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                        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 September 30, 1999

                                       OR

[ ] TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
                      For the transition period from to

                         Commission file number 0-29172

                           ProMedCo Management Company
             (Exact name of Registrant as specified in its charter)


                  Delaware                             75-2529809
     (State or other jurisdiction of                (I.R.S. Employer
      incorporation or organization)              Identification Number)


         801 Cherry Street, Suite 1450
               Fort Worth, Texas                           76102
      (Address of principal executive offices)           (Zip Code)

                                (817) 335-5035
              (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 (    )

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

                                                      Outstanding at
   Class of Common Stock                             October 31, 1999
      $.01 par value                                 21,732,423 shares


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<PAGE>



                  PROMEDCO MANAGEMENT COMPANY AND SUBSIDIARIES

                                      INDEX
<TABLE>
<CAPTION>


                                                                                                           Page
                                                                                                            No.
<S>                                                                                                        <C>

Part I. Financial Information

         Item 1. Financial Statements

                  Condensed Consolidated Balance Sheets
                      September 30, 1999 and December 31, 1998                                               2

                  Condensed Consolidated Statements of Operations
                      Three Months and Nine Months Ended September 30, 1999 and 1998                         3

                  Condensed Consolidated Statements of Cash Flows
                      Nine Months Ended September 30, 1999 and 1998                                          4

                  Notes to Condensed Consolidated Financial Statements                                       5

         Item 2. Management's Discussion and Analysis of Financial Condition and Results of
                  Operations                                                                                10

Part II. Other Information

         Item 2. Changes in Securities and use of Proceeds                                                  18

         Item 6. Exhibits and Reports on Form 8-K                                                           18

Signatures                                                                                                  19

</TABLE>



<PAGE>



                  PROMEDCO MANAGEMENT COMPANY AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (All amounts are expressed in thousands)
<TABLE>
<CAPTION>


                                                                           September 30, 1999       December 31,
                                                                               (Unaudited)              1998
<S>                                                                        <C>                  <C>

                                     ASSETS
Current assets:
         Cash and cash equivalents                                         $           11,104    $           13,871
         Accounts receivable, net                                                      61,436                51,375
         Management fees receivable                                                     9,894                 8,490
         Due from affiliated medical groups                                             9,992                 8,399
         Deferred tax benefit                                                           2,206                 2,206
         Prepaid expenses and other current assets                                     19,574                13,043
                                                                           ------------------    ------------------
                  Total current assets                                                114,206                97,384
                                                                           ------------------    ------------------
Property and equipment, net                                                            23,075                15,125
Intangible assets, net                                                                220,978               153,402
Long-term receivables                                                                  42,785                40,429
Other assets                                                                            3,239                 3,133
                                                                           ------------------    ------------------
                  Total assets                                             $          404,283    $          309,473
                                                                           ==================    ==================


                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
         Accounts payable                                                  $            5,933    $            4,683
         Payable to affiliated medical groups                                          11,109                 9,455
         Accrued salaries, wages and benefits                                           8,183                 8,146
         Accrued purchased medical services                                             9,605                 6,087
         Accrued expenses and other current liabilities                                 5,907                 6,741
         Current maturities of long-term debt                                          12,464                 3,232
         Current portion of obligations under capital leases                              522                   557
         Current portion of deferred purchase price                                     2,400                 2,137
         Income taxes payable                                                           1,564                   847
                                                                           ------------------    ------------------
                  Total current liabilities                                            57,687                41,885
                                                                           ------------------    ------------------
Long-term debt, net of current maturities                                             132,742                58,130
Obligations under capital leases, net of current portion                                  411                   701
Deferred purchase price, net of current portion                                        19,302                25,290
Convertible subordinated notes payable                                                 10,162                 7,635
Deferred income tax liability                                                           4,810                 2,872
Other long-term liabilities                                                                81                   312
                                                                           ------------------    ------------------
                  Total liabilities                                                   225,195               136,825
                                                                           ------------------    ------------------

