<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D. C.  20549

                                   FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
 
    For the quarterly period ended March 31, 1998

                                      Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
 
                        Commission file number: 0-26190
 
                       American Oncology Resources, Inc.
            (Exact name of registrant as specified in its charter)
 
              Delaware                                   84-1213501
    (State or other jurisdiction of                   (I.R.S. Employer
     incorporation or organization)                  identification no.)
 
                      16825 NORTHCHASE DRIVE, SUITE 1300
                                HOUSTON, TEXAS
                                     77060
                   (Address of principal executive offices)
                                  (Zip Code)
 
                                (281) 873-2674
             (Registrant's telephone number, including area code)
                                        
   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
                                             ---    ---
   As of May 6, 1998, 32,392,836 shares of the Registrant's Common Stock were
outstanding.  In addition, as of May 6, 1998, the Registrant had agreed to
deliver 16,405,393 shares of its Common Stock on certain future dates for no
additional consideration.
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.

                                   FORM 10-Q

                                 MARCH 31, 1998

                                        

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
 
                                                                            Page No.
                                                                            --------
<S>                 <C>                                                        <C>
 
PART I.  FINANCIAL INFORMATION
       Item 1.      Condensed Consolidated Financial Statements
                    Condensed Consolidated Balance Sheet                        3
                    Condensed Consolidated Statement of Operations              4
                    Condensed Consolidated Statement of Stockholders' Equity    5
                    Condensed Consolidated Statement of Cash Flows              6
                    Notes to Condensed Consolidated Financial Statements        7
       Item 2.      Management's Discussion and Analysis of
                    Financial Condition and Results of Operations              12
 
PART II. OTHER INFORMATION
       ITEM 2.      Changes in Securities                                      16
       Item 6.      Exhibits and Reports on Form 8-K                           17
 
       SIGNATURES                                                              18
 
</TABLE>




                                        

                                      -2-
<PAGE>
 
PART I.  FINANCIAL INFORMATION
Item 1.   Condensed Consolidated Financial Statements

                       AMERICAN ONCOLOGY RESOURCES, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEET
                   
              (in thousands, except par value and share amounts)
<TABLE>
<CAPTION>
                                                                                      March 31,                December 31,
                                                                                        1998                       1997
                                                                                 -------------------        -------------------
                                    ASSETS                                             (UNAUDITED)  
<S>                                                                              <C>                        <C>
Current assets:
  Cash and equivalents........................................................          $    2,783                 $    5,000  
  Accounts receivable.........................................................             106,240                     92,038  
  Prepaids and other current assets...........................................              11,440                     10,149  
  Due from affiliated physician groups........................................               2,181                      7,904  
  Income tax receivable                                                                      1,627                   
                                                                                        ----------                 ----------
      Total current assets....................................................             124,271                    115,091
Property and equipment, net...................................................              42,856                     38,564  

Management service agreements, net of amortization of $17,692 and $15,589                  334,102                    326,295  
Other assets..................................................................               5,933                      3,943
                                                                                        ----------                 ----------
                                                                                        $  507,162                 $  483,893
                                                                                        ==========                 ==========
                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term notes payable....................................................                                     $   14,011  
  Current maturities of long-term indebtedness................................          $    9,437                      8,628  
  Accounts payable............................................................              28,913                     38,870  
  Due to affiliated physician groups..........................................               2,301                        289  
  Accrued compensation costs..................................................               1,432                      2,783  
  Accrued interest payable....................................................               2,748                      2,804  
  Income taxes payable........................................................                                              8  
  Other accrued liabilities...................................................               7,343                      3,834  
                                                                                        ----------                 ----------
      Total current liabilities...............................................              52,174                     71,227  
Deferred income taxes.........................................................              11,121                      8,956  
Long-term indebtedness........................................................             165,857                    139,716  
                                                                                        ----------                 ----------
      Total liabilities.......................................................             229,152                    219,899  
                                                                                        ----------                 ----------
Stockholders' equity:
  Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued and
    outstanding...............................................................
  Series A Preferred Stock, $.01 par value, 500,000 shares authorized and
    reserved, none issued and outstanding.....................................
  Common stock, $.01 par value, 80,000,000 shares authorized, 31,530,926
    and 29,721,754 shares issued and outstanding..............................                 315                        297  
  Additional paid-in capital..................................................             147,053                    138,381  
  Common stock to be issued, 17,034,784 and 17,937,752  shares................              73,212                     74,757  
  Retained earnings...........................................................              57,430                     50,559  
                                                                                        ----------                 ----------
      Total stockholders' equity..............................................             278,010                    263,994  
                                                                                        ----------                 ----------
                                                                                        $  507,162                 $  483,893
                                                                                        ==========                 ==========
</TABLE>
        The accompanying notes are an integral part of this statement.

