  As  a result of the entry of 
the Partial Judgment and issuance of the Opinion and Order, only three counts 
remained--a claim against AHS for alleged breach of a voting trust agreement, 
and breach of fiduciary duty claims, as separate claims by the conjugal 
partnerships and the husband and wife who make up each conjugal partnership.  
On May 15, 1996, a Further Judgment was entered finally resolving the 
remaining claims against AHS.  The Company made a payment of $50,000 to 
settle the remaining claims.

       In addition to the foregoing matters, InSight is engaged in the defense 
of lawsuits arising out of the ordinary course and conduct of its business and 
has insurance policies covering such potential insurable losses where such 
coverage is cost-effective.  InSight believes that the outcome of any such 
lawsuits will not have a material adverse impact on the Company's business.

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

       Special stockholders meetings for each of MHC and AHS were held on 
June 25, 1996 to approve the merger.  All the information required to be 
reported herein, including the results of the voting, has been reported in the 
Company's Transition Report for the transition period from January 1, 1996, 
to June 26, 1996 which was filed with the SEC on August 12, 1996.


                                          8

<PAGE>

                                       PART II

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

       InSight's Common Stock began trading on the national over-the-counter
market and quoted on the NASDAQ Small Cap Market under the symbol "IHSC" on July
17, 1996.

       The following table sets forth the high and low bids as quoted on the 
NASDAQ Small Cap Market for InSight's Common Stock for the months 
indicated:

     MONTH ENDED                   LOW          HIGH
     -----------                   ---          ----

     July 31, 1996                  5           7 1/2
     August 31, 1996                4 3/4       7
     September 30, 1996             5 3/4       6 3/4

     The prices (rounded to the nearest 1/8 or nearest 1/32 where applicable)
represent quotations between dealers without adjustment for mark-up, markdown or
commission, and may not necessarily represent actual transactions.

     The Company has never paid a cash dividend on its Common Stock and does 
not expect to do so in the foreseeable future.  The Company's loan agreements 
with its primary lender contain restrictions on its ability to pay dividends 
on its Common Stock.

       As of September 25, 1996, the Company's records indicate that there were 
in excess of 1,100 beneficial holders of the Common Stock and approximately 225
stockholders of record.

ITEM 6.     SELECTED FINANCIAL DATA

       On June 26, 1996, pursuant to the Merger Agreement each of MHC and AHS
became a wholly owned subsidiary of InSight.  The Merger was accounted for using
the purchase method of accounting in accordance with generally accepted
accounting principles.  MHC has been treated as the acquirer for accounting
purposes, based upon relative revenues, book values and other factors.  THE
SELECTED CONSOLIDATED FINANCIAL DATA REPRESENTS HISTORICAL DATA OF MHC ONLY,
EXCEPT FOR THE BALANCE SHEET DATA AS OF JUNE 30, 1996.  HISTORICAL DATA OF AHS
IS NOT INCLUDED (SEE NOTE 15 TO THE CONSOLIDATED FINANCIAL STATEMENTS).  The
selected consolidated financial data presented as of and for the six months
ended June 30, 1996 and for the years ended December 31, 1995, 1994,
1993, 1992 and 1991 has been derived from the Company's audited consolidated
financial statements and should be read in conjunction with such consolidated
financial statements and  related notes as of and for the six months ended June
30, 1996 and for the years ended December 31, 1995, 1994 and 1993 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere in this report. The selected consolidated 
financial data presented for the six months ended June 30, 1995 is unaudited 
and has been included herein for comparison purposes.


                                          9

<PAGE>

               (Amounts in thousands, except shares and per share data)
<TABLE>
<CAPTION>

                                             SIX MONTHS ENDED
                                                 JUNE 30,                               YEARS ENDED DECEMBER 31,
                                           ---------------------  --------------------------------------------------------------
                                                1996    1995 (6)     1995 (4)       1994         1993         1992        1991
                                           ---------- ----------  ------------  ---------    ---------    ----------   ---------
<S>                                      <C>          <C>         <C>          <C>          <C>           <C>          <C>
STATEMENT OF OPERATIONS DATA:
Revenues                                  $   26,460  $   24,434   $   50,609  $   45,868   $   45,075    $   45,135   $   34,388
Costs of operations (1)                       25,564      22,986       48,178      45,239       46,556        45,329       25,328
                                          ----------  ----------   ----------  ----------   ----------    ----------   ----------
Gross profit (loss)                              896       1,448        2,431         629       (1,481)         (194)       9,060
Corporate operating expenses                   3,983       1,915        3,972       4,240        5,244         6,747        6,605
                                          ----------  ----------   ----------  ----------   ----------    ----------   ----------
Income (loss) from company operations         (3,087)       (467)      (1,541)     (3,611)      (6,725)       (6,941)       2,455
Equity in earnings from unconsolidated
 partnerships                                    138        136           348         834          685         1,020          428
                                          ----------  ----------   ----------  ----------   ----------    ----------   ----------
Operating income (loss)                       (2,949)       (331)      (1,193)     (2,777)      (6,040)       (5,921)       2,883
Interest expense, net                         (1,144)       (648)      (1,626)     (1,206)      (1,773)       (2,391)      (3,646)
Provision for securities litigation
 settlement                                        -           -       (1,500)          -            -             -            -
Gain on sale of partnership interests              -           -            -       4,957            -             -            -
Income tax expense                               (65)          -            -        (160)           -             -            -
                                          ----------  ----------   ----------  ----------   ----------    ----------   ----------
Income (loss) before extraordinary 
 item (2)                                     (4,158)       (979)      (4,319)        814       (7,813)       (8,312)        (763)
Extraordinary item                             3,179           -            -       3,342        1,036             -            -
                                          ----------  ----------   ----------  ----------   ----------    ----------   ----------
Net income (loss)                               (979)       (979)      (4,319)      4,156       (6,777)       (8,312)        (763)
Preferred stock dividends, net                     -           -            -           -            -             -         (254)
                                          ----------  ----------   ----------  ----------   ----------    ----------   ----------
                                          $     (979) $     (979)  $   (4,319) $    4,156   $   (6,777)   $   (8,312)  $   (1,017)
                                          ----------  ----------   ----------  ----------   ----------    ----------   ----------
                                          ----------  ----------   ----------  ----------   ----------    ----------   ----------

INCOME (LOSS) PER COMMON SHARE:
Income (loss) before extraordinary
 item (3)                                 $    (2.99) $    (0.73)  $    (3.21) $     0.58   $    (4.49)   $    (4.89)  $    (1.01)
Net income (loss) (3)                     $    (0.70) $    (0.73)  $    (3.21) $     2.96   $    (3.89)   $    (4.89)  $    (1.01)
Weighted average number of common 
 shares outstanding(3)                     1,389,271   1,333,169    1,344,832   1,402,435    1,741,846     1,698,602    1,004,287

<CAPTION>
                                                                                                            AT DECEMBER 31,
                                           AT JUNE 30,               -------------------------------------------------------------
BALANCE SHEET DATA:                          1996 (5)                 1995 (4)      1994         1993         1992         1991
                                          ----------                ----------   ----------   ----------   ----------   ----------

<S>                                       <C>                       <C>          <C>          <C>          <C>          <C>
Working capital (deficit)                 $   (1,167)               $   (2,228)  $    1,587   $   (8,594)  $  (14,607)  $   (2,009)
Property and equipment, net                   29,852                    12,386        5,272        9,791       18,772       25,638
Intangible assets                             16,965                     4,047        1,194        1,263        2,513        1,641
Total assets                                  70,386                    28,306       22,592       23,566       38,043       42,203
Total long-term liabilities                   39,839                    19,723        9,575        7,967        8,368       19,244
Stockholders' equity (deficit)                 5,404                    (4,005)         300       (3,857)       2,502       10,150

</TABLE>

(1) Includes a (net credit) provision for prior restructuring costs of $(0.5)
    million and $7.5 million in 1993 and 1992, respectively.
(2) 1995 includes a $1.5 million provision for MHC's securities litigation
    settlement and 1994 includes a $4.8 million gain, net of income tax
    provision of $0.2 million on the sale of lithotripsy partnership interests.
(3) Amounts are computed on a pro forma basis as if the reset of par value of
    Maxum Common Stock and related conversion into InSight Common Stock had
    occurred on January 1, 1991.
(4) Includes two significant acquisitions which were completed during the year.
    See "Management's Discussion and Analysis of Financial Condition and
    Results of Operations-Acquisitions" included elsewhere in this report.
(5) Includes the acquisition of AHS which was completed on June 26, 1996.
(6)  Unaudited.



                                          10

<PAGE>

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

       The following discussion and analysis is provided to increase 
understanding of, and should be read in conjunction with Item 1., Business, 
and the consolidated financial statements and accompanying notes. All  
references herein to a "Note" are to the "Notes to Consolidated Financial 
Statements" contained in Item 8. "Financial Statements and Supplementary 
Data" included elsewhere in this report.  THE FOLLOWING DISCUSSION AND 
ANALYSIS CONTAINS THE HISTORICAL FINANCIAL DATA OF MHC ONLY, WHICH IS TREATED 
AS THE ACQUIRER FOR ACCOUNTING PURPOSES IN THE MERGER. 

ACQUISITIONS

InSight believes a consolidation in the diagnostic imaging industry is 
occurring and is necessary in order to provide surviving companies the 
opportunity to achieve operating and administrative efficiencies through the 
consolidation of duplicative infrastructures.

Subject to its ability to obtain financing terms reasonably acceptable to the 
Company, the strategy of InSight will be focused on three interrelated 
initiatives:  (i) consolidation of the highly fragmented diagnostic imaging 
industry through acquisition of organizations which either strategically fit 
into its regional networking strategy or provide significant cost savings; 
(ii) development of regional networks of radiology providers and physicians 
designed to provide the highest quality and most cost-effective unit of 
diagnostic information to the broadest population in a given market; and 
(iii) new business initiatives focused on broadening its range of services to 
managed care organizations, hospitals and physician management companies to 
include radiology management services; information management services; 
unbundling of current core services such as billing and collections, 
technician training and staffing, and asset management and continued 
evaluation of opportunities with emerging technologies.  InSight believes 
that long-term viability is contingent upon its ability to successfully 
participate in this industry consolidation.  InSight views the Merger of MHC 
and AHS as reflective of this consolidation. InSight will continue to 
consider and pursue consolidation opportunities.

During 1995, MHC completed two significant acquisitions.  In the first half 
of  the year, MHC acquired certain assets, including Mobile Facilities and 
customer contracts from a competitor operating in Ohio and Indiana,  and 
assumed certain equipment related liabilities.  Proceeds from the 1994 sale 
of interests in three partnerships that provided lithotripsy services were 
used to fund the net purchase price of $2.1 million.

In the second half of 1995, MHC acquired two Centers in Dallas, Texas.        
The transaction included the purchase of certain assets, primarily        
diagnostic equipment, and the assumption of certain equipment related       
liabilities.  The purchase price of $1.6 million and an additional $0.7      
 million for working capital requirements were financed by GE Medical.  In   
December 1995, one of the Centers was consolidated into two other Centers.

PRIOR RESTRUCTURE OF MHC'S OPERATIONS AND FINANCIAL OBLIGATIONS

       During recent years, MHC experienced many adverse market conditions
including significantly increased price competition, changes in equipment
technology, a surplus of equipment capacity and declining reimbursement rates.
In addition, an increased presence of managed care entities and the formation of
health care networks created additional challenges.

       Based on these market conditions, management of MHC concluded that the
lowest cost providers of health care services would be best positioned to meet
the challenges imposed by rapid changes in the health care industry.  In 1992,
MHC recorded a charge of $7.5 million in anticipation of a restructure of its
operations and financial obligations that was completed in 1994 (the "MHC Prior
Restructure").  The charge included estimated costs for the reconfiguration,
consolidation and wind-down of certain mobile MRI routes, the write-down of
certain older Mobile Facilities to be held for sale, accrual for estimated
termination costs associated with a reduction in work force, and other estimated
expenses and professional fees associated with the execution of the MHC Prior
Restructure.

       Execution of the MHC Prior Restructure began in 1993 focused primarily 
on reducing negative cash flow in the near-term, improving current viability 
and enhancing the potential for long-term viability.  During 1993, 
significant progress was achieved.  The reconfiguration, consolidation and 
wind-down of mobile MRI routes referenced above were completed, and four 
unprofitable partnerships in which MHC had interests were terminated.  
Expenses at MHC's corporate headquarters were reduced significantly, 
beginning in 1993, due primarily to a consolidation of functions, reduction 
in the headquarters facility and a significant reduction in personnel.  
Finally, MHC reached an agreement with GE Medical, its primary creditor, in 
early 1994, which was effective June 1993, whereby certain unpaid amounts 
past due under then current lease agreements with GE Medical were deferred 
and lease agreements were restructured to reduce the overall lease 
obligations.  In addition, outstanding amounts due MHC's senior creditor 
under a revolving credit agreement were settled, resulting in a $1.0 million 
extraordinary gain on debt extinguishment.  Also in 1993, MHC recorded a net 
credit adjustment of $0.5 million associated with the estimated costs of the 
MHC Prior Restructure.

       During 1994, the MHC Prior Restructure was completed.  MHC recorded a 
$3.3 million gain on debt extinguishments in connection with the settlement 
of outstanding amounts with another significant creditor and two smaller 
creditors. In addition, MHC sold its technical services division to GE 
Medical. Consideration for the sale included cash and future discounts on 
maintenance services to be realized over approximately five years.  MHC also 
sold its interests in three lithotripsy partnerships discussed above for 
approximately $5.0 million in cash.  The proceeds were used to retire 
outstanding debt obligations, to satisfy working capital requirements and for 
business expansion opportunities in the

                                          11

<PAGE>

first half of 1995.  This transaction resulted in a pretax gain of approximately
$5.0 million.  Finally, MHC terminated two additional unprofitable partnerships
in which it held interests.

       The favorable results of the MHC Prior Restructure were diminished by
continued deterioration in the industry.  MHC continued to operate while
experiencing negative cash flow by completing transactions involving the
financing of certain operating expenses by GE Medical, and the disposal of
certain assets and partnership interests until the completion of the Merger.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

       In connection with the Merger, certain financial accommodations with 
MHC's and AHS's primary creditor, GE Medical, became effective in June 1996. 
Management believes that InSight's long-term viability is contingent upon its 
ability (through MHC and AHS, its principal operating subsidiaries) to 
consider, pursue and to successfully participate in the ongoing industry 
consolidation.

       InSight operates in a capital intensive, high fixed cost industry that 
requires significant amounts of working capital to fund operations, 
particularly the initial start-up and development expenses of new operations. 
 Revenues and cash flows have been adversely affected by an increased 
collection cycle, increased competitive pressures and major restructurings 
within the health care industry.  This adverse effect on revenues and cash 
flow is expected to continue, especially in the mobile MRI business.  Absent 
further declines in reimbursement and/or cancellation of customer contracts, 
the Company believes it will finance its ongoing operations through 
internally generated funds.

       InSight continues to pursue other acquisition opportunities.  InSight 
believes that the expansion of its business through acquisitions is a key 
factor in achieving profitability.  Generally, acquisition opportunities are 
aimed at increasing revenues and profits, and maximizing utilization of 
existing capacity.  Incremental operating profit resulting from future 
acquisitions will vary depending on geographic location, whether facilities 
are mobile versus fixed, range of services provided and the Company's ability 
to integrate the acquired businesses into its existing infrastructure.  The 
ability of the Company to capitalize on identified acquisition opportunities 
is dependent upon the availability of financing on terms reasonably 
acceptable to the Company.

       During the six months ended June 30, 1996, MHC obtained financing of 
$1.0 million for certain operating expenses, and $1.2 million for transaction 
costs related to the Merger.  The Company has a working capital deficit of 
$1.2 million and $2.2 million, at June 30, 1996 and December 31, 1995, 
respectively. The net decrease in the working capital deficit of $1.0 million 
is due primarily to the Merger and debt restructuring.


                                          12

<PAGE>

       The Company's cash and cash equivalents increased $5.0 million during 
the six months ended June 30, 1996.  Net cash provided by operating 
activities for the six months ended June 30, 1996 was $0.7 million, which 
includes $1.0 million related to the financing of operating expenses by the 
issuance of debt.  Net cash provided by investing activities was $5.1 
million, which includes the cash acquired in the acquisition of AHS of $5.5 
million.  Net cash used by financing activities for the six months ended June 
30, 1996 was $0.8 million, which includes $2.3 million of  payments on 
long-term debt and capital lease obligations, offset by $1.5 million of 
proceeds from the issuance of debt related primarily to the financing of the 
Merger costs.  The Company currently has no lines of credit available to 
borrow against for working capital purposes.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)

       REVENUES:  Revenues increased $2.0 million, or approximately 8 
percent, during the six months ended June 30, 1996, compared with the same 
period in 1995. The increase in revenues was due primarily to the acquisition 
of certain customer contracts in April 1995, the acquisition of certain 
Centers in October 1995 and increases in volumes on certain contracts 
serviced by Mobile and Fixed Facilities.  These increases were offset by 
continued decreases in reimbursement rates from third party payors.

       COSTS OF OPERATIONS:  Costs of operations increased $2.6 million, or 
approximately 11 percent, during the six months ended June 30, 1996, compared 
with the same period in 1995.  This increase is primarily due to (i) an 
increase in cost of services of $2.3 million and (ii) an increase in 
depreciation of $0.7 million; offset by a decrease in the provision for bad 
debts of $0.4 million.