Stockholders' equity:
         Common stock                                                                     217                   211
         Additional paid-in capital                                                   156,010               152,786
         Common stock to be issued                                                         90                 6,005
         Treasury stock                                                                (2,077)                   -
         Stockholder notes receivable                                                    (250)                 (370)
         Retained earnings                                                             25,098                14,016
                                                                           ------------------    ------------------
                  Total stockholders' equity                                          179,088               172,648
                                                                           ------------------    ------------------
                  Total liabilities and stockholders' equity               $          404,283    $          309,473
                                                                           ==================    ==================


   The accompanying notes are an integral part of these financial statements.
</TABLE>


<PAGE>



                  PROMEDCO MANAGEMENT COMPANY AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
       (All amounts are expressed in thousands, except for earnings per share)
<TABLE>
<CAPTION>

                                                      Three Months Ended                 Nine Months Ended
                                                            September 30,                     September 30,
                                                        1999             1998             1999             1998
<S>                                                <C>             <C>               <C>            <C>
Net revenue                                        $     84,317    $      61,097     $    233,430    $     153,703

Operating expenses:
         Clinic salaries and benefits                    28,989           19,334           81,972           50,389
         Clinic rent and lease expense                    7,340            4,529           20,720           11,590
         Clinic supplies                                  9,514            6,598           27,073           17,793
         Purchased medical services                      13,631           14,813           35,294           33,601
         Other clinic costs                              10,972            6,649           29,661           16,608
         General corporate expenses                       2,396            1,233            6,659            3,607
         Depreciation and amortization                    3,093            2,075            8,979            5,118
         Interest expense                                 1,798              (48)           4,075              254
                                                  -------------  ---------------- ---------------  ---------------
         Total                                           77,733           55,183          214,433          138,960
                                                  -------------  ---------------  ---------------  ---------------

Income before provision for income taxes                  6,584            5,914           18,997           14,743

Provision for income taxes                                2,502            2,248            7,219            5,602
                                                  -------------  ---------------  ---------------  ---------------

Net income                                        $       4,082  $         3,666  $        11,778  $         9,141
                                                  =============  ===============  ===============  ===============

Earnings per share:
         Basic                                    $        0.19   $         0.17  $         0.56   $          0.52
                                                  =============   ==============  ==============   ===============
         Diluted                                  $        0.18   $         0.16  $         0.51   $          0.45
                                                  =============   ==============  ==============   ===============

Weighted average number of common shares outstanding:
         Basic                                           21,053           21,450          21,126            17,662
                                                  ==============  ==============  ==============   ===============
         Diluted                                         22,978           23,540          23,291            20,446
                                                  ==============  ==============  ==============   ===============





  The accompanying notes are an integral part of these financial statements.
</TABLE>



<PAGE>



                  PROMEDCO MANAGEMENT COMPANY AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                    (All amounts are expressed in thousands)
<TABLE>
<CAPTION>


                                                                                Nine Months Ended September 30,
                                                                                  1999                  1998
<S>                                                                           <C>                      <C>
Cash flows from operating activities:
     Net income                                                               $    11,778              $    9,141
     Adjustments  to  reconcile  net  income to net cash  provided  by
     (used in) operating activities (net of effects of purchase transactions):
         Depreciation and amortization                                              8,979                   5,118
         Provision for deferred income taxes                                        1,488                   1,116
         Changes in assets and liabilities:
              Accounts receivable, net                                             (5,892)                (11,360)
              Management fees receivable                                           (1,342)                 (5,994)
              Due from affiliated medical groups                                     (789)                    462
              Prepaid expenses and other assets                                    (3,641)                 (2,352)
              Accounts payable                                                       (369)                 (2,475)
              Payable to affiliated medical groups                                    495                     236
              Accrued expenses and other liabilities                               (3,090)                 (1,373)
                                                                              -----------             -----------
Net cash provided by (used in) operating activities                                 7,617                  (7,481)
                                                                              -----------             -----------

Cash flows from investing activities:
     Purchases of property and equipment                                          (4,885)                  (2,987)
     Purchases of clinic assets, net of cash acquired                            (84,494)                 (46,123)
     Collection of notes receivable                                                1,462                   (2,792)
                                                                              ----------              -----------
Net cash used in investing activities                                            (87,917)                 (51,902)
                                                                             -----------              -----------