                                      -3-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                     (in thousands, except per share data)
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                                      Three Months
                                                                     Ended March 31,
                                                                1998              1997
                                                           ----------------   --------------
<S>                                                        <C>                <C>
Revenue.................................................          $100,949          $70,396
                                                           
Operating expenses:                                        
  Pharmaceuticals and supplies..........................            45,109           32,138
  Practice compensation and benefits....................            19,459           13,471
  Other practice costs..................................            11,809            7,690
  General and administrative............................             6,041            4,171
       Depreciation and amortization....................             4,490            3,037
                                                                  --------          -------
                                                                    86,908           60,507
                                                                  --------          -------
Income from operations..................................            14,041            9,889
Other income (expense):                                    
  Interest income.......................................                29              102
  Interest expense......................................            (2,988)          (1,745)
                                                                  --------          -------
Income before income taxes..............................            11,082            8,246
Income taxes............................................             4,211            3,174
                                                                  --------          -------
Net income..............................................          $  6,871          $ 5,072
                                                                  ========          =======
Net income per share -- basic...........................          $   0.14          $  0.11
                                                                  ========          =======
                                                                  
Shares used in per share calculations -- basic..........            47,959           44,591
                                                                  ========          =======
Net income per share -- diluted.........................          $   0.14          $  0.11                         
                                                                  ========          ======= 
                                                                  
Shares used in per share calculations -- diluted........            49,940           47,392
                                                                  ========          ======= 
</TABLE>

        The accompanying notes are an integral part of this statement.

                                      -4-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 (in thousands)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                           Additional     Common
                                       COMMON STOCK         Paid-in      Stock to     Retained
                                    Shares     PAR VALUE    Capital      be issued    EARNINGS     Total
                                   ---------   ---------   ----------   -----------   --------   ---------
 
<S>                                <C>         <C>         <C>          <C>           <C>        <C>
Balance at December 31, 1997....      29,722       $ 297     $138,381    $   74,757    $50,559    $263,994
Medical practice
 transactions-value of 177,034
 shares to be issued  ..........                                              1,652                  1,652
Delivery of   1,080,002                                                        
 shares from issuance of Common                         
 Stock..........................       1,080          11        3,186        (3,197)
Exercise of options to
 purchase Common Stock..........         729           7        1,806                                1,813  
Tax benefit from exercise of
 non-qualified stock options....                                3,680                                3,680
Net Income......................                                                         6,871       6,871
                                     -------       -----     --------    ----------    -------    --------
Balance at March 31, 1998.......      31,531       $ 315     $147,053    $   73,212    $57,430    $278,010
                                     =======       =====     ========    ==========    =======    ========
</TABLE>


        The accompanying notes are an integral part of this statement.
                                        

                                      -5-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                        THREE MONTHS
                                                                                       ENDED MARCH 31,
                                                                                  1998                 1997
                                                                           ------------------   ------------------
<S>                                                                        <C>                  <C>
Cash flows from operating activities:
   Net income...........................................................            $  6,871             $  5,072
   Noncash adjustments:
       Depreciation and amortization....................................               4,490                3,037
       Deferred income taxes............................................               2,165                  815
   Cash provided (used), net of effects of medical practice
       transactions, by changes in:
       Accounts receivable..............................................             (14,268)              (8,942)
       Prepaids and other current assets................................              (1,649)                 273
       Other assets.....................................................                                     (502)
       Accounts payable.................................................             (10,241)               8,452
       Due from/to affiliated physician groups..........................               7,846                5,548
       Income taxes receivable/payable..................................               2,044                1,353
       Other accrued liabilities........................................               2,102               (2,668)
                                                                                    --------             --------
          Net cash provided (used) by operating activities..............                (640)              12,438
                                                                                    --------             --------
Cash flows from investing activities:
   Acquisition of property and equipment................................              (6,089)              (2,825)
   Net payments in medical practice transactions........................              (7,007)             (13,471)
   Other................................................................                  41    
                                                                                    --------             --------
          Net cash used in investing activities.........................             (13,055)             (16,296)
                                                                                    --------             --------
Cash flows from financing activities:
   Proceeds from credit facility........................................              26,000               32,000
   Repayment of credit facility.........................................                                  (10,000)
   Proceeds from other indebtedness.....................................                                      519
   Repayment of other indebtedness......................................             (16,335)              (7,242)
   Purchase of Treasury Stock...........................................                                   (6,418)
   Proceeds from exercise of options....................................               1,813
   Net proceeds from issuance of Common Stock...........................                                      121
                                                                                    --------             --------
          Net cash provided by financing activities.....................              11,478                8,980
                                                                                    --------             --------
Increase (decrease) in cash and equivalents.............................              (2,217)               5,122
Cash and equivalents:
   Beginning of period..................................................               5,000                3,429
                                                                                    --------             --------
   End of period........................................................            $  2,783             $  8,551
                                                                                    ========             ========
Interest paid...........................................................            $  3,180             $  2,313
Taxes paid..............................................................                   3                  420
Noncash transactions:
   Tax benefit from exercise of non-qualified stock options.............               3,680
   Value of Common Stock to be issued in medical practice transactions..               1,652                4,393
   Delivery of Common Stock to be issued in medical practice                           3,197                2,236
    transactions
   Debt issued in medical practice transactions.........................               3,214               8,955
</TABLE>

        The accompanying notes are an integral part of this statement.