         Cost of services increased $2.3 million during the six months ended 
June 30, 1996, compared with the same period in 1995.  The increase is due 
primarily to  (i) certain one-time charges relating to operating strategies 
associated with the Merger which include provisions for the closure of two 
small Centers, the write-down of a Mobile Facility and the estimated 
costs and termination fees for the early return of four Mobile Facilities; (ii)
increased costs associated with the acquisitions discussed above; and (iii) 
higher costs associated with the increase in patient services revenues which 
include personnel costs, facility costs, service supplies and professional fees.

         The provision for bad debts decreased $0.4 million during the six 
months ended June 30, 1996, compared with the same period in 1995.  This 
decrease is primarily attributable to a $0.3 million charge recorded in June 
1995.  A similar charge was not recorded in 1996.

         Depreciation increased $0.7 million during the six months ended June 
30, 1996, compared with the same period in 1995.  This increase is due 
primarily to capital leases entered into, acquisitions completed, and 
leasehold improvements incurred at several of MHC's Fixed Facilities 
subsequent to June 30, 1995.

         GROSS PROFIT:  Gross profit decreased $0.6 million during the six 
months ended June 30, 1996, compared with the same period in 1995.  This 
decrease in primarily attributable to the increase in cost of services 
discussed above.

         CORPORATE OPERATING EXPENSES:  Corporate operating expenses 
increased $2.1 million during the six months ended June 30, 1996, compared 
with the same period in 1995.  This increase is due primarily to (i) the 
write-off of $1.5 million of goodwill and other intangible assets related to 
two of MHC's Centers, and (ii) a provision in June 1996 of $0.6 million for 
termination benefits and facility costs in connection with the reduction in 
the duplicative administrative infrastructure as a result of the Merger.

         INTEREST EXPENSE, NET:  Interest expense, net increased $0.5 million 
during the six months ended June 30, 1996, compared with the same period in 
1995.  This increase is due primarily to debt financed in 1995 in connection 
with acquisitions and the financing of certain operating expenses.


         EXTRAORDINARY GAIN ON DEBT EXTINGUISHMENT:  In connection with the 
Merger, MHC recorded an extinguishment of $9.0 million of long-term 
obligations owed to GE Medical in June 1996.  The extraordinary gain 
represents the excess of the carrying value of the debt obligations settled 
over the sum of the fair value of the Maxum Series B Preferred Stock issued 
in exchange for such debt extinguishment and the sum of future interest 
payable on all remaining obligations owed to GE Medical.

                                          13

<PAGE>

In accordance with the provisions of troubled debt accounting, a portion of the
extraordinary gain, equal to the sum of the current and long-term portions of
future interest payable on all remaining GE Medical debt was deferred and will
be reduced by future interest payments over the terms of the respective debt
instruments.

YEARS ENDED DECEMBER 31, 1995 AND 1994


     REVENUES:  Revenues increased $4.7 million, or approximately 10%, in 1995
compared to 1994.  The increase in revenues was related primarily to
acquisitions.  This increase was partially offset by the continued decline in
reimbursement rates and a decrease in other revenues in 1995 compared to 1994.

     An increase in fee-for-service revenues of $5.0 million in 1995 compared to
1994 was attributable to:  (i) the award of an exclusive capitated managed care
contract in December 1994, under which MHC's fees are paid directly by the
managed care organization and are earned on a per-member-per-month basis; and
(ii) the acquisition of certain customer contracts in the first half of 1995.
Other fee-for-service revenues and equipment rental revenues (derived primarily
from Mobile Facilities) decreased $1.8 million, compared to 1994, due to
expiration of hospital service contracts and third party equipment leases.
Management fees decreased $0.6 million in 1995, compared to 1994, due primarily
to the sale or termination of certain partnerships in late 1994.

     Approximately 58% of the $2.4 million increase in patient services 
revenues was due to increased patient services revenues associated with 
acquisitions during 1995. Approximately 25% of the increase is attributable 
to a contract awarded in the third quarter of 1994 to provide radiology and 
management services at an outpatient Fixed Facility for a hospital customer.  
The remainder of the increase was due primarily to increases in procedure 
volumes at MHC's other Centers, offset by continued declines in reimbursement 
rates.

       Other revenues decreased during 1995 compared to 1994, due primarily to 
the sale of MHC's technical services division in June 1994.

          COSTS OF OPERATIONS:   Costs of operations increased $2.9 million, 
or approximately 6%, in 1995 compared to 1994. Cost of services in 1995 was 
reduced by $0.8 million related to sales/use tax refunds. These refunds 
represent taxes paid in prior years attributable to certain mobile diagnostic 
imaging equipment, and were received due to a determination by the taxing 
authority having reached a determination that the mobile equipment was 
subject to motor vehicle tax rather than sales/use tax.

          Occupancy expense (which includes operating costs of facilities 
leased or subcontracted by MHC) increased $0.8 million, or approximately 88%, 
in 1995 compared to 1994. This increase was due primarily to subcontracting 
costs incurred related to the capitated managed care contract that was 
awarded in December 1994.

          Professional fees increased $0.7 million, or approximately 41%, in 
1995 compared to 1994, due primarily to the increase in patient services 
revenues and to costs incurred related to the capitated managed care 
contract discussed above.

          In addition to the net impact of the sales/use tax refund, occupancy
expense and professional fees discussed above, all other components of cost of
services experienced a net increase of $2.2 million in 1995 compared to 1994,
due primarily to the variable costs associated with the increase in revenues
resulting primarily from acquisitions in 1995 discussed above.

          The provision for bad debts increased $0.5 million, or 
approximately 48%, in 1995 compared to 1994, due primarily to the increase in 
patient services revenues and a shift in the payor mix in MHC's Centers 
related to the penetration of managed care. This change in payor mix 
continues to have an unfavorable impact on reimbursement rates realized by 
the Centers and resulted in an increase in bad debt expense in 1995 
associated with unreimbursed amounts which were not subsequently collectible 
from patients. The Company expects reimbursement rates to continue to decline.

                                          14

<PAGE>

          Depreciation decreased $0.2 million, or approximately 6%, in 1995 
compared to 1994. This decrease was due primarily to a purchase and sale-
leaseback transaction (in connection with MHC's settlement with a significant 
creditor in June 1994) which resulted in reductions in net book values of 
certain Mobile Facilities.

          GROSS PROFIT:   Gross profit increased $1.8 million in 1995 
compared to 1994. The increase was primarily attributable to higher profit 
margins from the absorption of excess capacity associated with acquisitions 
completed in 1995 and the capitated managed care contract awarded in December 
1994.

          CORPORATE OPERATING EXPENSES:   Corporate operating expenses decreased
approximately $0.3 million, or approximately 6%, in 1995 compared to 1994. This
decrease was due primarily to reductions in legal costs and insurance premiums.

          EQUITY IN EARNINGS OF PARTNERSHIPS:   Equity in earnings of 
partnerships decreased $0.5 million, or approximately 58%, in 1995 compared 
to 1994, due to the sale of certain partnerships in late 1994 discussed below.

          INTEREST EXPENSE, NET:   Interest expense, net increased $0.4 
million, or approximately 35%, in 1995 compared to 1994. This increase was 
due primarily to (i) the addition of several capital leases of diagnostic 
imaging equipment; (ii) debt obligations incurred as a result of the 
acquisitions during 1995; and (iii) interest on operating expenses financed 
during late 1994 and in 1995.

          PROVISION FOR SECURITIES LITIGATION SETTLEMENT:    In anticipation 
of the MHC settlement of two class-action lawsuits originally filed in 1993, 
MHC recorded a charge of $1.5 million in the fourth quarter of 1995.

          GAIN ON SALE OF PARTNERSHIP INTERESTS:   In December 1994, MHC sold 
its interests in three lithotripsy partnerships for approximately $5.0 
million in cash which resulted in a pretax gain of approximately $5.0 million.

          EXTRAORDINARY GAIN ON DEBT EXTINGUISHMENTS:     During 1994, MHC 
settled its outstanding debt and lease obligations owed to a significant 
creditor and two smaller creditors which resulted in a net extraordinary gain 
of approximately $3.3 million.

YEARS ENDED DECEMBER 31, 1994 AND 1993

          REVENUES:   Revenues increased $0.8 million, or approximately 2%, 
in 1994 compared to 1993. The increase was due primarily to an increase in 
patient services revenues at two Centers.  In addition, in the third quarter 
of 1994, MHC began providing radiology and management services at an 
outpatient Fixed Facility for a hospital customer which resulted in revenues 
of approximately $0.8 million in 1994. These increases were partially offset 
by a decrease in contract services revenues. Fee-for-service revenues 
decreased due primarily to a decrease in the average revenue per procedure. 
Equipment lease revenues decreased due primarily to contract terminations for 
rentals of equipment to third parties. Revenues for 1993 exclude $4.5 million 
of fee-for-service revenues from routes which were reconfigured during 1993 
(in connection with the MHC Prior Restructure). The net operating losses of 
these routes were charged against the accrual of estimated MHC Prior 
Restructure costs during 1993.


                                          15

<PAGE>

          COSTS OF OPERATIONS:   Costs of operations decreased $1.3 million, 
or approximately 3%, during 1994  compared to 1993. Cost of services 
decreased $0.6 million due primarily to a $0.5 million provision in 1993 for 
the estimated settlement of sales tax audits primarily related to prior years.

          During 1993, MHC recorded a provision for bad debts of $0.5 million 
resulting from increased collection problems primarily associated with 
smaller hospitals and direct patient billings. A similar  charge  was not 
recorded in 1994.

          Equipment leases increased $0.6 million and depreciation decreased 
$1.4 million due primarily to the reclassification of certain leases from 
capital to operating leases late in 1993, as a result of changes in lease 
terms and financing arrangements in connection with the MHC Prior 
Restructure, and due to the settlement with a significant creditor in 1994.

          The net credit of $0.5 million for estimated MHC Prior Restructure 
costs in 1993 was to adjust MHC's estimate of the net costs of the MHC Prior 
Restructure, based on the current status of negotiations with its largest 
creditors at that time. No additional provision or credit was necessary in 
1994.

          Costs of operations for 1993 of $46.5 million, exclude $6.1 million 
of costs from routes that were reconfigured in connection with the MHC Prior 
Restructure. As previously discussed, the net operating losses of these 
routes were charged against the accrual of estimated MHC Prior Restructure 
costs during 1993.

          GROSS PROFIT:   Gross profit increased $2.1 million in 1994 
compared to 1993. The increase is primarily attributable to benefits in 1994 
resulting from the MHC Prior Restructure, and, as discussed above, 1993 
included one-time charges associated with the estimated settlement of sales 
tax audits and  the provision for bad debts.

          CORPORATE OPERATING EXPENSES:   Corporate operating expenses 
decreased approximately $1.0 million during 1994 as compared to 1993. The 
decrease was due primarily to a decrease in the amortization of intangible 
assets and cost reductions for personnel and facility costs at MHC's 
headquarters.

          EQUITY IN EARNINGS OF PARTNERSHIPS:   Equity in earnings of 
partnerships for 1994 was comparable to 1993. Partnerships which continued to 
operate under MHC's ownership after 1994 contributed $0.5 million and $0.3 
million in 1994 and 1993, respectively, net  to equity in earnings of 
partnerships.

          INTEREST EXPENSE, NET:   Interest expense, net decreased $0.6 
million, or 32%, in 1994 as compared to 1993. The decrease was due primarily 
to the aforementioned reclassification of certain leases from capital to 
operating leases late in 1993.

          GAIN ON SALE OF PARTNERSHIP INTERESTS:   In December 1994, MHC sold 
its interests in three lithotripsy partnerships for approximately $5.0 
million in cash which resulted in a pretax gain of approximately $5.0 million.

          EXTRAORDINARY GAIN ON DEBT EXTINGUISHMENTS:   During 1994, MHC 
settled its outstanding debt and lease obligations owed to a significant 
creditor and two smaller creditors which resulted in a net extraordinary gain 
of approximately $3.3 million. During 1993, MHC finalized an agreement with a 
senior creditor which resulted in a net extraordinary gain of $1.0 million on 
the extinguishment of a revolving credit note agreement.

INFLATION

       Inflation in recent years has not had a significant impact on MHC's or 
AHS's business, and is not expected to adversely affect the Company in the 
near future.

NEW PRONOUNCEMENTS

       The Company adopted the provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
(SFAS No. 123).  SFAS No. 123 requires new disclosures regarding employee and
non-employee stock-based compensation plans.


                                          16

<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES
                   Index to Consolidated Financial Statements
                   For the Six Months Ended June 30,1996 and for the
                   Years Ended December 31, 1995, 1994 and 1993

                                                                 PAGE NUMBER
                                                                 -----------

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                              18

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                              19

CONSOLIDATED BALANCE SHEETS                                           20

CONSOLIDATED STATEMENTS OF OPERATIONS                                 22

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)             23

CONSOLIDATED STATEMENTS OF CASH FLOWS                                 24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            25

SCHEDULE IX - VALUATION AND QUALIFYING ACCOUNTS                       42


                                          17

<PAGE>

                       REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To InSight Health Services Corp.:

We have audited the accompanying consolidated balance sheet of INSIGHT HEALTH
SERVICES CORP. (a Delaware corporation) and subsidiaries as of June 30, 1996,
and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the six months ended June 30, 1996.  These
financial statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of InSight Health Services Corp.
and subsidiaries as of June 30, 1996, and results of their operations and their
cash flows for the six months ended June 30, 1996, in conformity with generally
accepted accounting principles.




                                          ARTHUR ANDERSEN LLP




Orange County, California
September 13, 1996


                                          18

<PAGE>

                       REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To Maxum Health Corp.:

       We have audited the accompanying consolidated balance sheets of Maxum 
Health Corp. and Subsidiaries (MHC) as of December 31, 1995 and 1994, and the 
related consolidated statements of operations, stockholders' equity 
(deficiency) and cash flows for each of the three years in the period ended 
December 31, 1995.  Our audits also included the related financial statement 
schedule of valuation and qualifying accounts.  These financial statements 
and schedule are the responsibility of MHC's management. Our responsibility 
is to express an opinion on these financial statements and schedule based on 
our audits.

       We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

       In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of MHC at December 31, 1995 and
1994, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.  Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

       The accompanying financial statements have been prepared assuming that 
MHC will continue as a going concern.  As discussed in Note 3 to the 
financial statements, MHC is experiencing difficulty in generating sufficient 
cash flow to meet its obligations and sustain its operations.  These factors 
raise substantial doubt about its ability to continue as a going concern. 
Management's plans in regard to these matters are described in Notes 1 and 
3. The financial statements do not include any adjustments that might result 
from the outcome of this uncertainty.



DELOITTE & TOUCHE LLP

Dallas, Texas
March 1, 1996


                                          19

<PAGE>

                    INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS
                                (Amounts in thousands)

<TABLE>
<CAPTION>

                                                    June 30,     December 31,    December 31,
                                                      1996           1995            1994
                                                    --------     ------------    ------------

            ASSETS
            ------
<S>                                                <C>           <C>            <C>
 CURRENT ASSETS:
      Cash and cash equivalents                    $  6,864       $  1,870       $  6,950
      Trade accounts receivable, net                 12,916          6,296          5,181
      Other receivables, net                            973            490          1,138
      Other current assets                            1,708          1,704          1,035
                                                   --------       --------       --------
                Total current assets                 22,461         10,360         14,304
                                                   --------       --------       --------

 DIAGNOSTIC EQUIPMENT HELD FOR SALE                       -            172            575
                                                   --------       --------       --------

 PROPERTY AND EQUIPMENT:
      Vehicles                                          978            967          1,030
      Land, building and leasehold improvements       8,602          1,623            560
      Computer and office equipment                   3,638          2,521          2,274
      Diagnostic and related equipment               18,113          6,577          4,110
      Equipment and vehicles under capital leases    10,479         10,976          6,784
                                                   --------       --------       --------
             Total property and equipment            41,810         22,664         14,758
      Less:  Accumulated depreciation                11,958         10,278          9,486
                                                   --------       --------       --------
             Property and equipment, net             29,852         12,386          5,272
                                                   --------       --------       --------

 INVESTMENT IN PARTNERSHIPS                             359            442            357

 OTHER ASSETS                                           749            899            890

 INTANGIBLE ASSETS, net                              16,965          4,047          1,194
                                                   --------       --------       --------
                                                   $ 70,386       $ 28,306       $ 22,592
                                                   --------       --------       --------
                                                   --------       --------       --------

</TABLE>

                        The accompanying notes are an integral
                      part of these consolidated balance sheets.