Cash flows from financing activities:
     Borrowings under long-term debt                                              90,000                  47,320
     Payments on long-term debt                                                   (8,816)                (63,470)
     Payments on capital lease obligations                                          (390)                   (336)
     Payment of deferred financing costs                                            (736)                     -
     Proceeds from issuance of common stock, net                                     269                  72,940
     Purchase of treasury shares                                                  (2,914)                     -
     Collection of stockholder note receivable                                       120                      -
                                                                            ------------             -----------
Net cash provided by financing activities                                         77,533                  56,454
                                                                            ------------             -----------

Decrease in cash and cash equivalents                                            (2,767)                  (2,929)

Cash and cash equivalents, beginning of period                                   13,871                   15,761
                                                                            -----------              -----------

Cash and cash equivalents, end of period                                   $     11,104              $    12,832
                                                                           ============              ===========

Supplemental disclosure of cash flow information
     Cash paid during the period for -
         Interest expense                                                  $      5,567              $    2,008
         Income taxes                                                      $      4,927              $    3,941

    The accompanying notes are an integral  part of these financial statements.
</TABLE>



<PAGE>




                                                                  20
                  PROMEDCO MANAGEMENT COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.       SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation/Principles of Consolidation

The  condensed  consolidated  financial  statements  included  herein  have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"). Certain information and footnote
disclosures  normally  included in financial  statements  prepared in accordance
with generally  accepted  accounting  principles  have been condensed or omitted
pursuant  to such  SEC  rules  and  regulations.  Management  believes  that the
disclosures herein are adequate to prevent the information  presented from being
misleading.  The foregoing  financial  information,  not audited by  independent
public  accountants,  reflects,  in the opinion of the Company,  all adjustments
(which  included  only  normal  recurring  adjustments)  necessary  for  a  fair
presentation  of the financial  position and the results of  operations  for the
interim periods presented.  The results of operations for any interim period are
not necessarily indicative of the results of the operations for the entire year.
It is suggested that these condensed  consolidated  financial statements be read
in conjunction  with the financial  statements and notes thereto included in the
Company's  Annual  Report on Form 10-K for the year  ended  December  31,  1998.
Certain  prior period  amounts have been  reclassified  to conform with the 1999
presentation.

Earnings Per Share

Basic earnings per share ("EPS") is calculated by dividing  income  available to
common  stockholders by the weighted average number of common shares outstanding
during the  period.  Common  stock to be issued is  assumed  to be common  stock
outstanding  and is included in the  weighted  average  number of common  shares
outstanding  for the basic EPS  calculation.  Diluted EPS  includes the options,
warrants, and other potentially dilutive securities that are excluded from basic
EPS using the  treasury  method to the  extent  that  these  securities  are not
anti-dilutive.  For the three month and nine month period  ending  September 30,
1999,  approximately  2.9 million of stock stock  options were excluded from the
computation  of diluted EPS because the  options'  exercise  prices were greater
than the average market price of the common shares.

Net Revenue

Net revenue  represents  total revenue less amounts paid to medical groups.  The
amounts  paid to  medical  groups  (typically  80-85% of the  group's  operating
income) represents amounts paid to the groups pursuant to the service agreements
between  the Company  and the groups and  primarily  consists of the cost of the
services of the group's physicians.  Under the service  agreements,  the Company
provides  each  medical  group with the  facilities  and  equipment  used in its
medical practice, assumes responsibility for the management of the operations of
the  practice,  and  employs  substantially  all of the  non-provider  personnel
utilized by the group.

<PAGE>

Net revenue is detailed as follows (in thousands):
<TABLE>
<CAPTION>

                                                              Three Months Ended             Nine Months Ended
                                                                 September 30,                 September 30,
                                                             1999           1998            1999           1998
         <S>                                              <C>            <C>            <C>             <C>

         Total revenue                                    $   113,658    $    81,254    $   328,956     $   215,496
         Amounts paid to medical groups                        29,341         20,157         95,526          61,793
                                                          -----------    -----------    -----------     -----------
         Net revenue                                      $    84,317    $    61,097    $   233,430     $   153,703
                                                          ===========    ===========    ===========     ===========
</TABLE>