                                      -6-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  (unaudited)

NOTE 1 - Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and in accordance with Form 10-Q and Rule 10.01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the unaudited condensed
consolidated financial statements contained in this report reflect all
adjustments that are normal and recurring in nature and considered necessary for
a fair presentation of the financial position and the results of operations for
the interim periods presented. The preparation of the Company's financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses, as well as disclosures on contingent
assets and liabilities.  Because of inherent uncertainties in this process,
actual future results could differ from those expected at the reporting date.
These unaudited condensed consolidated financial statements, footnote
disclosures and other information should be read in conjunction with the
financial statements and the notes thereto included in the Company's Form 10-K
filed with the Securities and Exchange Commission on March 23, 1998.

NOTE 2 - MEDICAL SERVICE REVENUE

Medical service revenue for services to patients by the medical groups
affiliated with the Company is recorded when services are rendered based on
established or negotiated charges reduced by contractual adjustments and
allowances for doubtful accounts.  Differences between estimated contractual
adjustments and final settlements are reported in the period when final
settlements are determined.  Medical service revenue of the affiliated medical
groups is reduced by the contractual amounts retained by the medical groups to
arrive at the Company's revenue.

The following presents the amounts included in the determination of the
Company's revenue (in thousands):
 
<TABLE>
<CAPTION>
                                                             Three Months
                                                           Ended March 31,
                                                        1998              1997
                                                  ----------------   ---------------
<S>                                               <C>                <C>
Medical service revenue........................           $133,566           $92,137
Amounts retained by medical practices..........             32,617            21,741
                                                          --------           -------
Revenue........................................           $100,949           $70,396
                                                          ========           =======
</TABLE>

                                      -7-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED

                                  (UNAUDITED)

                                        

NOTE 3 - MEDICAL PRACTICE TRANSACTIONS

During the first three months of 1998, the Company affiliated with two oncology
practices and acquired two radiation oncology centers.  During the first three
months of 1997, the Company affiliated with four oncology practices.  The
transactions have been accounted for as asset purchases.  The following presents
the aggregate consideration required to complete those transactions (in
thousands):

<TABLE>
<CAPTION>
                                                   THREE MONTHS
                                                  ENDED MARCH 31,
                                               1998            1997
                                           -------------   -------------
                                         
<S>                                        <C>             <C>
Cash and transaction costs.............          $ 7,007         $13,471
Liabilities                                          895           2,212
 assumed...............................  
Issuance of short-term and               
      subordinated notes...............            2,644           8,955
Common Stock to be issued..............            1,652           4,393
                                                 -------         -------
                                                 $12,198         $29,031
                                                 =======         =======
</TABLE>

In conjunction with the medical practice transactions occurring since inception,
the Company is contingently obligated to pay up to an additional $3.3 million in
future years depending on the achievement of certain financial objectives, none
of which related to medical practice transactions occurring in the first three
months of 1998.  Such liability, if any, will be recorded in the period in which
the outcome of the contingency becomes known.  Any payment made will be
allocated to the long-term management services agreements and will not
immediately be charged to expense.

For transactions completed through March 31, 1998, the scheduled issuance of the
shares of Common Stock that the Company is committed to deliver over the passage
of the time are 1,860,616 in 1998, 5,244,319 in 1999, 5,491,409 in 2000,
1,725,021 in 2001, 1,965,408 in 2002 and 748,011 thereafter.  Although such
shares are not yet issued or outstanding, such shares are considered as
outstanding for the purpose of per share calculations.

NOTE 4 - CAPITALIZATION

As part of affiliating with medical practices described in Note 3, the Company
has nonforfeitable commitments to issue shares of Common Stock at specified
future dates for no further consideration.  Common Stock to be issued is shown
as a separate component in stockholders' equity, and the amounts, upon issuance
of the shares, will be reclassified to par value and additional paid-in capital.

During the first three months of 1998, options to purchase 403,000 shares of
Common Stock at $13.96 to $15.67 per share were granted under the Company's
various stock option plans, none of which was granted to executive officers and
directors.  During the first three months of 1998, options to purchase 729,170
shares of Common Stock at $1.34 to $10.56 per share were exercised, of which
712,500 were exercised by executive officers and directors.  During the first
three months of 1998, options to purchase 13,050 shares of Common Stock were
canceled.  At March 31, 1998, there were options to purchase 5,362,434 shares of
Common Stock outstanding under the Company's various stock option plans at
exercise prices of $1.34 to $24.18 per share.

On May 16, 1997, the Board of Directors of the Company adopted a shareholder
rights plan and, in connection therewith, declared a dividend of one Series A
Preferred Share Purchase Right for each outstanding share of Common Stock.  For
a more detailed description of the shareholder rights plan, refer to the
Company's Form 8-A filed with the Securities and Exchange Commission on June 2,
1997.