                                          20

<PAGE>

                    INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS
                      (Amounts in thousands, except share data)

<TABLE>
<CAPTION>

                                                               June 30,     December 31,    December 31,
                                                                 1996           1995            1994
                                                              --------     ------------    ------------
            LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
            ----------------------------------------------
<S>                                                           <C>          <C>             <C>
 CURRENT LIABILITIES:
      Current portion of equipment and other notes            $  6,585       $  3,361       $  2,441
      Current portion of capital lease obligations               2,638          2,782          1,587
      Accrued equipment related costs                            3,249          1,546          1,979
      Accounts payable and other accrued expenses                8,328          4,576          6,196
      Accrued payroll and related costs                          1,775            323            514
      Current portion of deferred gain on debt restructure       1,053              -              -
                                                              --------       --------       --------
          Total current liabilities                             23,628         12,588         12,717
                                                              --------       --------       --------

 LONG-TERM LIABILITIES:
      Equipment and other notes, less current portion           31,653         13,156          7,395
      Capital lease obligations, less current portion            3,988          4,667          2,180
      Accrued securities litigation settlement                   1,900          1,900              -
      Deferred gain on debt restructure, less current portion    1,467              -              -
      Other long-term liabilities                                  831              -              -
                                                              --------       --------       --------
          Total long-term liabilities                           39,839         19,723          9,575
                                                              --------       --------       --------

 COMMITMENTS AND CONTINGENCIES (Note 8)

 MINORITY INTEREST                                               1,515              -              -
                                                              --------       --------       --------

 STOCKHOLDERS' EQUITY (DEFICIT) :
     Convertible Series A preferred stock,
        $.001 par value, 3,500,000 shares authorized;
        2,501,760 outstanding at June 30, 1996  stated at        6,750              -              -
     Common stock, $.001 par value, 25,000,000
        shares authorized, 2,710,240 shares outstanding
        at June 30, 1996; $.01 par value, 10,000,000 shares
        authorized, 3,005,055 and 2,953,415 shares
        outstanding at December 31, 1995 and 1994,
        respectively                                                 3             30             29
      Common stock warrant                                           -              7              7
      Additional paid-in capital                                23,100         19,693         19,680
      Accumulated deficit                                      (24,449)       (23,470)       (19,151)
      Treasury stock, at cost                                        -           (265)          (265)
                                                              --------       --------       --------
                 Total stockholders' equity (deficit)            5,404         (4,005)           300
                                                              --------       --------       --------
                                                              $ 70,386       $ 28,306       $ 22,592
                                                              --------       --------       --------
                                                              --------       --------       --------

</TABLE>


                     The accompanying notes are an integral part
                        of these consolidated balance sheets.


                                          21

<PAGE>

                    INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF OPERATIONS
               (Amounts in thousands, except shares and per share data)

<TABLE>
<CAPTION>

                                             Six Months Ended          Year Ended          Year Ended          Year Ended
                                                     June 30,        December 31,        December 31,        December 31,
                                                         1996                1995                1994                1993
                                             ----------------        ------------        ------------        ------------
<S>                                          <C>                     <C>                 <C>                 <C>
REVENUES:
  Contract services:
     Fee-for-service                                 $ 19,304            $ 37,762            $ 32,834            $ 30,661
     Equipment rental                                     672               1,003               2,775               5,396
     Management fees                                       69                 211                 784               1,044
                                                   ----------          ----------          ----------          ----------
        Total contract services                        20,045              38,976              36,393              37,101
  Patient services                                      5,853              10,605               8,228               6,291
  Other                                                   562               1,028               1,247               1,683
                                                   ----------          ----------          ----------          ----------
        Total revenues                                 26,460              50,609              45,868              45,075

COSTS OF OPERATIONS:
  Cost of services                                     15,899              28,772              26,067              26,629
  Provision for bad debts                                 617               1,669               1,124               1,621
  Equipment leases                                      6,957              14,464              14,581              13,932
  Depreciation                                          2,091               3,273               3,467               4,864
  Credit adjustment to prior restructure provision          -                   -                   -                (490)
                                                   ----------          ----------          ----------          ----------
        Total costs of operations                      25,564              48,178              45,239              46,556
                                                   ----------          ----------          ----------          ----------

GROSS PROFIT (LOSS)                                       896               2,431                 629              (1,481)

CORPORATE OPERATING EXPENSES                            3,983               3,972               4,240               5,244
                                                   ----------          ----------          ----------          ----------
LOSS FROM COMPANY OPERATIONS                           (3,087)             (1,541)             (3,611)             (6,725)

EQUITY IN EARNINGS OF UNCONSOLIDATED PARTNERSHIPS         138                 348                 834                 685
                                                   ----------          ----------          ----------          ----------

OPERATING LOSS                                         (2,949)             (1,193)             (2,777)             (6,040)

OTHER INCOME (EXPENSE):
  Interest expense, net                                (1,144)             (1,626)             (1,206)             (1,773)
  Provision for securities litigation settlement            -              (1,500)                  -                   -
  Gain on sale of partnership interests                     -                   -               4,957                   -
                                                   ----------          ----------          ----------          ----------
                                                       (1,144)             (3,126)              3,751              (1,773)
                                                   ----------          ----------          ----------          ----------
INCOME (LOSS) BEFORE INCOME TAXES                      (4,093)             (4,319)                974              (7,813)

INCOME TAX EXPENSE                                         65                   -                 160                   -
                                                   ----------          ----------          ----------          ----------

INCOME (LOSS) BEFORE EXTRAORDINARY ITEM                (4,158)             (4,319)                814              (7,813)

EXTRAORDINARY ITEM - Net gain on
 debt extinguishment                                    3,179                   -               3,342               1,036
                                                   ----------          ----------          ----------          ----------

NET INCOME (LOSS)                                  $     (979)         $   (4,319)         $    4,156          $   (6,777)
                                                   ----------          ----------          ----------          ----------
                                                   ----------          ----------          ----------          ----------

INCOME (LOSS) PER COMMON SHARE:
  Income (loss) before extraordinary item          $    (2.99)         $    (3.21)         $     0.58          $    (4.49)
                                                   ----------          ----------          ----------          ----------
                                                   ----------          ----------          ----------          ----------
  Net income (loss)                                $    (0.70)         $    (3.21)         $     2.96          $    (3.89)
                                                   ----------          ----------          ----------          ----------
                                                   ----------          ----------          ----------          ----------
  Weighted average number of common shares
      outstanding                                   1,389,271           1,344,832           1,402,435           1,741,846
                                                    ---------           ---------           ---------           ---------
                                                    ---------           ---------           ---------           ---------

</TABLE>



                     The accompanying notes are an integral part
                     of these consolidated financial statements.


                                          22

<PAGE>


                    INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                      (Amounts in thousands, except share data)
 
<TABLE>
<CAPTION>

                                     Preferred Stock           Common Stock         Additional          Stockholder
                                    ----------------    ---------------------------  Paid-in Accumulated  Note     Treasury
                                    Shares    Amount    Shares    Amount    Warrant  Capital   Deficit  Receivable   Stock   Total
                                    ------    ------    ------    ------    -------  -------   -------  ----------   -----   -----
<S>                                 <C>       <C>       <C>       <C>       <C>      <C>       <C>      <C>          <C>    <C>
BALANCE AT DECEMBER 31, 1992          -    $    -     2,906,762    $29      $  -     $19,179  $(16,530)    $(131)  $ (45)   $2,502
  Stock issued under employee
   purchase plan                      -         -        42,726      -         -          43         -         -       -        43
  Repayment of stockholder
   note receivable                    -         -             -      -         -           -         -        21       -        21
  Capital contribution-former
   stockholder and creditor           -         -             -      -         -         457         -         -       -       457
  Issuance of common stock
   warrant                            -         -             -      -         7           -         -         -       -         7
  Surrender of 588,750 shares
   of Treasury stock in
   connection with debt
   extinguishment                     -         -             -      -         -           -         -         -    (110)     (110)
  Net loss                            -         -             -      -         -           -    (6,777)        -       -    (6,777)
                                  -----    ------     ---------  -----     -----     -------  --------   ------- -------   -------
BALANCE AT DECEMBER 31, 1993          -         -     2,949,488     29         7      19,679   (23,307)     (110)   (155)   (3,857)
  Stock issued under employee
   purchase plan                      -         -         3,927      -         -           1         -         -       -         1
  Surrender of 132,750 shares
   of treasury stock in 
   settlement of stockholder
   note receivable                    -         -             -      -         -           -         -       110    (110)        -
  Net income                          -         -             -      -         -           -     4,156         -       -     4,156
                                  -----    ------     ---------  -----     -----     -------  --------   ------- -------   -------
BALANCE AT DECEMBER 31, 1994          -         -     2,953,415     29         7      19,680   (19,151)        -    (265)      300
  Stock issued under employee
   purchase plan                      -         -        51,640      1         -          13         -         -       -        14
  Net loss                            -         -             -      -         -           -    (4,319)        -       -    (4,319)
                                  -----    ------     ---------  -----     -----     -------   --------  ------- -------   -------
BALANCE AT DECEMBER 31, 1995          -         -     3,005,055     30         7      19,693   (23,470)        -    (265)   (4,005)
  Issuance of Series A
   Preferred Stock and
   cancellation of common
   stock warrant              1,250,880     3,375             -      -        (7)          -         -         -       -     3,368
  Acquisition of AHS          1,250,880     3,375     1,349,908      1         -       3,644         -         -       -     7,020
  Retirement of MHC'S
  Treasury stock                      -         -             -      -         -        (265)        -         -     265         -
  Reset the par value of
   InSight common stock
   issued in exchange for 
   MHC's  common stock                -         -    (1,644,723)   (28)        -          28         -         -       -         -
  Net loss                            -         -             -      -         -           -      (979)        -       -      (979)
                              ---------    ------     ---------   -----    -----     -------  --------   ------- -------   -------
BALANCE AT JUNE 30, 1996      2,501,760    $6,750     2,710,240   $  3     $   -     $23,100  $(24,449)      $ -   $   -   $ 5,404
                              ---------    ------     ---------   -----    -----     -------  --------   ------- -------   -------
                              ---------    ------     --------    -----    -----     -------  --------   ------- -------   -------

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                          23

<PAGE>

                    INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Amounts in thousands)

<TABLE>
<CAPTION>

                                             Six Months Ended          Year Ended          Year Ended          Year Ended
                                                     June 30,        December 31,        December 31,        December 31,
                                                         1996                1995                1994                1993
                                             ----------------        ------------        ------------        ------------
<S>                                          <C>                     <C>                 <C>                 <C>
OPERATING ACTIVITIES:
  Net income (loss)                                $     (979)         $   (4,319)         $    4,156          $   (6,777)
  Adjustments to reconcile net income
   (loss) to net cash
   provided by operating activities:
    Depreciation and amortization                       4,022               4,060               3,913               6,390
    (Gain) loss on disposal of assets                    (133)                (35)               (112)                293
    Provision for securities litigation
     settlement                                             -               1,500                   -                   -
    Gain on sale of partnership interests                   -                   -              (4,957)                  -
    Operating expenses financed by issuance
     of debt                                            1,015               2,330               2,672                   -
    Credit adjustment to prior restructure
     provision                                              -                   -                   -                (490)
    Extraordinary gain on debt
     extinguishments                                   (3,179)                  -              (3,342)             (1,036)
  Cash provided by (used in) changes in
     operating assets and liabilities:
      Payments for restructure costs                        -                   -                (700)             (1,502)
      Receivables                                        (174)               (524)                (38)              1,171
      Other current assets                               (851)               (110)                782                 694
      Accounts payable and other current
       liabilities                                        975              (1,089)              1,088               3,019
                                                   ----------          ----------          ----------          ----------
          Net cash provided by operating
           activities                                     696               1,813               3,462               1,762
                                                   ----------          ----------          ----------          ----------

INVESTING ACTIVITIES:
  Cash acquired in acquisition of AHS                   5,489                   -                   -                   -
  Acquisition of Centers                                    -              (1,855)               (510)                  -
  Acquisition of customer contracts
   and intangibles                                          -              (2,108)                  -                   -
  Proceeds from termination of partnership                  -                   -                   -                 204
  Proceeds from sales of assets                           369                 745               1,358                   -
  Proceeds from sale of partnership interests               -                   -               5,007                   -
  Additions to property and equipment                    (960)               (548)               (349)               (715)
  Decrease in other assets, net                           195                 190                 582               3,012
                                                   ----------          ----------          ----------          ----------
          Net cash provided by (used in)
           investing activities                         5,093              (3,576)              6,088               2,501
                                                   ----------          ----------          ----------          ----------

FINANCING ACTIVITIES:

  Payments of debt and capital lease obligations       (2,302)             (6,020)             (4,752)             (3,376)
  Proceeds from issuance of debt                        1,507               2,689                 268               1,648
  Net repayments on revolving note payable                  -                   -                (250)             (2,300)
  Capital contribution - former stockholder and creditor    -                   -                   -                 457
  Other, net                                                -                  14                   1                  64
                                                   ----------          ----------          ----------          ----------
          Net cash used by financing activities          (795)             (3,317)             (4,733)             (3,507)
                                                   ----------          ----------          ----------          ----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS        4,994              (5,080)              4,817                 756
CASH AND CASH EQUIVALENTS:


  Beginning of period                                   1,870               6,950               2,133               1,377
                                                   ----------          ----------          ----------          ----------
  End of period                                    $    6,864          $    1,870          $    6,950          $    2,133
                                                   ----------          ----------          ----------          ----------
                                                   ----------          ----------          ----------          ----------
SUPPLEMENTAL INFORMATION (Note 13)
</TABLE>



                     The accompanying notes are an integral part
                     of these consolidated financial statements.


                                          24

<PAGE>

                    INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  MERGER

    InSight Health Services Corp. ("InSight" or the "Company") is a Delaware
corporation formed on February 23, 1996 in connection with the Agreement and
Plan of Merger, dated as of February 26, 1996 (the "Merger Agreement"), among
American Health Services Corp., a Delaware corporation ("AHS"), Maxum Health
Corp., a Delaware corporation ("MHC" or "Maxum"), InSight and two wholly owned
subsidiaries of InSight, AHSC Acquisition Company, a Delaware corporation ("AHSC
Acquisition"), and MXHC Acquisition Company, a Delaware corporation ("MXHC
Acquisition").  Pursuant to the terms of the Merger Agreement, (i) AHSC
Acquisition merged with and into AHS and MXHC Acquisition merged with and into
Maxum (collectively, the "Merger"), (ii) each outstanding share of common stock,
par value $.03 per share, of AHS ("AHS Common Stock") was converted into the
right to receive one-tenth of a share of common stock, par value $.001 per
share, of InSight ("InSight Common Stock"), (iii) each outstanding share of
Series B Senior Convertible Preferred Stock, par value $.03 per share, of AHS
("AHS Series B Preferred Stock") which was convertible into 100 shares of AHS
Common Stock was  converted into the right to receive 10 shares of InSight
Common Stock, (iv) each outstanding share of Series C Preferred Stock, par value
$.03 per share, of AHS (the "AHS Series C Preferred Stock"), which was issued
immediately prior to the consummation of the Merger, was converted into the
right to receive 1.25088 shares of Series A Preferred Stock, par value $.001 per
share, of InSight (the "InSight Series A Preferred Stock"), (v) each outstanding
share of common stock, par value $.01 per share, of Maxum ("Maxum Common Stock")
was converted into the right to receive .598 of a share of InSight Common Stock,
(vi) each outstanding share of Series B Preferred Stock, par value $.01 per
share, of Maxum (the "Maxum Series B Preferred Stock"), which was issued
immediately prior to the consummation of the Merger, was converted into the
right to receive 83.392 shares of InSight Series A Preferred Stock, and (vii)
each outstanding option, warrant or other right to purchase AHS Common Stock and
Maxum Common Stock was converted into the right to acquire, on the same terms
and conditions, shares of InSight Common Stock, with the number of shares and
exercise price applicable to such option, warrant or other right adjusted based
on the applicable exchange ratio for the underlying AHS Common Stock or Maxum
Common Stock.

    Concurrent with the consummation of the Merger, AHS and MHC completed a
debt restructuring with General Electric Company,  GE Medical, the primary
creditor of MHC and AHS, and General Electric Capital Corporation.  This
restructuring resulted in the reduction of certain debt and operating lease
obligations and cancellation of certain stock warrants of MHC and AHS in
exchange for, among other things, the issuance to GE Medical, immediately prior
to the consummation of the Merger, of Maxum Series B Preferred Stock and AHS
Series C Preferred Stock.  In connection with this restructuring, MHC recorded
the extinguishment of $9.0 million of long-term debt obligations and an
extraordinary gain representing the difference in the carrying value ($9.0
million) of the debt obligations settled over the fair value ($3.4 million) of
the Maxum Series B Preferred Stock issued to GE Medical.  In
accordance with the provisions of troubled debt accounting, a portion of the
extraordinary gain, equal to the sum of the current and long-term portions of
future interest payable on all remaining GE Medical debt and capital lease
obligations of $1.0 million and $1.5 million, respectively, was deferred and
will be reduced by future interest payments over the terms of the respective
debt instruments.

    At the effective time of the Merger, MHC Series B Preferred Stock and AHS 
Series C Preferred Stock issued to GE Medical was converted into the right to 
receive such number of shares of InSight Series A Preferred Stock that is 
convertible into such number of shares of InSight Common Stock representing 
approximately 48% of InSight Common Stock outstanding at the effective time 
of the Merger (after giving effect to such conversion).  Under an amended 
equipment maintenance service agreement, GE Medical will also be entitled to 
receive certain supplemental service fee payments based on future pretax 
income of InSight.