Total  revenue  consists  primarily of billings  and charges to patients,  third
party payors and others and payments  received  under  capitated  contracts  for
professional  and  ancillary  services  rendered.  Total  revenue also  includes
amounts earned for other services rendered,  including contract billing; medical
directorships;   transition   management;   strategic  planning  and  management
consulting.  Revenues are recorded at the estimated  realizable amounts,  net of
contractual  and other  adjustments.  Revenue  under  certain  third party payor
agreements is subject to audit and retroactive adjustments. Provisions for third
party  settlements  and  adjustments  are  estimated  in the period the  related
services are rendered  and adjusted in future  periods as the final  settlements
are  determined.  There are no material  claims,  disputes,  or other  unsettled
matters   that  exist  to   management's   knowledge   concerning   third  party
reimbursements.  In  addition,  management  believes  there  are no  retroactive
adjustments that would be material to the Company's financial statements.

2.       ACQUISITIONS:

Through  September  30, 1999 and during 1998,  the  Company,  through its wholly
owned  subsidiaries,  acquired certain operating assets of the following medical
clinics:

<TABLE>
<CAPTION>

                     Medical group                         Date                             Location
<S>      <C>                                         <C>                                <C>

1999:    El Paseo Medical Center                     January 1999 (a)                   Las Cruces, NM
         Boca Raton Medical Associates               February 1999 (b)                  Boca Raton, FL
         Medical Office Services                     May 1999                           Flagstaff, AZ
         Family Care Center of Indiana               May 1999                           Dyer, IN
         MedGroup                                    August 1999                        Prescott, AZ
         Horizon Medical Group                       October 1999 (c)                   Columbus, GA

1998:    Berkshire Physicians & Surgeons             April 1998 (d)                     Pittsfield, MA
         Primary Medical Clinics                     May 1998                           Midland, TX
         Prime Medical Associates                    June 1998                          Hudson, NY
         Physicians' Primary Care                    July 1998                          Ft. Myers, FL
         Medical Associates of Pinellas              November 1998 (e)                  Clearwater, FL

</TABLE>

(a)           The Company  operated El Paseo  Medical  Center  under a long-term
              service  agreement   effective   December  1,  1998.  The  Company
              completed its acquisition in January 1999.

(b)           The  Company  operated  Boca  Raton  Medical  Associates  under an
              interim service  agreement  effective October 1, 1998. The Company
              completed its  acquisition  in February  1999,  and entered into a
              long-term service agreement effective February 1, 1999.
<PAGE>

(c)           The  Company  operated  Horizon  Medical  Group  under an  interim
              service  agreement  effective July 1, 1998. The Company  completed
              its  acquisition  in October  1999,  and entered  into a long-term
              service agreement effective October 1, 1999.

(d)           The Company  operated  Berkshire  Physicians and Surgeons under an
              interim service agreement  effective February 1, 1998. The Company
              completed  its  acquisition  in April  1998,  and  entered  into a
              long-term service agreement effective April 1, 1998.

(e)           The Company  operated  Medical  Associates  of  Pinellas  under an
              interim  service  agreement  effective  May 1, 1998.  The  Company
              completed  its  acquisition  in October  1998 and  entered  into a
              long-term service agreement effective November 1, 1998.

Effective  August 1,  1999,  the  Company,  through a  wholly-owned  subsidiary,
completed its acquisition of Primergy,  Inc.,  ("Primergy").  Based in Kingston,
New York,  Primergy  is a medical  network  management  company  which  owns and
operates five IPAs in the Hudson Valley of New York and has under  contract more
than 1,000 physicians.

These  acquisitions  were  accounted  for as  purchases,  and  the  accompanying
condensed  consolidated  financial  statements  include  the  results  of  their
operations  from the  dates of their  respective  acquisitions.  Purchase  price
allocations to tangible assets acquired and liabilities assumed are based on the
estimated  fair  values at the dates of  acquisitions  and are  subject to final
revisions. Simultaneous with each medical group acquisition, the Company entered
into a long-term  service  agreement with the related medical group. The service
agreements are 40 years in length.

The  following   unaudited  pro  forma   information   reflects  the  effect  of
acquisitions  of medical  groups and  Primergy  on the  consolidated  results of
operations  of the  Company  had the  acquisitions  occurred at January 1, 1998.
Future  results may differ  substantially  from pro forma  results and cannot be
considered indicative of future results (in thousands).