Effective May 8, 1997, the Company's stockholders approved an increase in the
number of shares of Common Stock authorized to be issued to 80,000,000 shares.
In addition, the Company's Key Employee Stock Option Plan ("Plan") was amended
to increase the number of shares available for grants under the Plan to 7% from
5% of the Company's outstanding Common Stock (including shares to be issued at
future specified dates).

                                      -8-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                                  (UNAUDITED)

NOTE 5 - Indebtedness

Short-term notes payable

Short-term notes payable bear interest at 7% and have original maturities of
less than one year.  The notes are payable to physicians with whom the Company
entered into long-term management agreements and relate to medical practice
transactions.

Long-term indebtedness

Long-term indebtedness consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                     MARCH 31,          December 31,
                                                       1998                 1997
                                                     ---------          ------------  
<S>                                                  <C>                <C>
Subordinated notes.........................           $ 81,900            $ 80,710
Credit facility............................             92,000              66,000
Capital lease obligations and other........              1,394               1,634
                                                      --------            --------
                                                       175,294             148,344
Less current maturities....................             (9,437)             (8,628)
                                                      --------            --------
                                                      $165,857            $139,716
                                                      ========            ========
</TABLE>

Subordinated Notes

The subordinated notes are issued in substantially the same form in different
series and are payable to the physicians with whom the Company has entered into
management agreements.  Substantially all of the notes outstanding at March 31,
1998 and December 31, 1997 bear interest at 7% per annum, are due in
installments through 2005 and are subordinated to senior bank and certain other
debt.  If the Company fails to make a payment under any of the notes, the
respective physician group can terminate the related management service
agreement for cause.

Credit Facility

The Company has a loan agreement and revolving credit/term facility ("Credit
Facility") with First Union National Bank ("First Union") individually and as
Agent for twelve additional lenders ("Lenders"), which was amended as of
December 29, 1997 to improve certain terms and covenants.  Under the terms of
the agreement, the amount available for borrowing is $150 million through
October 31, 2002.  Proceeds of loans may be used to finance medical group
transactions, provide working capital or for other general corporate uses.  At
March 31, 1998, the Company had an outstanding balance of $92 million under the
Credit Facility.  The Company has classified this facility as long term due to
its ability and intent to maintain the borrowings past 1998.

Borrowings under the Credit Facility are secured by all securities owned by the
Company, including all capital stock of the Company's subsidiaries and all
management service agreements.  At the Company's option, funds may be borrowed
at the Base interest rate or the London Interbank Offer Rate (LIBOR) up to
London Interbank Offer Rate plus an amount determined under a defined formula.
The Base rate is selected by First Union and is defined as their prime rate or
Federal Funds Rate plus 1/2%.  Interest on amounts outstanding under Base rate
loans is due quarterly while interest on London Interbank Offer Rate related
loans is due at the end of each applicable interest period or quarterly, if
earlier.  As of March 31, 1998, the weighted average interest rate on all
outstanding draws was 6.5 %.

The Company is subject to restrictive covenants under the facility, including
the maintenance of certain financial ratios.  The agreement limits certain
activities such as additional indebtedness, sales of assets, investments,
capital expenditures, mergers and consolidations and the payment of dividends.
Under certain circumstances, additional medical practice transactions may
require First Union's and the Lenders' consent.

                                      -9-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED

                                  (UNAUDITED)

Master Lease

In December 1997, the Company entered into a $75,000,000 master lease agreement
for the purpose of financing property and construction of integrated cancer
centers.  Under the agreement, the lessor purchases the properties, pays for the
construction costs and thereafter leases the facilities to the Company.  The
initial term of the lease is for five years and can be renewed in one year
increments if approved by the lessor.  The lease provides for substantial
residual value guarantees and includes purchase options at original cost on each
option.

NOTE 6 - EARNINGS PER SHARE

During 1997, the Company adopted the provisions of Financial Accounting
Standards Board (FASB) Statement No. 128, "Earnings Per Share," (FAS 128) which
requires the Company to disclose "basic" and "diluted" EPS and to restate all
prior periods presented for comparative purposes.  In addition, the Securities
and Exchange Commission recently issued Staff Accounting Bulletin No. 98 (SAB
98) which eliminates the impact of "cheap stock" issued prior to an initial
public offering.  The Company has restated all periods presented to comply with
the provisions of FAS 128 and SAB 98.

The computation of basic earnings per share is based on a weighted average
number of Common Stock and Common Stock to be issued shares outstanding during
the periods.  The computation of the diluted earnings per share is based on a
weighted average number of Common Stock and Common Stock to be issued shares
outstanding during the periods as well as all dilutive potential Common Stock
calculated under the treasury stock method.