    The Merger was accounted for using the purchase method of accounting in 
accordance with generally accepted accounting principles.  MHC is treated as 
the acquiror for accounting purposes, based upon the relative revenues, book 
values and other factors. THE CONSOLIDATED FINANCIAL STATEMENTS PRESENTED 
HEREIN REPRESENT THE OPERATING RESULTS OF MHC ONLY, EXCEPT FOR THE 
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996, WHICH REFLECTS THE ACQUISITION 
OF AHS ON JUNE 26, 1996.  Management believes the results of operations of 
AHS for the period from June 27, 1996 to June 30, 1996 are immaterial to the 
Consolidated Financial Statements taken as a whole.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    a.   NATURE OF BUSINESS

    The Company provides diagnostic imaging, treatment and related services to
    hospitals, physicians and their patients through its imaging network in 30
    states throughout the United States, with a substantial presence in
    southern California, primarily Los Angeles County, and northern Texas,
    primarily the Dallas/Ft. Worth metroplex.  The Company's services are
    provided through a network of 39 mobile magnetic resonance imaging (MRI)
    facilities (Mobile Facilities), 14 fixed-site MRI facilities (Fixed
    Facilities), 8 multi-modality imaging centers (Centers), two Leksell
    Stereotactic Gamma Unit treatment centers (Gamma Knife), and one radiation
    oncology center.  An additional radiation oncology center is operated by
    the Company as a part of one of its Centers.

                                          25

<PAGE>

    b.   CONSOLIDATED FINANCIAL STATEMENTS

    The consolidated financial statements include the accounts of InSight and
    its wholly owned subsidiaries, MHC and AHS (Note 1).  The Company's 
    investment interests in partnerships (the Partnerships) are accounted for 
    under the equity method of accounting for ownership of 50 percent or less 
    when the Company does not exercise significant control over the operations 
    of the Partnership and have primary responsibility for the Partnership's 
    long-term debt.  The Company's consolidated financial statements include two
    Partnerships which have been accounted for under the equity method (Note
    12).

    At June 30, 1996, the Company's consolidated balance sheet includes two 50
    percent owned Partnerships and one less than 50 percent owned limited
    liability company.  Since the Company controls the operations of these 50
    percent or less owned entities and is primarily responsible for the
    associated long-term debt, management believes that consolidation of these
    entities is the most meaningful financial statement presentation (Note 12).

    Significant intercompany balances have been eliminated.

    c.   USE OF ESTIMATES

    The preparation of financial statements in conformity with generally
    accepted accounting principles requires management to make certain
    estimates and assumptions that affect the reported amounts of assets and
    liabilities at the date of the financial statements and the reported
    amounts of revenue and expenses during the reporting period.  Actual
    results could differ from those estimates.

    d.   REVENUE RECOGNITION

    Revenues  from contract fee-for-service (primarily Mobile Facilities) and
    from patient services (primarily Centers) are recognized when services are
    provided.  Patient services revenues are presented net of related
    contractual adjustments.  Equipment rental revenues, management fees and
    other revenues are recognized over the applicable contract period.
    Revenues collected in advance are recorded as unearned revenue.

    e.   CASH EQUIVALENTS

    Cash equivalents are generally composed of highly liquid investments with
    original maturities of three months or less, such as certificates of
    deposit and commercial paper.

    f.   DIAGNOSTIC EQUIPMENT HELD FOR SALE

    Diagnostic equipment held for sale is stated at the lower of cost or the
    estimated net realizable value and consists of older owned Mobile
    Facilities.

    g.   PROPERTY AND EQUIPMENT

    Property and equipment are depreciated and amortized on the straight-line
    method using the following estimated  useful lives:

         Vehicles                                     3 to 8 years
         Buildings                                    7 to 19 years
         Leasehold improvements                       Term of lease
         Computer and office equipment                3 to 8 years
         Diagnostic and related equipment             5 to 8 years
         Equipment and vehicles under capital leases  Term of lease

                                          26

<PAGE>

    The Company capitalizes expenditures for betterments and major renewals.
    Maintenance, repairs and minor replacements are charged to operations as
    incurred.  When assets are sold or otherwise disposed of, the cost and
    related reserves are removed from the accounts and any resulting gain or
    loss is included in the results of operations.

    h.   INTANGIBLE ASSETS

    The Company assesses the recoverability of its intangible assets (including
    goodwill) by determining whether the intangible asset balance can be
    recovered over the remaining amortization period through projected
    nondiscounted future cash flows.  If projected future cash flows indicate
    that the unamortized intangible asset balances will not be recovered, an
    adjustment is made to reduce the net intangible asset to an amount
    consistent with projected future cash flows discounted at the Company's
    incremental borrowing rate. Cash flow projections, although subject to a
    degree of uncertainty, are based on trends of historical performance and
    management's estimate of future performance, giving consideration to
    existing and anticipated competitive and economic conditions.

    The Company has classified as goodwill the cost in excess of fair value of
    the net assets acquired  in purchase transactions.  Intangible assets are
    amortized on the straight-line basis over the following periods:

              Goodwill                           6 to 20 years
              Non-compete agreements             5 to 7 years
              Customer service contracts         2 years
              Certificates of need               6 years

    i.   INCOME TAXES

    The Company accounts for income taxes using the liability method in
    accordance with the Statement of Financial Accounting Standard No. 109,
    Accounting for Income Taxes (SFAS No. 109), whereby the Company recorded the
    benefit of its net operating loss carryforwards and also recorded a
    valuation allowance for the entire amount.

    j.   INCOME (LOSS) PER COMMON SHARE

    The number of shares used in computing income (loss) per common share is
    equal to the weighted average number of common and common equivalent shares
    outstanding during the respective period, adjusted retroactively for the 
    conversion of Maxum Common Stock into InSight Common Stock as a result of 
    the Merger. Common stock equivalents relating to options, warrants and 
    convertible preferred stock are not included in 1996, 1995, 1994 and 1993, 
    due to their antidilutive effect.

    k.   FAIR VALUE OF FINANCIAL INSTRUMENTS

    Fair value of financial instruments are estimated using available market
    information and other valuation methodologies. The fair value of the
    Company's financial instruments is estimated to approximate the related
    book value, unless otherwise indicated.

    l.   POST-EMPLOYMENT AND POST-RETIREMENT BENEFITS

    The Company does not provide post-employment or post-retirement benefits to
    employees.  Accordingly, Statement of Financial Accounting Standard
    No. 112, Employers Accounting for Post-Employment Benefits, and Statement
    of Financial Accounting Standard No. 106,

                                          27

<PAGE>

    Employers Accounting for Post-Retirement Benefits have no impact on the
    Company's financial statements.

    m.   NEW PRONOUNCEMENTS

    In 1996, the Company adopted the provisions of the Statement of Financial
    Accounting Standard No. 121, Accounting for the Impairment of Long-Lived
    Assets and for Long-Lived Assets to be Disposed of (SFAS No. 121).  

    The Company adopted the provisions of Statement of Financial Accounting
    Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123).
    SFAS No. 123 requires new disclosures regarding employee and non-employee
    stock-based compensation plans.

    n.   RECLASSIFICATIONS

    Reclassifications have been made to certain 1995, 1994 and 1993 amounts to
    conform to the 1996 presentation.

3.  PRIOR RESTRUCTURE OF MHC'S OPERATIONS AND FINANCIAL OBLIGATIONS

    During recent years, MHC experienced many adverse market conditions and was
significantly impacted by continued deterioration and uncertainties in the
health care industry.  In 1992, MHC recorded a charge of $7.5 million in
anticipation of a restructure of its operations and financial obligations (the
Prior Restructure).  MHC began executing the Prior Restructure in 1993 and
completed it in 1994.  In 1993, MHC recorded a net credit adjustment of $0.5
million to the Prior Restructure provision, resulting in a net charge associated
with the Prior Restructure of $7.0 million.

    The Prior Restructure involved the reconfiguration, consolidation and
wind-down of certain Mobile Facilities and partnerships in which MHC had
ownership interests.  In addition, significant cost reductions at MHC's
headquarters were achieved and a broad restructuring and/or settlement of
obligations with all of MHC's significant creditors and certain smaller
creditors were completed.  Extraordinary gains from extinguishment of debt,
associated with these restructured and settled obligations, of $1.0 million and
$3.3 million, were recorded in 1993 and 1994, respectively.

    GE Medical provided financing for the settlement of obligations with MHC's
two other significant creditors.  In return for certain concessions made by GE
Medical, MHC agreed to certain contingent lease rental adjustments over the
remaining lease terms (Note 8) and issued a common stock warrant for 700,000
shares.  As a result of the Merger, the common stock warrant was canceled.  In
addition, MHC sold its technical services division to GE Medical in 1994.
Consideration for the sale included cash and future discounts on maintenance
services to be realized over approximately five years.

    By the end of 1994, MHC had completed the Prior Restructure and had
achieved the objectives of reducing negative cash flow in the near-term,
improving current and near-term viability and enhancing the potential for
long-term viability.  The favorable results of the Prior Restructure, however,
were diminished by continued deterioration in the industry.  MHC continued to
operate while experiencing negative cash flow by completing transactions
involving the financing of certain lease and other operating expenses with GE
Medical, and the disposal of certain assets and partnership interests.

    As of December 31, 1995, MHC did not have the resources to support its 
existing debt service and lease requirements and the obligation to settle 
pending securities litigation (Note 14).  The accompanying December 31, 1995 
financial statements were prepared on a going concern basis, and accordingly 
did not include any adjustments relating to the recoverability and 
classification of recorded asset amounts or the amounts and classification of 
liabilities had MHC been unable to continue as a going concern. In June 1996, 
the financial accommodation transactions with GE Medical were closed and the 
Merger was consummated (Note 1).

                                          28

<PAGE>


4.  ACQUISITIONS

    In June 1996, InSight, MHC and AHS completed the Merger (Note 1).  The
Merger was accounted for under the purchase method with MHC being treated as the
acquiror for accounting purposes.

    In April 1995, MHC purchased certain assets, primarily Mobile Facilities of
$2.4 million and intangible assets of $2.0 million in Ohio and Indiana.  MHC
paid approximately $2.1 million in cash and assumed certain equipment related
liabilities of approximately $2.3 million.

         In October 1995, MHC acquired two Centers in Dallas, Texas.  The
transaction included the purchase of certain assets, primarily diagnostic
equipment of $1.1 million and intangible assets of $1.0 million, and the
assumption of $0.5 million of equipment related liabilities.  The purchase price
of $1.6 million and an additional $0.7 million for working capital requirements
were financed by GE Medical.  MHC began providing services at both Centers
effective October 1, 1995 and, in December 1995, completed the planned
consolidation of the two Centers and an existing Center acquired in 1991, which
resulted in additional acquisition related costs of $0.2 million.

    These acquisitions were accounted for under the purchase method.
Accordingly, the results of related operations have been included in the
consolidated financial statements since the applicable acquisition dates.  The
pro forma effects of these acquisitions, as if they had occurred as of January 
1, 1995, are summarized as follows (amounts in thousands):

                                             Six Months Ended     Year Ended
                                              June 30, 1996    December 31, 1995
                                             ---------------   -----------------

    Revenues                                     $   44,249        $   92,507
    Expenses                                         49,474            98,528
                                                 ----------        ----------
    Loss before extraordinary item                   (5,225)           (6,021)
    Extraordinary item                                3,179                 -
                                                 ----------        ----------
    Net loss                                     $   (2,046)       $   (6,021)
                                                 ----------        ----------
                                                 ----------        ----------
    Loss per share before extraordinary item          (1.93)       $    (2.22)
                                                 ----------        ----------
                                                 ----------        ----------
    Net loss per share                           $    (0.75)       $    (2.22)
                                                 ----------        ----------
                                                 ----------        ----------


    The pro forma results for 1996 and 1995 include $0.3 million and $1.2 
million of amortization of intangibles, respectively, and $0.5 million of 
interest expense in 1995 related to these acquisitions.  The pro forma 
results do not include the interest and lease savings resulting from the 
Merger.

5.  TRADE RECEIVABLES

    Trade receivables are comprised of the following (amounts in thousands):

                                          29

<PAGE>

                                                                  December 31,
                                                    June 30,    -------------
                                                      1996       1995     1994
                                                   ---------     ----     ----

    Trade receivables                              $ 23,004  $ 10,199  $ 8,532
    Less:  Allowances for doubtful accounts and
            contractual adjustments                   7,808     3,283    2,893
           Allowances for professional fees           2,280       620      458
                                                   --------  --------  -------

    Net trade receivables                          $ 12,916  $  6,296  $ 5,181
                                                   --------  --------  -------
                                                   --------  --------  -------

    Net trade receivables arise from revenue 
     generated by:

    Patient services                               $  7,362  $  2,478  $ 1,830
    Fee-for-service                                   4,693     3,643    3,184
    Other                                               861       175      167
                                                   --------  --------  -------
    Net trade receivables                          $ 12,916  $  6,296  $ 5,181
                                                   --------  --------  -------
                                                   --------  --------  -------

    Receivables related to patient services revenues are due primarily from
managed care organizations, patients' private insurance companies and government
payors.  Receivables arising from fee-for-service revenues are due primarily
from hospitals.

    The allowance for doubtful accounts and contractual adjustments include
management's estimate of the amounts expected to be written off on specific
accounts and for write-offs on other as yet unidentified accounts included in
accounts receivable.  In estimating the write-offs and adjustments on specific
accounts, management relies on a combination of in-house analysis and a review
of contractual payment rates from private health insurance programs or under the
federal Medicare program.  In estimating the allowance for unidentified
write-offs and adjustments, management relies on historical experience.  The
amounts the Company will ultimately realize could differ materially in the near
term from the amounts assumed in arriving at the allowance for doubtful accounts
and contractual adjustments in the financial statements at June 30, 1996.

    The Company reserves a contractually agreed upon percentage at several of
its Centers, averaging  20 percent of the accounts receivable balance from
patients, for payments to radiologists for interpreting the results of the
diagnostic imaging procedures.  Payments to radiologists are only due when
amounts are received.  At that time, the balance is transferred from the
allowance account to a professional fees payable account.

6.  INTANGIBLE ASSETS

    Intangible assets consist of the following (amounts in thousands):

                                                                 December 31,
                                                    June 30,    -------------
                                                     1996       1995     1994
                                                    --------    ----     ----

    Total intangible assets                        $ 17,861  $  4,822  $ 1,447
    Less:  Accumulated amortization                     896       775      253
                                                   --------  --------  -------
                                                   $ 16,965  $  4,047  $ 1,194
                                                   --------  --------  -------
                                                   --------  --------  -------

    Goodwill                                       $ 16,382  $  3,338  $ 1,182
    Non-compete agreements                              245       191        -
    Customer service contracts                          113       188        -
    Certificates of need                                158       175        -
    Other                                                67       155       12
                                                   --------  --------  -------
                                                   $ 16,965  $  4,047  $ 1,194
                                                   --------  --------  -------
                                                   --------  --------  -------

    In connection with the Merger and MHC's acquisitions in 1996 (Note 1) and
1995 (Note 4), MHC recorded $13.6 million and $3.4 million of intangible assets,
respectively.  On December 31, 1994, MHC acquired the remaining 40% interest in
a Center, 60% of which was acquired in 1992, and recorded goodwill of $0.5
million.  Projected future cash flows for two of MHC' Centers at June 30, 1996
indicated that the unamortized goodwill of $1.4 million and the unamortized
deferred organizational costs of $0.1 million related to these two Centers were
not recoverable.  Therefore, in accordance with the

                                          30

<PAGE>

Company's policy, the intangible assets related to these Centers were written
off as of June 30, 1996.  Amortization of intangible assets of $1.9 million
(including the $1.5 million discussed above), $0.6 million, $0.2 million and
$0.9 million for the six months ended June 30, 1996 and for the years ended
December 31, 1995, 1994, and 1993, respectively, is included in Corporate
Operating Expenses.

7.  EQUIPMENT AND OTHER NOTES PAYABLE

    Equipment and other notes payable consists of the following (amounts in 
thousands):

                                                                December 31,
                                                    June 30,   -------------
                                                     1996      1995     1994
                                                    --------   ----     ----
    Notes payable to GE Medical, bearing
    interest at rates which range from 8
    percent  to 12.5 percent, maturing at
    various dates through February 2005.
    The notes are secured by substantially
    all of the Company's assets.                   $ 36,072   $15,374   $9,316

    Notes payable to third parties (other
    than banks), bearing interest at rates
    which range from 6.6 percent to 10 percent,
    maturing at various dates through May 2000.
    The notes are primarily secured by certain
    diagnostic equipment.                               935     1,143      520

    Other notes payable.                              1,231         -        -
                                                   --------   -------   ------
    Total notes payable                              38,238    16,517    9,836
    Less:  Current portion                            6,585     3,361    2,441
                                                   --------   -------   ------
    Long-term debt                                 $ 31,653   $13,156   $7,395
                                                   --------   -------   ------


    Scheduled maturities of long-term debt at June 30, 1996, are as follows
    (amounts in thousands):

              1997                     $6,585
              1998                      7,644
              1999                      7,934
              2000                      6,885
              2001                      2,799
              Thereafter                6,391
                                      -------
                                      $38,238
                                      -------
                                      -------

    The terms of the notes payable to GE Medical include certain restrictive
covenants which, among others, limit capital expenditures and restrict payment
of dividends.  As of June 30, 1996, the Company was in compliance with these
covenants.

    Interest expense on debt related to GE Medical for the six months ended
June 30, 1996 and the years ended December 31, 1995, 1994 and 1993, was $0.8
million, $1.0 million, $0.6 million, and $0.3 million, respectively.