<TABLE>
<CAPTION>

                                                              Three Months Ended             Nine Months Ended
                                                                 September 30,                 September 30,
                                                             1999           1998            1999           1998
         <S>                                              <C>          <C>             <C>            <C>

         Net revenue                                      $    86,414  $   79,263      $  252,518     $   207,825
                                                          ===========  ==========      ==========     ===========
         Net income                                       $     4,406  $    4,396      $   12,927     $    10,109
                                                          ===========  ==========      ==========     ===========

         Earnings per share
                  Basic                                   $      0.21  $     0.20      $     0.61     $      0.56
                                                          ===========  ==========      ===========    ===========
                  Diluted                                 $      0.19  $     0.18      $     0.55     $      0.48
                                                          ===========  ==========      ===========    ===========

         Weighted average number of common
         shares outstanding
                  Basic                                        21,240      21,706          21,355          18,084
                                                          ===========  ==========      ===========    ===========
                  Diluted                                      23,165      23,795          23,519          20,868
                                                          ===========  ===========     ===========    ===========

</TABLE>
The pro forma net income for the three months ended  September  30, 1999 is only
slightly  larger  than  the  amount  for the same pro  forma  period  in 1998 as
incremental  growth  in  clinic  contribution  of over 10% was  offset by higher
general corporate expenses which includes no pro forma adjustments.
<PAGE>

The pro  forma  information  presented  above  does not take  into  account  the
Company's  public offering of 6,900,000  shares of common stock in May 1998, see
Note 5, and a change in the Company's amortization policy, see Note 6.

3.       LONG-TERM DEBT:

Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>

                                                                              September 30,         December 31,
                                                                                  1999                  1998
         <S>                                                               <C>                   <C>

         Borrowings under bank credit facility                             $          139,500    $           54,500
         Notes payable issued to medical groups                                         4,547                 6,654
         Other long-term debt                                                           1,159                   208
                                                                           ------------------    ------------------
                                                                                      145,206                61,362
         Less- current maturities                                                     (12,464)               (3,232)
                                                                           -------------------   ------------------
         Long-term debt, net of current maturities                         $          132,742    $           58,130
                                                                           ==================    ==================
</TABLE>


4.       SUPPLEMENTAL CASH FLOW INFORMATION:

In March  1998,  an officer of the  Company  utilized  43,693  warrants  in full
payment of the $600,000 outstanding note balance and $30,875 of accrued interest
receivable.

In March  1998,  the Company  converted  approximately  $360,000 of  convertible
subordinated  notes  payable  to a  medical  group  into  39,999  shares  of the
Company's common stock.

In the second and third  quarters of 1999, the Company  converted  approximately
$106,000  of  convertible  subordinated  notes  payable to a medical  group into
11,736 shares of the Company's common stock.

In the first nine months of 1999, an affiliated medical group surrendered 32,896
shares of the Company's  common stock as partial payment of an outstanding  note
balance and accrued interest.

<PAGE>

5.       SUPPLEMENTAL NET EARNINGS PER SHARE DATA:

In May 1998,  the Company  completed a public  offering of  6,900,000  shares of
common  stock at a price of $11.00 per share  (the  "Offering").  The  unaudited
supplemental  earnings per share data has been calculated  assuming the Offering
occurred as of January 1, 1998.

<TABLE>
<CAPTION>
                                                                        Nine Months Ended
<S>                                                                    <C>

September 30, 1998
         Supplemental net earnings per share
              Basic                                                     $          0.47
                                                                        ===============
              Diluted                                                   $          0.42
                                                                        ===============

         Supplemental weighted average number of common shares outstanding (in
              thousands)
              Basic                                                              21,006
                                                                        ===============
              Diluted                                                            23,790
                                                                        ===============

</TABLE>

6.       CHANGE IN ACCOUNTING ESTIMATE:

Effective July 1, 1998, in compliance  with a change in SEC  accounting  policy,
the Company  changed its  estimate  with  respect to the  estimated  life of its
service  agreement  rights  intangible  assets.  All existing and future service
agreement rights intangible assets will be amortized over a period not to exceed
25 years  from the  inception  of the  respective  service  agreements.  Had the
Company adopted this policy at the beginning of 1998, amortization expense would
have  increased  and  diluted   earnings  per  share  would  have  decreased  by
approximately  $480,000  and  $0.02,  respectively,  in the nine  months  ending
September 30, 1998.
<PAGE>


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview

We are a medical services company that manages and coordinates the delivery of a
wide  variety of  healthcare  services in  non-urban  communities.  We typically
affiliate  with a leading  medical  group in the  community,  which  becomes our
platform from which we consolidate the delivery of local healthcare services. We
expand this  platform by adding  ancillary  services,  physicians  and mid-level
providers (such as nurse practitioners and physician assistants).