The table summarizes the determination of shares used in per share calculations
(in thousands):


<TABLE>
<CAPTION>
                                                                        Three Months Ended March 31,
Basic                                                                        1998            1997
                                                                         -------------   -------------
<S>                                                                      <C>             <C>
     Outstanding at end of period:
     Common Stock......................................                        31,531          27,531
     Common Stock to be issued.........................                        17,035          17,417
                                                                               ------          ------
                                                                               48,566          44,948
     Effect of weighting...............................                          (607)           (357)
                                                                               ------          ------ 
       Shares used in per share calculations...........                        47,959          44,591
                                                                               ======          ======
 Diluted
     Outstanding at end of period:
     Common Stock......................................                        31,531          27,531
     Common Stock to be issued.........................                        17,035          17,417
                                                                               ------          ------
                                                                               48,566          44,948
     Effect of weighting and assumed share
       equivalents for grants of stock options and                                                   
       issuances of stock at less than the weighted
       average price                                                            1,374           2,444
                                                                               ------          ------
       Shares used in per share calculations...........                        49,940          47,392
                                                                               ======          ======
</TABLE>

                                      -10-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED

                                  (UNAUDITED)

                                        

NOTE 7 - RECENT PRONOUNCEMENTS

The FASB recently issued Statement No. 130, "Comprehensive Income," which is
effective for the Company's financial statements as of and for the year ending
December 31, 1998.  In addition to net income, comprehensive income is comprised
of "other comprehensive income" which includes all charges and credits to equity
that are not the result of transactions with owners of the Company's Common
Stock.  This Statement is not anticipated to materially affect the Company's
financial statements.

The FASB recently issued statement No. 131, "Disclosures About Segments of an
Enterprise and Related Information," which is effective for the Company's
financial statements as of and for the year ending December 31, 1998.  This
Statement requires reporting of summarized financial results for the operating
segments as well as established standards for related disclosures about products
and services, geographic areas and major customers.  Primary disclosure
requirements include total segment revenues, total segment profit or loss and
total segment assets.  The Company has not yet completed its evaluation of the
impact of this Statement on the Company's financial statements.

                                      -11-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

Introduction

American Oncology Resources, Inc. (the "Company") enters into management
agreements with, and purchases the nonmedical assets of, medical and radiation
oncology practices. Under the terms of the management agreements, the Company
provides comprehensive management services to its affiliated oncology practices,
including operational and administrative services, and furnishes personnel,
facilities, supplies and equipment. These practices provide a broad range of
medical services to cancer patients, integrating the specialties of medical
oncology, hematology, radiation oncology, diagnostic radiology and stem cell
transplantation.  Substantially all of the Company's revenue consists of
management fees and includes all medical practice operating costs for which the
Company is contractually responsible.

In recent years, there has been a trend among oncologists to form larger group
practices that provide a broad range of services to cancer patients in
outpatient settings, rather than in hospitals or other inpatient settings.  The
Company believes that the coordinated delivery of comprehensive cancer care in
an outpatient setting offers high quality care that is more cost-effective than
traditional approaches and is increasingly preferred by patients, payors and
physicians.  The Company believes that many of these larger oncology practices
recognize the need for outside managerial, financial and business expertise to
more efficiently manage the increasingly complex, burdensome and time-consuming
nonmedical aspects of their practices and that such practices will increasingly
elect to enter into management relationships with entities such as the Company.

The Company's objective is to be the leading national physician practice
management company providing comprehensive services to an integrated network of
affiliated oncology practices.  The Company intends to achieve this objective by
(i) focusing exclusively on oncology, (ii) affiliating with leading oncology
practices throughout the United States, (iii) expanding each affiliated oncology
group's presence in its market, (iv) assisting affiliated oncology practices in
offering coordinated, comprehensive cancer care, (v) negotiating and expanding
managed care relationships and (vi) expanding the clinical research operations
of the affiliated physician groups.  Based on the Company's success in expanding
its business to date, the Company believes that it has effective strategies for
achieving its objective of becoming the leading national oncology practice
management company.

FORWARD LOOKING STATEMENTS

The statements contained in this report, in addition to historical information,
are forward looking statements based on the Company's current expectations, and
actual results may vary materially.  The Company's business and financial
results are subject to various risks and uncertainties, including the Company's
continued ability to enter into affiliations with new physician practices and to
successfully integrate such practices, the results of operations of groups
currently affiliated with the Company (including results of operations impacted
by changes in cancer therapies or the manner in which cancer care is delivered),
competition, the amortization period of its management services agreements,
reductions in third party reimbursement for services rendered by physician
groups affiliated with the Company, health care regulation and other risks
generally affecting the health care industry.  Please refer to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 for a more
detailed discussion of such risks and uncertainties.  Many of these risks and
uncertainties are beyond the Company's ability to control or predict.  These
forward-looking statements are provided as a framework for the Company's results
of operations.  The Company does not intend to provide updated information other
than as otherwise required by applicable law.