                                          31

<PAGE>

8.  LEASE OBLIGATIONS AND COMMITMENTS

    The Company is leasing diagnostic equipment, certain other equipment and
its office facilities under various capital and operating leases.  Future
minimum scheduled rental payments required under these noncancelable leases at
June 30, 1996, are as follows (amounts in thousands):

                                                 Capital        Operating
                                                 -------        ---------

              1997                               $ 3,180        $ 19,768
              1998                                 2,494          16,589
              1999                                 1,224          11,493
              2000                                   681           5,360
              2001                                    46           2,488
              Thereafter                               -             496
                                                 -------        --------
    Total minimum lease payments                   7,625        $ 56,194
                                                                --------
                                                                --------

    Less:  Amounts representing interest             999
                                                 -------
    Present value of capital lease obligations     6,626
    Less:  Current portion                         2,638
                                                 -------
    Long term capital lease obligations          $ 3,988
                                                 -------
                                                 -------

    As of June 30, 1996, a substantial amount of equipment leased by the
Company is subject to contingent rental adjustments dependent on certain
operational factors through 1999.  The Company's future operating and capital
lease obligations to GE Medical were approximately $33.2 million and $4.3
million, respectively.

    Rental expense for diagnostic equipment and other equipment for the six 
months ended June 30, 1996 and for the years ended December 31, 1995, 1994 
and 1993, was $7.0 million, $14.5 million, $14.6 million, and $13.9 million, 
respectively.  These amounts include contingent rental expense of $0.2 
million, $0.5 million, $0.8 million and $0.5 million for the six months ended 
June 30, 1996 and for the years ended December 31, 1995, 1994 and 1993, 
respectively.

    The Company occupies office facilities under lease agreements expiring
through August 2000.  Rental expense for these facilities for the six months
ended June 30, 1996 and for the years ended December 31, 1995, 1994 and 1993,
was $0.3 million, $0.6 million, $0.6 million, and $0.8 million, respectively.

9.  CAPITAL STOCK

    Warrants - In connection with the Prior Restructure discussed in Note 3, 
MHC issued a warrant for 700,000 shares of its Common Stock to GE Medical.  
This warrant was canceled in connection with the Merger (Note 1).  
Additionally, InSight assumed a warrant to purchase 20,000 shares of its 
common stock at an exercise price of $2.50 per share issued to the estate of Cal
Kovens, a former director of AHS.

                                          32

<PAGE>

         STOCK OPTIONS -  MHC has a stock option plan and AHS has three stock
    option plans which provided for the granting of incentive or nonstatutory
    stock options to key employees, non-employee directors and independent
    contractors.  In addition, in August 1994, MHC issued options to purchase
    44,850 shares to non-employee directors.  These options were not covered
    by an existing plan but were approved at MHC's June 25, 1996 stockholders'
    meeting.  The Company also has two stock option plans which provide for the
    granting of incentive and nonstatutory stock options to key employees,
    independent contractors and non-employee directors.  Incentive stock
    options must have a exercise price of at least the fair market value of 
    InSight Common Stock on the grant date.  Options become vested cumulatively
    over various periods up to four years from the grant date, are exercisable
    in whole or in installments, and expire five or ten years from the grant 
    date. Pursuant to the Merger, the Company assumed all of MHC's and 
    AHS's outstanding options at June 26, 1996.  No shares are available
    for future grants under the MHC and AHS plans; however, shares are
    available for future grants of options under the Company's two stock option
    plans.  The following table summarizes stock option activity for the years
    ended December 31, 1993, 1994, and 1995 and for the six months ended 
    June 30, 1996, with shares and prices adjusted retroactively for the 
    applicable exchange ratio in the Merger:

                                                           Exercise Price
                                                           Per Share Range
                                           Number of       ---------------
                                            Shares         From         To
                                           ---------       ----         --

    Outstanding at December 31, 1992      242,070          $1.39       $19.72
    Granted                                44,850           1.25         1.25
    Forfeited                            (102,108)          7.84        19.72
                                         --------          -----       ------
    Outstanding at December 31, 1993      184,812           1.25        16.94
    Granted                                91,195           0.10         0.42
    Canceled                              (55,315)          1.39        19.72
    Forfeited                             (55,494)          1.39         8.26
                                          -------          -----       ------
    Outstanding at December 31, 1994      165,198           0.10        16.94
    Granted                                53,820           0.84         0.84
    Canceled                              (14,950)          0.15        16.94
                                          -------          -----       ------
    Outstanding at December 31, 1995      204,068           0.10        15.64
    Granted                                89,850           0.10         5.37
    AHS Options Assumed                    76,000           2.50        16.20
                                         --------          -----       ------
    Outstanding at June 30, 1996          369,918           0.10        16.20
                                         --------          -----       ------
                                         --------          -----       ------
    Exercisable at June 30, 1996          263,378           0.10        16.20
                                         --------          -----       ------
                                         --------          -----       ------

                                          33


<PAGE>


    Stock Purchase Plan - MHC had an Employee Stock Purchase Plan which
provided for the sale of up to 375,000 shares of common stock.  MHC's Board of
Directors terminated the Plan at the effective time of the Merger.

10. INCOME TAXES

    The Company accounts for income taxes using the liability method in
accordance with SFAS No. 109, which requires the asset and liability method of
accounting for income taxes.  The provision for income taxes for the six months
ended June 30, 1996 and for the year ended December 31, 1994 represents
primarily state and federal tax expenses under the Alternative Minimum Tax
(AMT).  Deferred income tax assets and liabilities, which arise from temporary
differences between the financial statement and tax bases of assets and
liabilities, are as follows at June 30, 1996 (amounts in thousands):


     Reserves                                                $   2,148
     Accrued expenses, not currently deductible                  1,222
     Deferred gain on debt restructure                             887
     Depreciation and amortization                                (126)
     Other                                                         153
     NOL carryforwards                                          13,896
     Valuation allowance                                       (18,180)
                                                              --------
         Total                                                $      -
                                                              --------
                                                              --------

     As of June 30, 1996, the Company had net operating loss carryforwards of
approximately $38.5 million, expiring in 2004 through 2010.  As a result of the
Merger, there will be a substantial limitation on the use of these net operating
loss carryforwards.  The amount of that limitation has not yet been determined.

     A valuation allowance is provided against the deferred tax asset when it 
is more likely than not that some portion of the deferred tax asset will not 
be realized.  The Company has established a valuation allowance for the 
deferred tax allowance for the deferred tax asset as, in management's best 
estimate, it is not likely to be realized in the near term.

11.  RETIREMENT SAVINGS PLANS

     The Company, through MHC, has a 401(k) profit sharing plan (the  MHC Plan)
for all MHC employees, whereby MHC may match a percentage of employee
contributions to the Plan and make additional contributions on behalf of the
employees at the discretion of its Board of Directors.  Contributions of
$50,000, $100,000, $62,000 and $40,000 were made during the six months ended
June 30, 1996 and the years ended December 31, 1995, 1994 and 1993,
respectively.  Contributions of $12,000 in 1994 and the full amount in 1993 were
funded with forfeitures.

     The Company, through AHS, has a 401(k) profit sharing plan (the AHS Plan)
for all AHS employees, whereby AHS matches a percentage of employee
contributions to the AHS Plan.

     Subsequent to June 30, 1996, the Company combined the MHC Plan and the 
AHS Plan into one plan (the Plan). Under this Plan, which is available to 
all eligible employees, the Company will match a percentage of employee 
contributions to the Plan.

12.  INVESTMENTS IN AND TRANSACTIONS WITH PARTNERSHIPS

     The Company, through MHC, has direct ownership in two Partnerships at June
30, 1996, both of which operate Centers.  MHC owns 43.75% and 50% of these
Partnerships, serves as the managing general partner and provides certain
management services under agreements expiring in 2007 and 2004, respectively.
These Partnerships are accounted for under the equity method since the Company
does not exercise significant control over the operations of these Partnerships
or have primary responsibility for the


                                          34

<PAGE>


Partnership's long-term debt.  Set forth below is certain financial data of the
Partnerships (amounts in thousands):

                                                             December 31,
                                         June 30,     ------------------------
                                           1996         1995             1994
                                         --------     --------         -------
     Combined Financial Position:
     Current assets:
     Cash                             $   549        $   582           $    93
          Trade receivables,
           less allowances                721            675               624
          Other                            31             24                66
     Property and equipment, net          442            566               309
                                      -------        -------           -------
     Total assets                       1,743          1,847             1,092
     Current liabilities                 (358)          (238)             (256)
     Due to MHC                          (269)          (499)                -
     Long-term liabilities               (226)           (82)              (20)
                                      -------        -------           -------
     Net assets                       $   890        $ 1,028           $   816
                                      -------        -------           -------
                                      -------        -------           -------

     Set forth below are the combined operating results of the Partnerships and
the Company's equity in earnings of the Partnerships (amounts in thousands):

                                  
                                  Six Months       Years Ended December 31,
                                 Ended June 30, ------------------------------
                                      1996        1995       1994        1993
                                    --------    --------   --------    -------
     Operating Results:
     Net revenues                  $   2,346    $ 4,455    $ 13,456    $ 16,162
     Expenses                          2,002      3,636       9,217      12,223
                                   ---------    -------    --------    --------
     Net income                    $     344    $   819    $  4,239    $  3,939
                                   ---------    -------    --------    --------
                                   ---------    -------    --------    --------

     Equity in Earnings:
     Share of net income of
       Partnerships                $     138    $   348    $    876    $    650
     Minority interest                     -          -         (42)        (15)
     Amortization of deferred gain         -          -           -          50
                                   ---------    -------    --------    --------
     Equity in earnings of
      partnerships                 $     138    $   348    $    834    $    685
                                   ---------    -------    --------    --------
                                   ---------    -------    --------    --------

     REVENUES OF THE PARTNERSHIPS are recognized when services are provided to
patients at established billing rates or at the amount realizable under
agreements with third party payors, with the provision for contractual
adjustments deducted to report net patient services revenues.  The Partnerships'
patient receivables are generally reimbursed by managed care organizations, 
and/or patient's private insurance companies, with the remainder of the patient
receivables reimbursed by health care plans and government payors.

     LEASE COMMITMENTS OF THE PARTNERSHIPS exist under various operating leases
for equipment and office space.  Future minimum lease payments for the
Partnerships' noncancelable leases at June 30, 1996, are as follows (amounts in
thousands):



                                          35

<PAGE>


                                               Capital      Operating
                                               -------     ----------
     1997                                          $102         $  764
     1998                                           102            727
     1999                                            43            152
     2000                                            36              -
                                                   ----         ------
                                                   $283         $1,643
                                                   ----         ------
                                                   ----         ------

     The Company, through AHS, has direct ownership in two Partnerships and 
one limited liability company, all of which operate Centers.  AHS owns 50% of 
each of the Partnerships and 35% of the limited liability company.  Since the 
Company controls the operations and is primarily responsible for the 
associated long-term debt, the Centers have been included in the Company's 
consolidated balance sheet at June 30, 1996.  The summarized condensed 
balance sheet data of the Company's three 50 percent or less owned and 
controlled entities which are consolidated into the Company's balance sheet 
at June 30, 1996 is as follows (amounts in thousands):

     Current assets                             $ 2,327
     Total assets                                 3,955
     Current liabilities                          1,019
     Long-term debt                                 416
     Minority interest equity                     1,391

     In December 1994, MHC sold the common stock of three wholly owned
subsidiaries, whose primary operations were equity interests of approximately
20% in each of three partnerships that provided lithotripsy services, for
approximately $5.0 million in cash.  MHC's investment in and share of earnings
of these partnerships had been reported in MHC's financial statements using the
equity method of accounting.  This transaction resulted in a pretax gain of
approximately $5.0 million in 1994.  In addition, two other Partnerships which
provided services through mobile MRI and CT facilities were terminated in 1994.

     MHC leased equipment to certain Partnerships under direct financing leases
and operating leases, and arranged for equipment maintenance services.  In
connection with providing these and other services, MHC received management fees
related to certain Partnerships.  Revenues related to these Partnership
activities included in MHC's financial statements for the years ending December
31, 1994 and 1993 were $1.3 million and $3.5 million, respectively.
Substantially all of these revenues relate to Partnerships that were sold or
terminated in 1994 or 1993.

     At June 30, 1996, the Company has a receivable of $0.3 million related to
certain lease and operating expenses of the two existing Partnerships that are
accounted for under the equity method of accounting.

13.  SUPPLEMENTAL CASH FLOW INFORMATION

The following is provided as supplemental information to the consolidated
statements of cash flows (amounts in thousands):


                                          36

<PAGE>

<TABLE>
<CAPTION>

                                                   Six Months
                                                 Ended June 30,    Years Ended December 31,
                                                                -----------------------------
                                                      1996       1995       1994        1993
                                                 -------------  -------    ------      ------
<S>                                               <C>            <C>        <C>         <C>
     Cash paid for interest                           $1,011      $1,411    $  879        $897
     Noncash investing and financing activities:
        Equipment purchased with debt                      -       2,133     1,385         107
        Equipment additions under capital leases         238       8,117     2,779         475
        Prepaid insurance premiums financed              208         555       430         717
        Debt extinguished with issuance of
         preferred stock                              (9,018)          -         -           -
        Deferred gain on debt restructure              2,519           -         -           -
        Accrued interest on debt extinguishment          (48)          -         -           -
        Preferred stock issued                         3,375           -         -           -
        Cancellation of common stock warrant              (7)          -         -           -

</TABLE>

14.  LITIGATION SETTLEMENTS

MAXUM - In May and June 1993, MHC was named a defendant in two lawsuits filed 
on behalf of a purported class of stockholders in the U.S. District Court for 
the Southern District of New York (the Court).  Also named as defendants were 
the underwriting firms that led MHC's initial public offering in September 
1991, a former stockholder and senior creditor of MHC, and certain executives 
and members of MHC's Board of Directors.  These two actions were consolidated 
into one action.  In February 1994, the plaintiffs filed a second 
consolidated amended complaint, which superseded the previously filed 
complaints.  The plaintiffs alleged that misstatements and omissions were 
made by MHC and the other defendants in connection with MHC's initial public 
offering and in subsequent public disclosures from September 19, 1991 until 
March 1, 1993 when MHC announced that it would write down assets and 
establish reserves related to the restructuring of its mobile MRI business.  
The plaintiffs sought monetary damages under various provisions of the 
federal securities laws and state law in an unspecified amount, as well as 
other relief. In March 1994, MHC and all other defendants moved to dismiss 
the second amended complaint for, among other things, failure to state a 
claim.  In November 1994, the Court granted the motions to dismiss and gave 
the plaintiffs permission to file a third amended complaint.  In January 
1995, the plaintiffs served their third consolidated amended complaint.  At 
approximately the same time, plaintiffs agreed to dismiss without prejudice 
their claims against the two underwriter defendants.  In June 1995, MHC and 
the other defendants moved to dismiss the third amended complaint for failure 
to state a claim and failure to plead fraud with particularity.

    On February 23, 1996, while the motions to dismiss were still under 
consideration by the Court, the defendants, plaintiffs and other interested 
parties (acting through their respective counsel) entered into a Stipulation 
of Settlement pursuant to which, subject to certain conditions, the action 
was settled and all claims dismissed on the merits.  In anticipation of this 
settlement, MHC recorded a charge of $1.5 million in the fourth quarter of 
1995.  As a part of the  Merger discussed in Note 1, the Company arranged to 
borrow approximately $1.9 million to finance the litigation settlement.  This 
borrowing will be payable over a five year period beginning in late 1996.

    On April 8, 1996, the Court entered an order that, among other things,
approved the proposed settlement and scheduled a hearing on June 21, 1996 to
determine, among other things, whether to grant final approval to the
settlement.

    The Final Judgment of Dismissal became final on July 26, 1996.  Pursuant 
to the parties' Stipulation of Settlement, and as a result of all conditions 
to effectiveness having been met, including MHC's having financing available 
to it for its contribution, the settlement became effective as of July 27, 
1996.  On July 29, 1996, MHC and other parties collectively paid to the 
plaintiffs in the class action the

                                          37

<PAGE>


balance of the agreed upon settlement amount, including accrued interest,
thereby completing the remaining obligations of MHC.

    AHS - In September 1992, a complaint was filed in the United States District
Court for the District of Puerto Rico by PRF, Inc. d/b/a San Juan Health Centre,
Inc., Drs. Pablo Rodriguez Millan and Rafael Rodriquez Sepulveda and their
spouses against Philips Credit Corporation ("Philips"), AHS, Clarke J.
Underwood, Margaret van Gilse d/b/a Berkshire Consulting Group, et al (Case No.
92-2266).  The complaint alleged against all defendants violations of the
Racketeer Influenced and Corrupt Organizations Act ("RICO"), mail fraud, wire
fraud, misrepresentation and fraud, infliction of emotional distress and
tortious misconduct upon Drs. Millan and Sepulveda and their spouses, and loss
of consortium by Dr. Millan.  The complaint alleged against AHS breach of
management agreement, breach of voting trust agreement and breach of fiduciary
duty, tortious interference with contractual relations, and breach of fiduciary
duty to Drs. Millan and Sepulveda and their spouses.  The complaint sought
compensatory damages in excess of $400,000,000, punitive damages, costs,
injunctive relief and attorneys' fees.  Mr. Underwood and Ms. van Gilse are
former officers/employees of AHS.