We formed the company in December 1994 and have  experienced  rapid growth since
then,  primarily  as a result of  entering  new  communities  and also from same
market growth within our  communities.  We currently  operate in 24  communities
where we are affiliated with medical groups comprised of some 790 physicians and
150 mid-level providers. In addition, we are associated with approximately 1,800
physicians in independent practice association ("IPA") networks.

Our agreements with medical groups are structured to provide a common  incentive
for growth. When affiliating with a medical group, we typically acquire, at fair
market value,  the group's  non-real  estate  operating  assets and enter into a
40-year service agreement with the group in exchange for various combinations of
cash, our common stock,  other securities  issued by us and/or our assumption of
certain  liabilities.  Under  these  service  agreements,  we  receive  a  fixed
percentage,  typically  15% to 20%,  of each  group's  operating  income  before
physician  compensation.  In our more recent  affiliations,  our share of income
from new ancillary services has been increased to 50%. We also share between 25%
and 50% of each  group's  surplus or  deficit  under  risk-sharing  arrangements
pursuant to capitated managed care contracts.

We have also developed alternative  affiliation structures which require minimal
initial  investment and have recently closed one such  affiliation.  The related
25-year service  agreement gives us a lower percentage of the group's  operating
income than our  typical  agreement,  but  entitles us to 50% of the income from
ancillary  services added  following the initial  affiliation  date. The service
agreement  also allows the group to terminate  the  agreement  for any reason at
five-year intervals,  but only if the group purchases all of the practice assets
then owned by us and pays us a multiple of  additional  cash flows created since
the initial affiliation date.

Our net revenue  represents total revenue for services rendered (reported at the
estimated  realizable amounts from patients,  third-party payors and others, net
of contractual and other adjustments),  less amounts paid to the medical groups.
The amounts paid to the medical groups,  typically 80-85% of the medical groups'
operating income, primarily consist of the cost of physician services. Under our
service  agreements,  we provide  each  medical  group with the  facilities  and
equipment used in its medical practice, assume responsibility for the management
of the operations of the practice and employ  substantially all of the personnel
utilized by the group other than the physicians and mid-level  providers.  We do
not consolidate the operating results and accounts of the medical groups.

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)

Results of Operations

We began  operations in our first two communities in June and December 1995, and
entered  five  additional  communities  in 1996,  six in 1997 and eight in 1998.
During the first nine months of 1999, we entered three  additional  communities.
Changes in  results of  operations  were  caused  primarily  by  expanding  into
additional  communities and same market growth in our existing communities.  The
following  table sets forth the  percentages  of revenue  represented by certain
items reflected in our condensed consolidated statements of operations.

<TABLE>
<CAPTION>


                                                              Three Months Ended             Nine Months Ended
                                                                 September 30,                 September 30,
                                                             1999           1998            1999           1998
<S>                                                      <C>           <C>            <C>            <C>
Net revenue                                                   100.0%          100.0%         100.0%         100.0%
Operating expenses:
         Clinic salaries and benefits                          34.4            31.7           35.2           32.8
         Clinic rent and lease expense                          8.7             7.4            8.9            7.5
         Clinic supplies                                       11.3            10.8           11.6           11.6
         Purchased medical services                            16.2            24.2           15.1           21.9
         Other clinic costs                                    13.0            10.9           12.7           10.8
         General corporate expenses                             2.8             2.0            2.9            2.3
         Depreciation and amortization                          3.7             3.4            3.8            3.3
         Interest expense                                       2.1            (0.1)           1.7            0.2
                                                            -------        ---------      --------        -------
Income before provision for income taxes                        7.8             9.7            8.1            9.6
Provision for income taxes                                      3.0             3.7            3.1            3.6
                                                            -------        --------       --------        -------
Net income                                                      4.8%            6.0%           5.0%           6.0%
                                                            =======        ========       ========        =======