RESULTS OF OPERATIONS

Since the Company's incorporation in October 1992, it has grown rapidly from
managing six affiliated physicians in one state to 321 affiliated physicians in
17 states as of March 31, 1998.  For the first three months of 1998, no
affiliated physician group contributed more than 10% of the Company's revenue.
For the first quarter of 1997, only one of the Company's affiliated physician
groups contributed more than 10% of total revenue.  For the first three months
of 1998, the payor mix of the affiliated physician groups' medical practice
revenue, expressed as a percentage, was 32% for Medicare and Medicaid, 49% for
managed care and 19% for private insurance and other payors. For the first three
months of 1997, the payor mix of the affiliated physician groups' medical
practice revenue, expressed as a percentage, was 33% for Medicare and Medicaid,
46% for managed care, and 21% for private insurance and other payors.

                                      -12-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED

When affiliating with an oncology group, the Company records an intangible asset
for the excess of transaction consideration over the value of the nonmedical
tangible assets acquired.  The Company believes that the only intangible asset
acquired in a physician transaction is the Company's exclusive right to manage
the affiliated oncology group on a long-term basis under the management
agreement.  The Company believes that the management agreement has an
amortizable life for accounting purposes that corresponds to the initial forty
year term of the management agreement and, therefore, amortizes this intangible
asset against earnings ratably over forty years.  The Company recently became
aware of a physician practice management company that shortened the amortization
period of its management agreements to twenty-five years.  The Company is also
aware that the Securities and Exchange Commission is carefully scrutinizing the
amortization period of management agreements of physician practice management
companies in general, often with the view of shortening the amortization period.
The Company is not currently in discussions with the Securities and Exchange
Commission regarding this matter.  After consulting with its independent
accountants, and after a review of the facts and circumstances relating to each
of its management agreements, the Company continues to believe that the
amortization period of each management agreement is forty years.  If the
amortization period of the Company's agreements should ever be shortened from
forty years, the amount of amortization expense charged against earnings each
year would increase, which would reduce the Company's earnings and could
adversely affect the Company's stock price.  Any such change, however, would not
impact the Company's cash flow or earnings before interest, taxes, depreciation
and amortization.

The following table sets forth the percentages of revenue represented by certain
items reflected in the Company's Statement of Operations.  The information that
follows should be read in conjunction with the Company's unaudited condensed
consolidated financial statements and notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
                                                                    THREE MONTHS
                                                                   Ended March 31,
                                                                1998            1997
                                                            -------------   -------------
<S>                                                         <C>             <C>
Revenue..................................................          100.0%          100.0%
Operating expenses:
 Pharmaceuticals and supplies............................           44.7            45.7
 Practice compensation and benefits......................           19.3            19.1
 Other practice costs....................................           11.7            10.9
 General and administrative..............................            5.9             5.9
 Depreciation and amortization...........................            4.4             4.3
 Net interest expense....................................            3.0             2.4
                                                                   -----           -----
Income before income taxes...............................           11.0            11.7
Income taxes.............................................            4.2             4.5
                                                                   -----           -----
Net income...............................................            6.8%            7.2%
                                                                   =====           =====
</TABLE>

1998 Compared to 1997

The Company affiliated with two and four oncology groups in the first three
months of 1998 and 1997, respectively.  The results of the new affiliated
oncology practices are included in the Company's operating results from the
dates of affiliation.  Changes in results of operations from the first three
months of 1997 to the first three months of 1998 were caused, in part, by
affiliations with these oncology practices.

  Revenue.  Revenue increased from $70.4 million in the first three months of
1997 to $100.9 million in 1998, an increase of $30.5 million, or 43%.  Revenue
for markets under management in 1997 and 1998 increased $21.5 million or 31%
over the same period from the prior year.  This growth was the result of
expansion of services, increases in patient volume, recruitment of or
affiliation with additional physicians and, to a lesser extent, increases in
charges for certain physician services. The remaining $9.0 million was
attributable to affiliations with oncology practices in new markets.

                                      -13-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED

  Pharmaceuticals and Supplies.  Pharmaceuticals and supplies, which include
drugs, medications and other supplies used by the affiliated physician groups,
increased from $32.1 for the first three months of 1997 to $45.1 million for the
first three months of 1998, an increase of $13.0 million, or 40%.  This increase
was principally attributable to the same factors that caused revenue to
increase.  As a percentage of revenue, pharmaceuticals and supplies decreased
from 45.7% for the first three months of 1997 to 44.7% for the comparable period
of 1998.  This decrease was primarily due to initating preferrred pharmaceutical
relationships.  Management expects that third-party payors will continue to
negotiate the reimbursement rate for medical services, pharmaceuticals
(including chemotherapy drugs) and other supplies, with the goal of lowering
reimbursement and utilization rates, and that such lower reimbursement and
utilization rates as well as shifts in revenue mix may adversely impact the
Company's margins with respect to such items.  The Company has adopted a number
of strategies to address this matter, including maintaining and improving
existing preferred pharmaceutical relationships and initiating new ones.