    San Juan Health Centre ("SJHC"), a freestanding health care clinic, was 
created by Drs. Millan and Sepulveda and Mr. Amezquita, who are the three 
shareholders of PRF, Inc., the surviving entity of a merger of PRF, Inc. and 
San Juan Health Centre, Inc. ("SJ Inc.").  Prior to AHS's involvement with 
SJHC, Philips was a large creditor of PRF, Inc., having made sizable loans 
for medical equipment purchases and operations.  Philips was at the time and, 
until February 1993, continued to be AHS's primary lender.  In January 1990, 
in connection with Philips making another large loan to PRF, Inc. and SJ 
Inc., Philips requested AHS to manage SJHC, which it agreed to do.  In 
connection with the loan, PRF, Inc. and SJ Inc. entered into a management 
agreement with AHS on January 12, 1990, with a two-year term, pursuant to 
which AHS was to provide SJHC with general management services.  In October 
1991, PRF, Inc. notified AHS that it would not be extending the management 
agreement beyond the initial two-year term.  As of January 1992, AHS was 
no longer the manager of SJHC. Berkshire Consulting Group became the manager 
of SJHC.  Also, in connection with the loan, on January 13, 1990, Drs. Millan 
and Sepulveda placed their PRF, Inc. and SJ Inc. stock into a voting trust.  
In the voting trust agreement, AHS was named the trustee of the voting trust 
with broad powers with respect to the stock.  AHS resigned as trustee on June 
24, 1992.

    In July 1993, one of the plaintiffs, PRF, Inc., filed a voluntary petition
under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court,
District of Puerto Rico (Case No. 93-03880 SEK).  In the context of this
proceeding, all of the claims of PRF, Inc. have been resolved.  The defendants
subsequently moved to dismiss the individual and conjugal partnership claims on
the basis that they were derivative of the resolved claims of PRF, Inc.  On
March 11, 1996, the District Court issued an Opinion and Order and Partial
Judgment dismissing with prejudice all claims brought by the individual
plaintiffs and conjugal partnership plaintiffs based on alleged violations of
the RICO statute, mail fraud, wire fraud, misrepresentation and fraud,
intentional infliction of emotional distress, tortious misconduct, and loss of
consortium.  As  a result of the entry of the Partial Judgment and issuance of
the Opinion and Order, only three counts remained--a claim against AHS for
alleged breach of a voting trust agreement, and breach of fiduciary duty claims
brought, as separate claims by the conjugal partnerships and the husband and
wife who make up each conjugal partnership.  On May 15, 1996, a Further Judgment
was entered finally resolving the remaining claims against AHS.  The Company
made a payment of $50,000 to settle the remaining claims.

    In addition to the foregoing matters, InSight is engaged in the defense of
lawsuits arising out of the ordinary course and conduct of its business and has
insurance policies covering such potential insurable losses where such coverage
is cost-effective.  InSight believes that the outcome of any such lawsuits will
not have a material adverse impact on InSight's business.



                                          38

<PAGE>


15. AHS FINANCIAL STATEMENTS

    In connection with the Merger, the consolidated statements of operations
and cash flows for AHS for the period from January 1, 1996 to June 26, 1996 are
presented as follows (amounts in thousands):

CONSOLIDATED STATEMENT OF OPERATIONS

REVENUES:
     Contract services                                             $ 3,066
     Patient services                                               14,723
                                                                   -------
          Total revenues                                            17,789


COSTS OF OPERATIONS:
     Cost of services                                                9,337
     Provision for doubtful accounts                                   451
     Equipment leases                                                2,485
     Depreciation                                                    1,986
                                                                   -------
          Total costs of operations                                 14,259
                                                                   -------

GROSS PROFIT                                                         3,530

CORPORATE OPERATING EXPENSES                                         2,141
                                                                   -------

INCOME FROM COMPANY OPERATIONS                                       1,389

INTEREST EXPENSE, NET                                               (1,994)
                                                                   -------

LOSS BEFORE INCOME TAXES                                              (605)
                                                                   -------

INCOME TAX EXPENSE                                                     152
                                                                   -------
NET LOSS                                                           $  (757)
                                                                   -------
                                                                   -------



The consolidated statement of operations does not include approximately $1,450
of costs incurred related to the Merger.


                                          39

<PAGE>

CONSOLIDATED STATEMENT OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                           $  (757)
    Adjustments to reconcile net loss to net cash provided by
    operating activities:
         Depreciation and amortization                                   2,250
         Deferred rent expense                                            (104)
         Changes in operating assets and liabilities:
         Increase in accounts receivable, net                              (31)
         Decrease in prepaid expenses and other                             35
         Increase in other assets                                         (501)
         Increase in accounts payable and accrued expenses                 219
         Increase in professional fees payable                            (113)
         Decrease in reserve for center terminations                      (309)
                                                                       --------
              Net cash provided by operating activities                    689
                                                                       --------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of property and equipment                                 (558)
                                                                       --------
              Net cash used in investing activities                       (558)
                                                                       --------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Principal payments under long-term obligations                      (1,219)
    Increase in principal under long-term obligations                      480
    Proceeds from issuance of common stock                                   8
    Decrease in minority interest                                          (87)
                                                                       --------
              Net cash used in financing activities                       (818)
                                                                       --------

NET DECREASE IN CASH                                                      (687)
    CASH, beginning of period                                            6,176
                                                                       --------
    CASH, end of period                                                $ 5,489
                                                                       --------
                                                                       --------


                                          40

<PAGE>

                                    PART III

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

THE BOARD OF DIRECTORS

     The Company's Certificate of Incorporation, which was filed with the
Secretary of State of Delaware on February 23, 1996 ("Certificate"), provides
for a three-tiered classified Board of Directors with staggered terms of office.
The Board of Directors consists of three classes, designated as Class I, Class
II and Class III.  The authorized number of directors is five, and there are
currently five directors.  The initial four directors were designated in the
Certificate on February 23, 1996, and on July 19, 1996, an additional director
was elected by the unanimous written consent of the Board of Directors.

     Pursuant to the Certificate, at each annual meeting of stockholders only
one class of directors will be elected, and each class of directors will serve a
three-year term and until their successors are duly elected and qualified.  The
term of the Class I director will expire at the 1997 annual meeting, the term of
the Class II director will expire at the 1998 annual meeting, and the term of
the Class III directors will expire at the 1999 annual meeting.

     Set forth below are the directors of the Company:

                                                                      YEAR FIRST
                                                                        ELECTED
   NAME                   AGE      POSITION                            TO SERVE
   ----                   ---      --------                            ---------

   E. Larry Atkins         49      President and Chief Executive
                                   Officer and Director, Class I         1996


   Grant R. Chamberlain    31      Director, Class II                    1996

   Frank E. Egger          52      Chairman of the Board and Director,
                                   Class III                             1996

   Leonard H. Habas        53      Director, Class III                   1996

   Ronald G. Pantello      52      Director, Class II                    1996

     E. Larry Atkins has been a director and president and chief executive
officer of the Company since February 23, 1996.  Mr. Atkins joined AHS in 1986
and has served as AHS's president and chief executive officer since August 1990
and chairman of the board from December 1990 to June 1992.  Mr. Atkins served as
executive vice president and chief operating officer of AHS from 1986 to August
1990.  Mr. Atkins became a director of AHS in 1988.  From 1979 to 1986, Mr.
Atkins served as president and chief executive officer of AMI Diagnostic
Services, a wholly-owned subsidiary of American Medical International, Inc.

     Frank E. Egger has been chairman of the board and a director of the Company
since February 23, 1996.  Mr. Egger was a director of AHS from August 1991 until
June 26, 1996.  He was appointed chairman of the board of AHS in May 1995, and
served as such until June 26, 1996.  Presently, Mr. Egger serves as vice
president of Kovens & Associates, Inc. ("Kovens & Associates"), a successor
entity to Kovens Enterprises, where Mr. Egger served as chief financial officer
from 1980 to 1995.  Kovens & Associates is a group of real estate development
and investment companies based in Miami, Florida.

     Leonard H. Habas has been a director of the Company since February 23,
1996.  From 1986 to June 26, 1996, Mr. Habas was a director of MHC.  Since 1995
he has been a director , chairman of the board and chief executive officer of
Advance Publishers, L.C., a book distribution company based in Winter Park,
Florida.  He established his own financing and consulting firm in 1987, which he
continues to own.  Mr. Habas is also a director of Dick Davis Digest and CeraMed
Corporation.

<PAGE>

     Ronald G. Pantello has been a director of the Company since February 23,
1996.  From 1993 to June 26, 1996, Mr. Pantello was a director of MHC.  He is a
founding partner of Lally, McFarland & Pantello, an advertising agency
specializing in the health care industry, based in New York City, and has been
its chief executive officer since 1980.

     Grant R. Chamberlain has been a director of the Company since July 19,
1996.  Since April 1995, Mr. Chamberlain has been a vice president of
Shattuck Hammond Partners, an investment banking firm based in New York City.
From April 1991 to April 1995, he served as manager of strategic
investments and restructurings for GE Medical.

     From February 23, 1996 through June 30, 1996, the Board of Directors held
one meeting at which all the directors were present.  In addition, the Board of
Directors took action by unanimous written consent three times.

     COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.  The 
Company's Compensation Committee currently consists  of two non-employee 
directors, Messrs. Habas (chairman) and Pantello.  The Compensation Committee is
responsible for determining the specific forms and levels of compensation of 
the Company's executive officers, and administering the Company's 1996 
Employee Stock Option Plan and 1996 Directors' Stock Option Plan, AHS's 1987 
Stock Option Plan, AHS's 1989 Stock Incentive Plan, AHS's 1992 Option and 
Incentive Plan, and MHC's 1989 Stock Option Plan.

     AUDIT COMMITTEE.  The Audit Committee currently consists of Messrs.
Chamberlain (chairman) and Pantello.  The Audit Committee's principal
functions are to review the results of the Company's annual audit of its
financial statements with the Company's independent public accountants and
approve the appointment of the Company's independent public accountants.

     NOMINATING COMMITTEE.  The Nominating Committee currently consists of
Messrs. Egger (chairman) and Habas.  The Nominating Committee's primary function
is to make recommendations relating to the organization, size and composition of
the Board of Directors and Board committees.

     The Company does not have an executive or similar committee.  The Company's
Board generally acts in its entirety upon matters which might otherwise be the
responsibility of such a committee.

     COMPENSATION OF DIRECTORS.  The members of the Company's Board who are not
employees of the Company receive an annual director fee of $15,000 and options
to purchase InSight Common Stock for their services as directors, as provided in
the Company's 1996 Directors' Stock Option Plan ("Directors' Plan").  On March
28, 1996, the Company entered into a consulting agreement with Mr. Egger
pursuant to which Mr. Egger receives $100,000 per year for services rendered to
the Company in connection with its acquisition and financing activities.  See
"Item 11 - Employment Agreements and Severance Agreements" and "Item 13 -
Certain Relationships and Related Transactions."

     The Directors' Plan provided for the automatic grant at the
effective time of the Merger to each non-employee director then serving on the
Company's Board of an option to purchase 15,000 shares of InSight Common Stock
at an exercise price equal to the fair market value of such stock on the date of
the grant.  In addition, each new director of the Company who commences service
after the effective time of the Merger will be granted an option to purchase
15,000 shares of InSight Common Stock.  The initial grants vest monthly on a pro
rata basis over a three-year period, so long as the individual remains a
director of the Company or is an employee or independent contractor of the
Company or any of its subsidiaries.  At the end of such three-year period and
annually thereafter during the term of the Directors' Plan, so long as the
individual remains a director, he or she will be granted an option to purchase
5,000 shares of InSight Common Stock.  These additional grants vest monthly over
one year on the same terms as the initial grants.  These options expire ten
years from the date of grant.  In accordance with this formula, on June 26,
1996, each of Messrs. Egger, Habas and Pantello were granted options to purchase
15,000 shares of InSight Common Stock at an option price of $5.37 per share.  In
addition, on July 19, 1996, Mr. Chamberlain was granted an option to purchase
15,000 shares of InSight Common Stock at an option price of $7.00 per share.

<PAGE>

EXECUTIVE OFFICERS

     The executive officers of the Company, together with the year in which they
were appointed to their current positions, are set forth below:

  EXECUTIVE OFFICER      AGE       POSITION                                YEAR
  -----------------      ---       --------                                ----
  E. Larry Atkins         49       President, Chief Executive Officer      1996
                                   and Director
  Glenn P. Cato           43       Senior Executive Vice President and     1996
                                   Chief Operating Officer
  Thomas V. Croal         36       Executive Vice President, Chief
                                   Financial Officer and Secretary         1996
  Michael A. Boylan       40       Senior Vice President-Operations        1996
  Michael D. Cragin       48       Senior Vice President-Operations        1996
  Robert N. LaDouceur     51       Senior Vice President-Operations        1996
  Deborah M. MacFarlane   40       Senior Vice President-Marketing         1996
  Robert J. Armstrong     58       Vice President-Design & Construction    1996
  Brian G. Drazba         35       Vice President-Finance and              1996
                                   Corporate Controller

     Information concerning Mr. Atkins is set forth above under "The Board of
Directors."

     Glenn P. Cato has been senior executive vice president and chief operating
officer of the Company since February 23, 1996.  Mr. Cato has served as
president and chief executive officer of MHC since March 1994 and served as
secretary from 1993 until June 26, 1996.  From 1989 to 1994, he served as senior
vice president and chief financial officer of MHC.

     Thomas V. Croal has been executive vice president, chief financial officer
and secretary of the Company since February 23,  1996.  Mr. Croal served as a
director of AHS from March 1991 until June 26, 1996.  He has served as vice
president and chief financial officer of AHS since April 1991.  He was
controller of AHS from 1989 until April 1991.  In December 1990, Mr. Croal was
appointed corporate secretary.  From 1981 to 1989, Mr. Croal was employed by
Arthur Andersen & Co., an independent public accounting firm.

     Michael A. Boylan has been senior vice president-operations of the Company
since February 23, 1996.  Mr. Boylan has served as executive vice president of
MHC since March 1994.  From 1992 to 1994, he served as a regional vice president
of MHC's principal operating subsidiary, Maxum Health Services Corp. ("MHSC")
From 1991 to 1992, he served as an executive director of certain of MHC's
operations.  From 1986 to 1991, Mr. Boylan served in various capacities as an
officer or employee, including president and chief operating officer,with
American Medical Imaging Corporation.

     Michael D. Cragin has been senior vice president-operations of the 
Company since February 23, 1996.  Mr. Cragin has served as regional vice 
president, western operations of AHS since he joined AHS in May 1994.  From 
1989 to 1994 he was Director of Professional Business Affairs at Saint 
John's Hospital, Santa Monica, California.

     Robert N. LaDouceur has been senior vice president-operations of the
Company since February 23, 1996.  Mr. LaDouceur has served as executive vice
president of MHC since March 1994.  From 1992 to 1994, he served as a regional
vice president of MHSC.  From 1991 to 1992, he served as an executive director
of certain of MHC's operations.  From 1984 to 1991, Mr. LaDouceur served in
various capacities as an officer or employee, including vice president, with
Glassrock Home Health Care.

     Deborah M. MacFarlane has served as senior vice president-marketing of the
Company since March 28, 1996.  Since July 1991, she has served as vice
president, marketing of AHS.  From 1987 until June 1991, Ms. MacFarlane served
as director of marketing for the Center Operating Group of Medical Imaging
Centers of America, Inc.

     Robert J. Armstrong has been vice president, design and construction of the
Company since March 28, 1996.  Since 1985, Mr. Armstrong has been vice
president, design and construction of AHS.  Mr. Armstrong served as director of
design and construction of AHS from 1983 to 1985.

<PAGE>

     Brian G. Drazba has been vice president, finance of the Company since March
28, 1996.  Since June 1995, he has served as vice president, finance of AHS.
Mr. Drazba served as corporate controller for AHS from 1992 to 1995.  From 1985
to 1992, Mr. Drazba was employed by Arthur Andersen & Co.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act") 
requires the Company's directors and officers and persons who own more than 
10% of a registered class of the Company's equity securities to file reports 
of ownership and changes in ownership with the Securities and Exchange 
Commission ("SEC") and the National Association of Securities Dealers, Inc.  
Directors and officers and greater than 10% stockholders are required by SEC 
regulation to furnish the Company with copies of the reports they file.  
Based solely on the review of the copies of such reports and written 
representations from certain persons that certain reports were not required 
to be filed by such persons, the Company believes that all its directors, 
officers and greater than 10% beneficial owners complied with all filing 
requirements applicable to them with respect to transactions for the period 
February 23, 1996 through June 30, 1996, except that each of Messrs. Egger, 
Habas and Pantello failed to include in their timely filed Initial Statement 
of Beneficial Ownership of Securities on Form 3 an automatic option grant 
pursuant to InSight's Directors' Plan, and Messrs. Armstrong and Drazba, 
neither of whom owns beneficially or otherwise any InSight Common Stock, 
failed to timely file an Initial Statement of Beneficial Ownership of 
Securities on Form 3; when it was brought to their attention, Messrs. Egger, 
Habas and Pantello agreed to promptly file an amendment to Form 3 and Messrs. 
Armstrong and Drazba agreed to promptly file a Form 3, disclosing these 
inadvertant omissions.

ITEM 11.       EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

     Because (i) the Company was not a reporting company pursuant to Section 
13(a) or 15(d) of the Exchange Act until June 26, 1996, (ii) its fiscal year 
ended shortly thereafter on June 30, 1996 and (iii) each of its predecessors, 
MHC and AHS, were reporting companies and have reported executive 
compensation information through the year ended December 31, 1995, the 
following table sets forth information concerning the annual, long-term and 
all other compensation for services rendered in all capacities to the 
Company, its subsidiaries and predecessors for the years ended December 31, 
1995, 1994 and 1993, and the six months ended June 30, 1996 of (i) the 
Company's Chief Executive Officer and (ii) the four most highly compensated 
executive officers (other than the chief executive officer) of the Company 
(the "Other Executive Officers")  whose aggregate cash compensation exceeded 
$100,000 for the year ended December 31, 1995.