Other Financial Information:
     Total revenue, amounts in thousands (1)              $ 113,658    $     81,254    $   328,956    $   215,496
     Payor breakdown (2)
         Commercial and discounted fee-for-service             37.7%           37.7%          38.2%          40.3%
         Medicare/Medicaid                                     29.9            30.0           29.3           29.3
         Capitation                                            17.2            20.4           17.1           18.8
         Other                                                 15.2            11.9           15.4           11.6
                                                            -------        --------       --------        -------
                                                              100.0%          100.0%         100.0%         100.0%
                                                            =======        ========       ========        =======
</TABLE>


(1)  Total revenue  represents  amounts  received for professional and ancillary
     services  and  for  other  services,  such  as  contract  billing;  medical
     directorship and transition  management.  These amounts are recorded at the
     estimated realizable amounts, net of contractual and other adjustments. Our
     net  revenue  represents  revenue,  reduced by amounts  paid to the medical
     groups.
(2) As a percentage of total revenue.
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)

Three Months Ended September 30, 1999 Compared With Three Months Ended
September 30, 1998

Net revenue  increased by 38.0% to $84.3 million for the quarter ended September
30,  1999,  from  $61.1  million  for the  quarter  ended  September  30,  1998.
Approximately  two-thirds of this increase was  attributable  to  communities we
entered since  September 30, 1998,  with the balance coming from  communities in
which we began  operations  prior to October 1, 1998.  Same market growth in net
revenue for  communities  in which we operated for longer than one year was over
13% for the quarter  ended  September  30, 1999  compared with the quarter ended
September 30, 1998.

Overall clinic costs,  including purchased medical services,  as a percentage of
net  revenue  decreased  to 83.6% for the  quarter  ended  September  30,  1999,
compared to 85.0% for the quarter ended  September 30, 1998.  Purchased  medical
services reflect the cost of services required under managed care contracts that
are not  provided by our  medical  groups.  The  primary  reason for the overall
decrease  in clinic  expenses  as a  percentage  of net  revenue was a change in
purchased  medical  services,  which  decreased to 16.2% as a percentage  of net
revenue for the third quarter of 1999, compared to 24.2% in the third quarter of
1998. This change resulted from the relative  decrease in full  professional and
global capitation  revenue (compared to total revenue) caused by our affiliation
with additional medical groups having lower concentration of capitation and from
the conversion of one of our payor contracts from a capitation  arrangement to a
discounted  fee-for-service  payment contract. The decrease in purchased medical
services was partially offset by increases,  as a percentage of net revenue,  in
clinic  salaries and  benefits,  clinic rent and lease  expense and other clinic
costs  which  increased  to 34.4%,  8.7% and 13.0%,  respectively,  in the third
quarter of 1999 compared to 31.7%,  7.4% and 10.9%,  respectively  in the second
quarter  of 1998.  These  increases  were  caused by the  changes  in mix of our
medical  groups and due to the  expansion of ancillary  services we offer within
the communities we serve.

General corporate  expenses as a percentage of net revenue increased to 2.8% for
the quarter  ended  September  30, 1999,  compared to 2.0% for the quarter ended
September 30, 1998. We anticipated  this increase in expenses as we continued to
add  management  resources  and  technology  infrastructure.   We  believe  that
increases in the amount of general corporate  expenses will continue as we enter
new communities and expand our operations in existing communities.

Depreciation and  amortization as a percentage of net revenue  increased to 3.7%
for the quarter ended September 30, 1999, compared to 3.4% for the quarter ended
September  30,  1998.  This  increase  resulted  primarily  from an  increase in
depreciation  due to changes in the mix of our medical  groups,  with certain of
our more recent  affiliations  having a relatively higher amount of property and
equipment.

Net interest  expense as a percentage  of net revenue  increased to 2.1% for the
quarter  ended  September  30,  1999,  compared to (0.1)% for the quarter  ended
September 30, 1998.  This increase is a result of the increase in long-term debt
relating to  financing  our  affiliation  with  additional  medical  groups.  In
addition,  interest  expense in the third quarter of 1998 was offset by interest
income earned on unused proceeds from a public offering of our common stock that
was completed in May 1998.