  Practice Compensation and Benefits. Practice compensation and benefits, which
include the salaries, wages and benefits of the affiliated physician groups'
employees (excluding affiliated physicians) and the Company's employees who are
located at the affiliated physician practice sites and business offices,
increased from $13.5 million in the first three months of 1997 to $19.5 million
in the first three months of 1998, an increase of $6.0 million or 44%.  This
increase was principally attributable to the same factors that caused revenue to
increase.  As a percentage of revenue, practice compensation and benefits
increased from 19.1% for the first three months of 1997 to 19.3% for the first
three months of 1998, primarily as a result of investments in infrastructure for
new product lines.

  Other Practice Costs. Other practice costs, which consist of rent, utilities,
repairs and maintenance, insurance and other direct practice costs, increased
from $7.7 million in the first three months of 1997, to $11.8 million in the
first three months of 1998, an increase of $4.1 million or 53% over the
comparable prior year period.  This increase was principally attributable to the
same factors that caused revenue to increase.  As a percentage of revenue, other
practice costs increased from 10.9% to 11.7%.  This increase is attributable to
increased stem cell transplantation revenue, which has associated direct costs
for third-party services that are included in other practice costs.

  General and Administrative. General corporate expenses increased from $4.2
million in the first three months of 1997 to $6.0 million in the first three
months of 1998, an increase of $1.8 million or 43%.  This increase was primarily
attributable to the addition of personnel and greater support costs associated
with the Company's rapid growth since March 31, 1997.  As a percentage of
revenue, general and administrative expenses remained at 5.9%.

  Depreciation and Amortization. Depreciation and amortization expenses
increased from $3.0 million in the first three months of 1997 to $4.5 million in
the first three months of 1998, an increase of $1.5 million or 50%.  This
increase was primarily the result of amortization of intangible assets
associated with the Company's affiliating with physician groups, as well as
investments in equipment, leasehold improvements and management information
systems.

  Interest.  Net interest expense increased from $1.6 million in the first three
months of 1997, to $3.0 million in the first three months of 1998, an increase
of $1.4 million or 88%.  The increase was the result of higher levels of debt,
principally incurred to finance transactions with eleven oncology groups since
March 31, 1997.  As a percentage of revenue, net interest expense increased from
2.4% in the first three months of 1997 to 3.0% in the first three months of
1998.  Indebtedness to physicians increased from approximately $68.2 million at
March 31, 1997 to $81.9 million at March 31, 1998.  In the future, management
expects that net interest expense as a percentage of revenue will continue to
increase due to anticipated debt related to medical practice transactions.

  Income Taxes. Income tax expense increased from the prior year as a result of
the Company's increased profitability.  For the first three months of 1998 the
Company recognized a tax provision of $4.2 million resulting in an effective tax
rate of 38.0% as compared to a rate of 38.5% for the first three months of 1997.

                                      -14-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF
OPERATIONS - CONTINUED

LIQUIDITY AND CAPITAL RESOURCES

  The Company requires capital primarily to enter into management agreements
with, and to purchase the nonmedical assets of, medical and radiation oncology
practices.  During the first three months of 1998, the Company paid total
consideration of $12 million in connection with affiliations with two physician
groups and the acquisition of two radiation oncology centers including cash and
transaction costs of $7 million.  During the comparable period of the prior
year, the Company paid $29 million for affiliations with four physician groups,
including cash and transaction costs of $13 million.

  To fund its growth and development, the Company has satisfied its transaction
and working capital needs through debt and equity financings and borrowings
under a $150 million syndicated revolving credit facility ("Credit Facility")
with First Union National Bank of North Carolina ("First Union"), as agent for
the various lenders.  In addition, as part of the Credit Facility, the Company
has recently obtained a $75 million end-loaded leasing facility, which will
principally be used to finance the purchase of property and construction of
integrated cancer centers.  The Company has typically relied primarily on
management fees received from its affiliated physician groups to fund its
operations.  Cash used in operations was $0.6 million in the first three months
of 1998, a decrease of $13.1 million from 1997.  The decrease was due to
substantial growth in revenue, the deferral of certain annual fourth quarter
payments into the first quarter of 1998 and, to a lesser extent, working capital
for new product lines.

  During the first three months of 1998, the Company borrowed $26 million under
the Credit Facility to fund medical practice transactions and the development of
integrated cancer centers.   Borrowings under the Credit Facility bear interest
at a rate equal to a rate based on prime rate or the London Interbank Offer
Rate, based on a defined formula.  The Credit Facility contains affirmative and
negative covenants, including the maintenance of certain financial ratios,
restrictions on sales, leases or other dispositions of property, restrictions on
other indebtedness and prohibitions on the payment of dividends.  The Company's
management service agreements, and the capital stock of the Company's
subsidiaries are pledged as security under the Credit Facility.  The Company is
currently in compliance with the Credit Facility covenants.

  At March 31, 1998, the Company had net working capital of $72.1 million and
cash and cash equivalents of $2.8 million.  The Company's also had $52.2 million
of current liabilities, including approximately $9.4 million of long-term
indebtedness maturing before March 31, 1999.  The Company currently expects that
its principal use of funds in the near future will be in connection with
anticipated transactions with affiliated physician groups and the purchase of
medical equipment.  The Company expects that the existing cash and investment
balances, cash generated from operations and amounts available under the Credit
Facility will be adequate to satisfy the Company's cash requirements for the
next 12 months.