                           Summary Compensation Table
<TABLE>
<CAPTION>

                                                                                           Long-Term      All Other
                                                Annual Compensation                      Compensation  Compensation(3)
                            ----------------------------------------------------------   ------------  ---------------
                                                                                            Awards
Name and Principal                                                                       Stock Options
Position                        Period        Salary(1)       Bonus(2)      Other(3)       (Shares)
------------------              ------        ---------       --------      --------       --------

<S>                        <C>                 <C>             <C>            <C>            <C>           <C>
E. Larry Atkins            Six months ended
    President and Chief       June 30, 1996    $123,200        $ --           $ 5,250          --         $   4,691
    Executive Officer       Year ended 1995     246,400         61,600          4,680        175,000          7,882
                            Year ended 1994     220,000         54,000          3,789          --             9,327
                            Year ended 1993     200,000          --            11,763          --            10,245

Glenn P. Cato              Six months ended
    Senior Executive Vice     June 30, 1996      97,500         10,000          3,000          --               --
    President and Chief     Year ended 1995     172,500         20,000          6,000         30,000          3,158
    Operating Officer       Year ended 1994     143,750         71,875          4,500         57,500          1,751
                            Year ended 1993     109,000         40,000          --             --               612

Thomas V. Croal            Six months ended
    Executive Vice,           June 30, 1996      87,615          --             4,500          --             2,669
    President, Chief        Year ended 1995     175,230         43,808          4,742        125,000          5,252
    Financial Officer and   Year ended 1994     148,500         38,000          4,836          --             3,519
    Corporate Secretary     Year ended 1993     135,000         10,000          8,760          --             1,950

Robert N. LaDouceur        Six months ended
    Senior Vice               June 30, 1996      82,500         10,000          3,900          --               --
    President-Operations    Year ended 1995     165,000         20,000          6,400         30,000          3,072
                            Year ended 1994     165,000         82,500          5,400         35,000          1,751
                            Year ended 1993      96,158         10,000        141,878         20,000          1,010

<PAGE>

Michael A. Boylan          Six months ended
    Senior Vice               June 30, 1996      81,865         25,000          3,900           --            --
    President-Operations    Year ended 1995     165,000         20,000          6,400         30,000          --
                            Year ended 1994     165,000         82,500          5,400         35,000          --
                            Year ended 1993     111,729         10,000        170,789         20,000          --
_______________________
</TABLE>

(1)  Includes amounts for periods during which the chief executive officer and
     the Other Executive Officers of the Company, whose aggregate cash
     compensation exceeded $100,000, served as executive officers of AHS or MHC,
     which are now wholly owned subsidiaries of the Company. The Other 
     Executive Officers were also the four most highly compensated 
     executive officers (other than the chief executive officer) of 
     the Company for the six months ended June 30, 1996.

(2)  Annual bonuses are earned and accrued during the fiscal years indicated,
     and paid subsequent to the end of each fiscal year.

(3)  Amounts of Other Annual Compensation include perquisites (auto allowances
     and commissions for contract awards and renewals) and amounts of All Other
     Compensation include (i) amounts contributed to MHC's or AHS's 401(k)
     profit sharing plans, as the case may be, (ii) specified premiums on
     executive split-dollar insurance arrangements, and (iii) specified premiums
     on executive health insurance arrangements, for the chief executive officer
     and the Other Executive Officers of the Company.


OPTION GRANTS

     During the six months ended June 30, 1996, no stock options were granted
under the Company's 1996 Employee Stock Option Plan, nor under any stock option
plan of either AHS or MHC, to the chief executive officer and the Other
Executive Officers of the Company.

OPTION EXERCISES AND FISCAL YEAR-END VALUES

     During the six months ended June 30, 1996, neither of the chief 
executive officer nor the Other Executive Officers of the Company exercised 
any stock options.  The following table sets forth information with respect 
to the unexercised stock options to purchase InSight Common Stock granted, 
under MHC's and AHS's stock option plans and assumed by the Company pursuant 
to the Merger, to the chief executive officer and the Other Executive 
Officers of the Company as of June 30, 1996.

                         Number of Unexercised         Value of Unexercised
                            Options Held at           In-the-Money Options at
Name                        June 30, 1996                  June 30, 1996
----                    ----------------------        -----------------------
                      Exercisable  Unexercisable    Exercisable  Unexercisable
                      -----------  -------------    -----------  -------------

E. Larry Atkins         19,000        10,500         $  20,090     $  30,135
Glenn P. Cato           46,345         5,980           227,310        27,113
Thomas V. Croal         10,000         7,500            14,350        21,525
Robert N. LaDouceur     32,890         5,980           160,682        27,113
Michael A. Boylan       32,890         5,980           160,682        27,113
_____________________

(1) Based on the closing price reported on NASDAQ Small Cap Market for InSight
Common Stock on that date of $5.37.

INDEMNIFICATION AGREEMENTS

     The Company has entered into separate indemnification agreements with each
of its directors and officers that could require the Company, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status

<PAGE>

or service as directors and officers and to advance expenses incurred by them as
a result of any proceedings against them as to which they could be indemnified.


EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS

     The Company has entered into executive employment agreements with its 
chief executive officer, the Other Executive Officers and Messrs. Cragin 
and Drazba and Ms. MacFarlane, which provide for rolling twelve (12) month 
periods of employment, and severance compensation equal to 12 months of 
compensation at his or her annual salary rate then in effect, in the event 
the executive's employment is terminated (i) because of physical or mental 
disability, (ii) because of discretionary action of the Board of Insight, or 
(iii) voluntarily by the executive due to a "Change of Control." A "Change of 
Control" will have occurred if (a) the Company or its stockholders enter into 
an agreement to dispose of, whether by sale, exchange, merger, consolidation, 
reorganization, dissolution or liquidation, (i) not less than 80% of the 
assets of the Company or (ii) a portion of the outstanding InSight Common 
Stock such that one person or "group" (as defined by the SEC) owns, of record 
or beneficially, not less than 50% of the outstanding InSight Common Stock; 
or (b) one person or "group" (as defined by the SEC) acquires not less than 
18% of the Post-Conversion Common Stock (as defined below).  However, a 
Change of Control will not have occurred if GE Medical converts its Series A 
Preferred Stock into InSight Common Stock.  "Post-Conversion Common Stock" 
means the outstanding InSight Common Stock issuable, at the time a 
determination is made, upon conversion of the outstanding Series A Preferred 
Stock.  In the event that the executive's employment is terminated for cause, 
he or she has no right to receive any severance compensation under his or her 
employment agreement.  In consideration for such severance compensation, each 
executive has agreed not to solicit, entice, divert or otherwise contact any 
customer or employee of InSight for any provision of services which 
constitute "Company Business" during the period that the executive is 
receiving severance compensation or for a period of 12 months after the 
executive's termination of employment, whichever is later.  "Company 
Business" means the development and operation, at times together with other 
healthcare providers, of outpatient facilities which provide diagnostic 
services in the areas of general radiology, MRI, cardiology and neurosciences 
utilizing the related equipment and computer programs and software and 
various distribution methods and investment structures.  Mr. Cato's executive 
employment agreement also provides that his term of employment shall be three 
(3) years commencing on June 26, 1996.  Subsequent to June 26, 1996, he will 
be employed for rolling twelve (12) month periods.

     Mr. Egger, a director and chairman of the board, has entered into a
consulting agreement with InSight providing for compensation at the rate of
$100,000 per year.  Mr. Egger's agreement provides for severance compensation
equal to 12 months of compensation in the event the agreement is terminated as a
result of (i) Mr. Egger becoming physically or mentally disabled, (ii)
discretionary action of the Board of InSight, or (iii) a corporate
reorganization that has the effect of diminishing or impairing Mr. Egger's
consulting responsibilities.

ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table shows the beneficial ownership, reported to the Company
as of September 30, 1996, of InSight's Common Stock, including shares as to
which a right to acquire ownership exists (for example, through the exercise of
stock options and warrants and conversions of Series A Preferred Stock) within
the meaning of Rule 13d-3(d)(1) under the Exchange Act, of (i) each person known
to the Company to own beneficially 5% or more of InSight Common Stock, (ii) each
director of the Company, (iii) the Company's executive officers,and (iv) all
directors and executive officers, as a group.

                                   Amount and          Percentage
                                    Nature of              of
Name and Address                    Beneficial           Common
of Beneficial Owner               Ownership(1)            Stock
-------------------               ------------           ------

General Electric Company (2)        2,501,760              48%
20825 Swenson Drive
Suite 100
Waukesha, WI  53186

<PAGE>

                                        Amount and          Percentage
                                         Nature of              of
Name and Address                        Beneficial            Common
of Beneficial Owner                    Ownership(1)            Stock
-------------------                    ------------           ------

E. Larry Atkins (3)
4400 MacArthur Blvd., Suite 800           12,100                 *
Newport Beach, CA  92660

Grant R. Chamberlain (4)
630 Fifth Avenue, Suite 2900               1,666                 *
New York, NY  10111

Frank E. Egger (5)
551 N.W. 77th St., Suite 114              28,369                  1%
Boca Raton, FL  33487

Leonard H. Habas (6)
501 So. New York Avenue                   34,508               1.3%
Suite 210
Winter Park, FL  32789

Estate of Cal Kovens (7)
9999 Collins Ave. #K-1                   482,031               17.4%
Bal Harbor, FL  33154

Roz Kovens (8)
9999 Collins Ave. #K-1                   563,876               20.3%
Bal Harbor, FL  33154

Ronald G. Pantello (9)
60 Madison Avenue                         20,023                 *
New York, NY  10010

Glenn P. Cato (10)
4400 MacArthur Blvd., Suite 800           46,345                1.7%
Newport Beach, CA  92660

Thomas V. Croal (11)
4400 MacArthur Blvd., Suite 800            5,000                  *
Newport Beach, CA  92660

Michael A. Boylan (12)
110 Gibraltar Road                         32,890               1.2%
Horsham, PA  18901

Robert N. LaDouceur (13)
11011 King Street, Suite 240               32,890               1.2%
Overland Park, KS  66210

<PAGE>

                                        Amount and          Percentage
                                         Nature of              of
Name and Address                        Beneficial            Common
of Beneficial Owner                    Ownership(1)            Stock
-------------------                    ------------           ------

Robert J. Armstrong                          0                   0
4400 MacArthur Blvd., Suite 800
Newport Beach, CA  92660

Michael D. Cragin                            0                   0
4400 MacArthur Blvd., Suite 800
Newport Beach, CA  92660

Brian G. Drazba                              0                   0
4400 MacArthur Blvd., Suite 800
Newport Beach, CA  92660

Deborah M. MacFarlane                        0                   0
4400 MacArthur Blvd., Suite 800
Newport Beach, CA  92660

All directors and executive
officers, as a group (14)              213,791                 7.4%
(13 persons)
-----------------------------

*  Less than 1% of the outstanding Common Stock.

(1)  For purposes of this table, a person is deemed to have "BENEFICIAL
     OWNERSHIP" of any security that such  person has the right to acquire
     within 60 days after September 30, 1996.

(2)  Includes 2,501,760 shares of Common Stock into which InSight Series A
     Preferred Stock held by GE Medical are convertible at any time, subject to
     certain antidilution and other adjustments.

(3)  Includes an option to purchase 7,000 shares of InSight Common Stock at
     an exercise price of $2.50 per share.  Does not include an option to
     purchase 10,500 shares of InSight Common Stock at an exercise price of
     $2.50 per share, which is not currently exercisable.

(4)  Includes an option to purchase 1,666 shares of InSight Common Stock at 
     an exercise price of $7.00 per share.  Does not include an option to 
     purchase 13,334 shares of InSight Common Stock at an exercise price of
     $7.00 per share, which is not currently exercisable.

(5)  Includes (i) an option to purchase 3,000 shares of InSight Common Stock 
     at an exercise price of $16.20 per share, (ii) an option to purchase 
     1,800 shares of InSight Common Stock at an exercise price of $2.50 per 
     share, (iii) an option to purchase 2,083 shares of InSight Common Stock
     at an exercise price of $5.37 per share and (iv) warrants to purchase 
     2,268 shares of InSight Common Stock at an exercise price of $5.64 per 
     share.  Does not include (i) an option to purchase 1,200 shares of 
     InSight Common Stock at an exercise price of $2.50 per share and (ii) an 
     option to purchase 12,917 shares of InSight Common Stock at an exercise 
     price of $5.37 per share, which are not currently exercisable.  The InSight
     Common Stock and warrants held by Mr. Egger are pledged to the estate of 
     Cal Kovens as security for the repayment of a loan.  If the loan is not 
     repaid when due, the estate of Mr. Kovens would have the right to sell such
     of the pledged securities as are necessary to satisfy the indebtedness.

(6)  Includes (i) an option to purchase 8,970 shares of InSight Common Stock 
     at an exercise price of $1.25 per share, (ii) an option to purchase 4,485 
     shares of InSight Common Stock at an exercise price of $15.64 per share, 
     (iii) an option to purchase 2,083 shares of InSight Common Stock at an 
     exercise price of $5.37 per share, and (iv) an option to purchase 8,970 
     shares of InSight Common Stock at an exercise price of $0.10 per share.
     Does not include an option to purchase 12,917 shares of InSight Common 
     Stock at an exercise price of $5.37 per share, which is not currently
     exercisable.

(7)  The information in the table is based upon Amendment No.1 to Schedule 
     13D filed with the SEC on July 9, 1996. Includes warrants to purchase 
     (i) 20,000 shares of InSight Common Stock at an exercise price of $2.50 
     per share and (ii) 33,645 shares of InSight Common Stock at an exercise 
     price of $5.64 per share.


(8)  The information in the table is based upon Amendment No. 1 to Schedule 
     13D filed with the SEC on July 9, 1996. Includes (i) an option to 
     purchase 1,800 shares of InSight Common Stock at an exercise price of 
     $2.50 per share, (ii) warrants to purchase 7,660 shares of InSight 
     Common Stock at an exercise price of $5.64 per share and (iii) by virtue 
     of her status as personal representative of the estate of Cal Kovens, 
     the 482,031 shares of InSight Common Stock beneficially owned by it.


<PAGE>

(9)  Includes (i) an option to purchase 8,970 shares of InSight Common Stock 
     at an exercise price of $1.25 per share, (ii) an option to purchase 2,083
     shares of InSight Common Stock at an exercise price of $5.37 per share and
     and (iii) an option to purchase 8,970 shares of InSight Common Stock at an 
     exercise price of $0.10 per share. Does not include an option to purchase 
     12,917 shares of InSight Common Stock at an exercise price of $5.37 per 
     share, which is not currently exercisable.

(10) Includes (i) an option to purchase 25,415 shares of InSight Common Stock
     at an exercise price of $0.42 per share, (ii) an option to purchase 8,970
     shares of InSight Common Stock at an exercise price of $0.10 per share,
     and (iii) an option to purchase 11,960 shares of InSight Common Stock at
     an exercise price of $0.84 per share.  Does not include an option to
     purchase 5,980 shares of InSight Common Stock at an exercise price of $0.84
     per share, which is not currently exercisable.

(11) Includes an option to purchase 5,000 shares of InSight Common Stock at an
     exercise price of $2.50 per share.  Does not include an option to purchase
     7,500 shares of InSight Common Stock at an exercise price of $2.50 per 
     share, which is not currently exerciable.

(12) Includes (i) an option to purchase 8,970 shares of InSight Common Stock at
     an exercise price of $0.10 per share, (ii) an option to purchase 11,960
     shares of InSight Common Stock at an exercise price of $0.42 per share, and
     (iii) an option to purchase 11,960 shares of InSight Common Stock at an
     exercise price of $0.84 per share.  Does not include an option to purchase
     5,980 shares of InSight Common Stock at an exercise price of $0.84 per 
     share, which is not currently exercisable.

(13) Includes (i) an option to purchase 8,970 shares of InSight Common Stock
     at an exercise price of $0.10 per share, (ii) an option to purchase
     11,960 shares of InSight Common Stock at an exercise price of $0.42 per 
     share, and (iii) an option to purchase 11,960 shares of InSight Common 
     Stock at an exercise price of $0.84 per share.  Does not include an option
     to purchase 5,980 shares of InSight Common Stock at an exercise price of
     $0.84 per share, which is not currently exercisable.

(14) Assumes the exercise in full of all currently exercisable warrants and
     options described in footnotes (3), (4), (5), (6), (7), (8), (9), (10),
     (11), (12) and (13).

     Except as otherwise noted, the Company believes that each of the
stockholders listed in the table above has sole voting and dispositive power
over all shares owned.

Item 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS WITH THE ESTATE OF CAL KOVENS

     In February 1992, AHS purchased a Gamma Knife from Elekta to be located in
California and made a deposit toward the  purchase of another Gamma Knife.  AHS
received nonrecourse interim financing of $2,000,000 toward the acquisition of
the Gamma Knife and the deposit for the other Gamma Knife from Cal Kovens (a
director until his death on February 6, 1995).  The interim financing was
borrowed from Mr. Kovens pursuant to the terms of a nonrecourse promissory note
secured by the Gamma Knife and due August 24, 1992, at an interest rate of 10.5%
per annum.  Mr. Kovens extended the term of the note while AHS sought to obtain
permanent financing.