YEAR 2000 ISSUE

The Year 2000 issue (i.e., the ability of computer systems to accurately
identify and process dates beginning with year 2000 and beyond) affects
virtually all companies and organizations.  Recognizing the need to limit
problems associated with year 2000 software failures, the Company has developed
plans to address this potential exposure.  Key financial information and
operational systems are being assessed, detailed plans have been developed and
initial conversion efforts are underway.  The Company recognizes that
information systems are integral to its operations, and in 1998 and 1999 the
Company intends to make significant capital investments in developing an
integrated clinical and financial information system throughout its network of
affiliated physicians.  As a result of these investments, the Company believes
that the year 2000 issue will not pose significant internal problems for the
Company's business.  The Company is also communicating with suppliers, financial
institutions and, most importantly, third-party payors (such as managed care
companies and governmental payors) to determine their plans to limit problems
associated with the year 2000 issue. Despite these efforts, the year 2000 issue
is complex and may present unforeseen problems in the Company's systems and from
third parties with which the Company deals, such as third party payors. Failure
of the Company's or third parties' computer systems could materially and
adversely impact the Company's operations.

                                      -15-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.

PART II.   OTHER INFORMATION
ITEM 2.    Changes in Securities

  In connection with each affiliation transaction between the Company and a
physician group, the Company purchases the nonmedical assets of, and enters into
a long-term management agreement with, that physician group.  In consideration
for that arrangement, the Company typically pays cash, issues subordinated
promissory notes (in general, payable in equal installments on the third through
seventh anniversaries of the closing date at an annual interest rate of seven
percent) and unconditionally agrees to deliver shares of Common Stock at future
specified dates (in general, on each of the third through fifth anniversaries of
the closing date).  The price per share is the lower of the average of the
closing price per share for the five days preceding the date of the letter of
intent or the closing date with respect to such affiliation transaction.

  The following table describes all unregistered sales by the Company of the
Company's securities during the first three months of 1998.  Each sale was a
private placement made in connection with a physician transaction, as described
in general in the preceding paragraph.  The overwhelming majority of the
affiliated physicians are accredited investors.  No underwriter was involved in
any such sale, and no commission or similar fee was paid with respect thereto.
Each sale was not registered under the Securities Act of 1933 in reliance on
Section 4(2) of such Act and Rule 506 enacted thereunder.
<TABLE>
<CAPTION>
                                                            Number of Shares    Aggregate Principal       
   Date of Transaction          Number of Physicians        of Common Stock(1)    Amount of Notes
--------------------------   ---------------------------    ------------------  -------------------
<S>                          <C>                            <C>                  <C>
           3/98                           3                        61,276             $1,140,000
           3/98                           6                       115,758             $1,504,000
</TABLE>

(1) In connection with each affiliation transaction, the Company unconditionally
agrees to deliver shares of Common Stock at specified future dates.

                                      -16-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.

                         OTHER INFORMATION - CONTINUED

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

  Exhibit
  Number    Description
  ------    -----------

    3.1     Certificate of Incorporation, as amended (incorporated by reference
            from Form 10-Q for the period ended March 31, 1997)

    3.2     By-Laws, as amended (incorporated by reference from Form 10-Q for
            the period ended March 31, 1997)

    4.1     Rights Agreement between the Company and American Stock Transfer &
            Trust Company (incorporated by reference from Form 8-A filed June 2,
            1997)

   11       Statement Re - Computation of Per Share Earnings

   27       Financial Data Schedule


(b)  Reports on Form 8-K

  During the first quarter of 1998, the Company did not file any Current Reports
on Form 8-K.

                                      -17-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.

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



Date:  May 13, 1998          AMERICAN ONCOLOGY RESOURCES, INC.

 

                           By:   /s/   R. DALE ROSS
                                 --------------------------------------
                                 R. Dale Ross, Chairman of the Board
                                 and Chief Executive Officer



 
                           By:   /s/   L. FRED POUNDS
                                 --------------------------------------
                                 L. Fred Pounds, Vice President of Finance
                                 and Chief Financial Officer

                                      -18-
<PAGE>
 
                       AMERICAN ONCOLOGY RESOURCES, INC.

                                 EXHIBIT INDEX


Exhibit Number         Description of Exhibits
--------------         -----------------------
   3.1                 Certificate of Incorporation, as amended (incorporated by
                       reference from Form 10-Q for the period ended March 31,
                       1997)

   3.2                 By-Laws, as amended (incorporated by reference from Form
                       10-Q for the period ended March 31, 1997)

   4.1                 Rights Agreement between the Company and American Stock
                       Transfer & Trust Company (incorporated by reference from
                       Form 8-A filed June 2, 1997)

   11                  Statement Re - Computation of Per Share Earnings

   27                  Financial Data Schedule

                                      -19-