     In December 1992, AHS's wholly owned subsidiary, Radiosurgery Centers, Inc.
("RCI"), entered into a five-year loan of $2,750,000 with City National Bank of
Florida ("City National Bank"), and the promissory note in favor of Mr. Kovens
was repaid from the proceeds of such loan in the first quarter of 1993.  The new
loan was guaranteed by Mr. Kovens and his spouse, Roz Kovens.  During the second
half of fiscal 1993, Mr. Kovens repurchased RCI's promissory note from City
National Bank.  Pursuant thereto, Mr. Kovens was paid approximately $195,000 in
interest in fiscal 1993.

<PAGE>

     In early 1993, RCI, AHS and Elekta became involved in a dispute when RCI
advised Elekta that it intended to relocate the Gamma Knife System it purchased
for a location in California to Miami, Florida, since in December 1992, RCI had
entered into an agreement with Public Health Trust, an agency and
instrumentality of Metropolitan Dade County, Florida, to establish and operate a
Gamma Knife center at Jackson Memorial Hospital Medical Center located in Miami.
The parties settled their claims and, pursuant to the terms thereof, Mr. Kovens
agreed to guarantee certain scheduled payments of $250,000 to be made by RCI to
Elekta in connection with the delivery of the Gamma Knife to Miami, which
payment has been made by RCI.

     In February 1994, RCI entered into a new five-year loan of $2,900,000 with
County National Bank of South Florida.  Mr. Kovens was repaid from the proceeds
of such new bank loan in the first quarter of 1994.  This loan was guaranteed by
Mr. Kovens and secured by certain real property owned by Mr. Kovens.  Effective
March 1, 1996, RCI refinanced the remainder of the equipment loan (approximately
$2,075,000) with GE Medical on terms substantially equivalent to the original 
equipment loan.  The loan is secured by all of the assets of the Gamma Knife 
center, as well as by a letter of credit of $300,000 which is guaranteed by the
estate of Cal Kovens.

     In November 1994, AHS issued Mr. Kovens a warrant to purchase 200,000 
shares of AHS Common Stock at $0.25 per share in consideration of the Gamma 
Knife financing activities discussed above.  Pursuant to the terms of the 
Merger, InSight assumed the warrant which, after the applicable exchange 
ratio, became a warrant to purchase 20,000 shares of InSight Common Stock at 
the exercise price of $2.50 per share.  The warrant is exercisable at any 
time up to November 14, 1997.

TRANSACTIONS WITH FRANK E. EGGER

     For fiscal year commencing July 1, 1996, Mr. Egger is being paid
$100,000 per year for acquisition and financing activities pursuant to a
consulting agreement.  In the event the agreement is terminated as a result
of (i) Mr. Egger becoming physically or mentally disable, (ii) discretionary
action of the Board of InSight, or (iii) a corporate reorganization that has
the effect of diminishing or impairing Mr. Egger's consulting responsibilities,
he is entitled to a severance compensation equal to 12 months of compensation.

     Pursuant to certain agreements among InSight, AHS and the holders of AHS 
Series B Preferred Stock, InSight issued to Mr. Egger on August 9, 1996 a 
warrant to purchase 2,268 shares of InSight Common Stock at the exercise 
price of $5.64 per share.  The warrant is exercisable at any time up to 
August 9, 2001.  In addition, subject to certain conditions, Mr. Egger, and 
other holders, have certain "piggyback" registration rights to register the 
shares subject to the warrants under the Securities Act.  See "Transactions 
with Holders of AHS Series B Preferred Stock."

TRANSACTIONS WITH GE MEDICAL

     GE Medical, as the primary creditor of AHS and Maxum, had from time to 
time granted AHS and Maxum certain financial accommodations with respect to 
certain loans and leases.  In exchange for such accommodations, AHS and Maxum 
issued certain considerations to GE Medical.  As a prerequisite to the 
consummation of the Merger, certain financial accommodations were provided by 
GE, the primary creditor of each of AHS and Maxum, and its affiliate GE 
Capital.  As a result, certain debt and operating lease obligations of AHS 
and Maxum were reduced in exchange for, among other things, the issuance to 
GE Medical immediately prior to the consummation of the Merger of AHS Series 
C Preferred Stock and Maxum Series B Preferred Stock.  At the effective time 
of the Merger, the AHS Series C Preferred Stock and Maxum Series B Preferred 
Stock issued to GE Medical was converted into the right to receive such 
number of shares of InSight Series A Preferred Stock which were convertible 
into InSight Common Stock representing approximately 48% of InSight Common 
Stock outstanding at the effective time of the Merger (after giving effect to 
such conversion).

     In addition, as part of the granting of certain financial accommodations 
contemplated to be provided by GE Medical, at the effective time of the 
Merger, warrants previously issued to GE Medical by AHS to acquire 1,589,072 
shares of AHS Common Stock, and warrants previously issued to GE Medical by 
Maxum to acquire 700,000 shares of Maxum Common Stock, were canceled. 
Furthermore, GE Medical has the right to receive for ten years annual 
payments ("Supplemental Service Fee") under its maintenance agreements with 
InSight, AHS and Maxum equal to 14% of InSight pre-tax income, subject to 
certain adjustments, and further subject to proportional reductions for 
certain post-Merger acquisitions. InSight

<PAGE>

may terminate the Supplemental Service Fee at any time during such ten-year
period by making a payment to GE Medical equal to $8 million less the
discounted value of the aggregate amount of such Supplemental Service Fee
(calculated at a discount rate of 15% per annum) paid through the date of such
termination payment.

     In negotiating the Merger with GE Medical, AHS and Maxum, the Company 
agreed to reimburse to GE Medical an amount equal to 40% of the legal costs 
incurred by GE Medical in connection with such transactions.  The amount 
reimbursed to GE Medical in the six months ended June 30, 1996, was 
approximately $240,316.

TRANSACTIONS WITH HOLDERS OF AHS SERIES B PREFERRED STOCK

     Pursuant to certain agreements among InSight, AHS and the holders of AHS 
Series B Preferred Stock, the holders of Series B Preferred Stock agreed to 
waive any rights to dividends, liquidation preferences, voting and redemption 
they might have had in connection with the Merger and certain other rights.  
In consideration therefor, upon the consummation of the Merger, InSight 
issued to such holders, including Mr. Egger, Roz Kovens and the estate of 
Cal Kovens, warrants to purchase an aggregate of 50,000 shares of InSight 
Common Stock at the exercise price of $5.64 per share.  The warrants are 
exercisable at any time up to August 9, 2001.  In addition, subject to 
certain conditions, the holders have certain "piggy-back" registration rights
to register the shares subject to the warrants under the Securities Act.

TRANSACTIONS WITH SHATTUCK HAMMOND PARTNERS

     On August 14, 1996, the Company entered into an agreement with Shattuck 
Hammond Partners ("SHP"), an investment banking firm located in New York in 
which a director of the Company, Mr. Chamberlain, is a vice president, 
pursuant to which SHP will provide general strategic advisory and investment 
banking services.  The term of the agreement commenced July 1, 1996 and 
extends through December 31, 1997.  The Company is obligated to pay SHP 
$180,000, payable in quarterly installments of $30,000.  SHP also will be 
entitled to separately negotiated fees for certain mergers or acquisitions. 
In addition, the Company also issued SHP a warrant to purchase 35,000 shares 
of InSight Common Stock at an exercise price of $5.50 per share.  The warrant 
vests cumulatively on a monthly basis over the 18 month term of the agreement.
The warrant is exercisable at any time up to August 14, 2000.  In addition, SHP
has certain "piggy-back" registration rights to register the shares subject to 
the warrant under the Securities Act. 

<PAGE>

                                     PART IV


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

ITEM 14 (a) (1).  FINANCIAL STATEMENTS

     Included in Part II of this report:

          Report of Independent Public Accountants
          Report of Independent  Public Accountants
          Consolidated Balance Sheets
          Consolidated Statements of  Operations
          Consolidated Statements of Stockholders' Equity (Deficit)
          Consolidated Statements of Cash Flows
          Notes to Consolidated Financial Statements

ITEM 14 (a) (2).  FINANCIAL STATEMENT SCHEDULES

     Report of Independent Public Accountants on Schedule
     Schedule IX - Valuation and Qualifying Accounts

     All other schedules have been omitted because they are either not required
or not applicable, or the information is presented in  the consolidated
financial statements or notes thereto.

ITEM 14 (a) (3).  EXHIBITS


EXHIBIT NUMBER      DESCRIPTION AND REFERENCES
--------------      --------------------------

     *2.1           Agreement and Plan of Merger dated as of February 26, 1996,
                    by and among InSight, AHS, AHSC Acquisition Company, MHC and
                    MXHC Acquisition Company, previously filed and incorporated
                    herein by reference from the Company's Registration
                    Statement on Form S-4  (Registration No. 333-02935), filed
                    April 29, 1996.

     *3.1           Certificate of Incorporation of InSight, previously filed
                    and incorporated herein by reference from  the Company's
                    Registration Statement on Form S-4 (Registration 
                    No. 333-02935), filed April 29, 1996.

     *3.2           Bylaws of InSight, previously filed and incorporated herein
                    by reference from  the Company's Registration Statement on
                    Form S-4 (Registration No. 333-02935), filed April 29,
                    1996.

     *10.1          Master Debt Restructuring Agreement by and among General
                    Electric Company acting through GE Medical Systems, General
                    Electric Capital Corporation, InSight, AHS and MHC (without
                    schedules and exhibits)  previously filed and incorporated
                    herein by reference from the Company's Registration
                    Statement on Form S-4 (Registration No. 333-02935), filed
                    April 29, 1996.

     *10.2          Registration Rights Agreement by and between General
                    Electric Company acting through GE Medical Systems and
                    InSight, previously filed and incorporated herein by
                    reference from  the Company's Registration Statement on Form
                    S-4 (Registration No. 333-02935), filed April 29, 1996.

<PAGE>

     *10.3          Master Service Agreement Addendum by and among General
                    Electric Company acting through GE Medical Systems, InSight,
                    AHS and MHC, previously filed and incorporated herein by
                    reference from  the Company's Registration Statement on Form
                    S-4 (Registration No. 333-02935), filed April 29, 1996.

     *10.4          InSight's 1996 Directors' Stock Option Plan, previously
                    filed and incorporated herein by reference from the
                    Company's Registration Statement on Form S-4 (Registration
                    No. 333-02935), filed April 29, 1996.

     *10.5          InSight's 1996 Employee Stock Option Plan, previously filed
                    and incorporated herein by reference from the Company's
                    Registration Statement on Form S-4 (Registration 
                    No. 333-02935), filed April 29, 1996.

     *10.6          Form of Indemnification Agreement between InSight and each
                    of its directors and executive officers, previously filed 
                    and incorporated herein by reference from the Company's 
                    Registration Statement on Form S-4 (Registration Statement
                    No. 333-02935), filed April 29, 1996.

     *10.8          Agreements and form of warrants with holders of Series B
                    Preferred Stock of AHS, previously filed and incorporated
                    herein by reference from the Company's Registration
                    Statement on Form S-4  (Registration No. 333-02935), filed
                    April 29, 1996.

     *10.9          AHS 1987 Stock Option Plan, previously filed and
                    incorporated herein by reference from Post-Effective
                    Amendment No. 4 on Form S-1 to AHS's Registration Statement
                    (Registration No. 33-00088), filed September 5, 1985.

     *10.10         AHS 1989  Stock Incentive Plan, previously filed and
                    incorporated herein by reference from AHS's Annual Report on
                    Form 10-K for the fiscal year ended December 31, 1990, filed
                    April 15, 1991.

     *10.11         AHS 1992 Option and Incentive Plan, previously filed and
                    incorporated herein by reference from AHS's Registration
                    Statement on Form S-8 (Registration No. 33-51532), filed
                    September 1, 1992.

     *10.12         MHC 1989 Stock Option Plan, Amended and Restated as of
                    October 28, 1993, previously filed and incorporated herein
                    by reference from MHC's Annual Report on Form 10-K for the
                    fiscal year ended December 31, 1993.

     *10.13         Letter Agreement for Consulting Services between InSight and
                    Frank E. Egger dated March 28, 1996, previously filed and
                    incorporated herein by reference from the Company's
                    Registration Statement on Form S-4 (Registration 
                    No. 333-02935), filed April 29, 1996.

     *10.14         Executive Employment Agreement between InSight and E. Larry
                    Atkins dated as of February 25, 1996, previously filed and
                    incorporated herein by reference from the Company's
                    Registration Statement on Form S-4 (Registration 
                    No. 333-02935), filed April 29, 1996.

     *10.15         Executive Employment Agreement between InSight and Glenn P.
                    Cato dated as of May 1, 1996, previously filed and 
                    incorporated herein by reference from the Company's 
                    Amendment No. 1 to the Registration Statement on Form S-4
                    (Registration No. 333-02935), filed May 9, 1996.

     *10.16         Form of Executive Employment Agreement between InSight and
                    various officers of InSight, dated as of February 25,
                    1996, previously filed and incorporated herein by reference
                    from the Company's Registration Statement on Form S-4
                    (Registration No. 333-02935), filed April 29, 1996.

      10.17         Nonqualified Stock Option Agreement, dated August 17, 1994,
                    between MHC and Leonard H. Habas, filed herewith.

<PAGE>

      10.18         Nonqualified Stock Option Agreement, dated August 17, 1994,
                    between MHC and Ronald G. Pantello, filed herewith.

      21            Subsidiaries of InSight, filed herewith.
      
__________________

*  Previously filed.


ITEM 14(b).    REPORTS ON FORM 8-K.  The Company filed a Current Report on Form
               8-K with the SEC on July 5, 1996

ITEM 14(c).    The Exhibits described above in Item 14(a)(3) are incorporated by
               reference herein.

ITEM 14(d).    Not applicable.

<PAGE>

                                   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, thereunto duly authorized.

                                   INSIGHT HEALTH SERVICES CORP.




                                   By   /s/ E. Larry Atkins
                                        --------------------
                                        E. Larry Atkins, President and
                                        Chief Executive Officer


                                   Date: October 15, 1996


     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 and on the dates indicated.

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

/s/ E. Larry Atkins        Director, President and          October 15, 1996
-------------------        Chief Executive Officer
E. Larry Atkins            (Principal Executive Officer)


/s/ Thomas V. Croal        Executive Vice President and     October 15, 1996
-------------------        Chief  Financial Officer
Thomas V. Croal            (Principal  Accounting Officer)


/s/ Grant R. Chamberlain   Director                         October 15, 1996
------------------------
Grant R. Chamberlain


/s/ Frank E. Egger         Director                         October 15, 1996
------------------
Frank E. Egger


/s/ Leonard H. Habas       Director                         October 15, 1996
--------------------
Leonard H. Habas


/s/ Ronald G. Panello      Director                         October 15, 1996
---------------------
Ronald G. Panello


<PAGE>

            REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To InSight Health Services Corp.:

We have audited, in accordance with generally accepted auditing standards, 
the financial statements for INSIGHT HEALTH SERVICES CORP. included in this 
Form 10-K and have issued our report thereon dated September 13, 1996. 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 to consolidated 
financial statements is presented for purposes of complying with the 
Securities and Exchange Commission's rules and is not part of the basic 
financial statements. The 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


Orange County, California
September 13, 1996


<PAGE>


                                     SCHEDULE IX

                          VALUATION AND QUALIFYING ACCOUNTS
                      FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND
                 FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
                                (AMOUNTS IN THOUSANDS)
 
<TABLE>
<CAPTION>

                                              Balance at  Charges to                      Balance at
                                              Beginning    Cost and                          End of
                                               of Period   Expenses     Other                Period
                                              ----------  ----------  --------            -----------
<S>                                           <C>         <C>         <C>        <C>      <C>
December 31, 1993:
    Allowance for doubtful accounts            $   466     $ 1,621    $   (423)     (A)     $ 1,664
    Allowance for contractual adjustments          250       2,504      (1,724)     (A)       1,030
    Inventory reserve                               81         749           -                  830
                                               -------     -------    --------              -------
         Total                                 $   797     $ 4,874    $ (2,147)             $ 3,524
                                               -------     -------    --------              -------
                                               -------     -------    --------              -------


December 31, 1994:
    Allowance for doubtful accounts            $ 1,664     $ 1,124    $ (1,233)     (A)     $ 1,555
    Allowance for contractual adjustments        1,030       2,692      (2,384)     (A)       1,338
    Inventory reserve                              830           -        (830)     (B)           -
                                               -------     -------    --------              -------

         Total                                 $ 3,524     $ 3,816    $ (4,447)             $ 2,893
                                               -------     -------    --------              -------
                                               -------     -------    --------              -------

December 31, 1995:
    Allowance for  doubtful accounts           $ 1,555     $ 1,669    $ (1,489)     (A)     $ 1,735
    Allowance for contractual adjustments        1,338       4,512      (4,302)     (A)       1,548
                                               -------     -------    --------              -------
         Total                                 $ 2,893     $ 6,181    $ (5,791)     (A)     $ 3,283
                                               -------     -------    --------              -------
                                               -------     -------    --------              -------

June 30, 1996:
    Allowance for doubtful accounts            $ 1,735     $   617    $    (63)  (A)(C)     $ 2,289
    Allowance for contractual adjustments        1,548       3,440         531   (A)(C)       5,519
                                               -------     -------    --------              -------
         Total                                 $ 3,283     $ 4,057    $    468              $ 7,808
                                               -------     -------    --------              -------
                                               -------     -------    --------              -------

</TABLE>
 

(A) Write-offs of uncollectible accounts.
[cad 179](B) MHC sold all inventory on hand in 1994.
(C) In connection with the Merger, MHC acquired the valuation and qualifying
    accounts related to AHS.