Provision  for income taxes  reflects an effective  rate of 38.0%,  which is our
estimated effective rate for all of 1999.
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)

Nine Months Ended September 30, 1999 Compared With Nine Months Ended
September 30, 1998

Net revenue  increased  by 51.9% to $233.4  million  for the nine  months  ended
September 30, 1999,  from $153.7 million for the nine months ended September 30,
1998.   Approximately   three-fourths  of  this  increase  was  attributable  to
communities  we  entered  since  January  1,  1998,  with the  remainder  coming
primarily from  communities in which we began  operations  prior to December 31,
1997. Same market growth in net revenue for communities in which we operated for
longer than one year was over 15% for the nine months ended  September  30, 1999
compared with the nine months ended September 30, 1998.

Overall clinic costs,  including purchased medical services,  as a percentage of
net revenue  decreased  to 83.5% for the nine months ended  September  30, 1999,
compared  to 84.6% for the nine  months  ended  September  30,  1998.  Purchased
medical  services  reflect  the cost of services  required  under  managed  care
contracts  that are not provided by our medical  groups.  The primary reason for
the overall  decrease in clinic  expenses as a  percentage  of net revenue was a
change in purchased medical  services,  which decreased to 15.1% as a percentage
of net revenue for the nine months ending September 30, 1999,  compared to 21.9%
in the first  nine  months  of 1998.  This  change  resulted  from the  relative
decrease in full professional and global  capitation  revenue (compared to total
revenue) caused by our affiliation  with additional  medical groups and from the
conversion of one of our larger payor contracts from a capitation arrangement to
a discounted fee-for-service payment contract. The decrease in purchased medical
services was  partially  offset by an increase in clinic  salaries and benefits,
clinic rent and lease  expense and other clinic costs which  increased to 35.2%,
8.9% and 12.7%,  respectively,  in the nine  months  ending  September  30, 1999
compared  to 32.8%,  7.5% and 10.8%,  respectively,  in the nine  months  ending
September  30, 1998.  These  increases  were caused by the changes in mix of our
medical  groups and due to the  expansion of ancillary  services we offer within
the communities we serve.

General corporate  expenses as a percentage of net revenue increased to 2.9% for
the nine months ended September 30, 1999, compared to 2.3% for the quarter ended
September 30, 1998. We anticipated  this increase in expenses as we continued to
add management and technology  infrastructure.  We believe that increases in the
amount of general  corporate  expenses will continue as we enter new communities
and expand our operations in existing communities.

Depreciation and  amortization as a percentage of net revenue  increased to 3.8%
for the nine months  ended  September  30,  1999,  compared to 3.3% for the nine
months ended  September 30, 1998.  This  increase  resulted  primarily  from the
change in the amortization  period for our service agreement  intangible assets.
As a result of a change in SEC  accounting  policy,  effective July 1, 1998, all
existing and future  service  agreement  intangible  assets are amortized over a
period  not to exceed 25 years  from the  inception  of the  respective  service
agreements. In addition, depreciation has increased due to changes in the mix of
our  medical  groups,  with  certain of our more  recent  affiliations  having a
relatively higher amount of property and equipment.
<PAGE>
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)

Net interest  expense as a percentage  of net revenue  increased to 1.7% for the
nine months ended September 30, 1999, compared to 0.2% for the nine months ended
September 30, 1998.  This increase is a result of the increase in long-term debt
relating to  financing  our  affiliation  with  additional  medical  groups.  In
addition,  interest  expense in the nine months  ending  September  30, 1998 was
offset by interest  income earned on unused  proceeds from a public  offering of
our common stock that was completed in May 1998.

Provision  for income taxes  reflects an effective  rate of 38.0%,  which is our
estimated effective rate for all of 1999.

Year 2000

We are in the final stages of completing our company-wide  review and testing to
address issues associated with the programming code in existing computer systems
as the year 2000  approaches.  The "Year 2000" problem is pervasive and complex,
as virtually  every  computer  operation will be affected by the rollover of the
two digit year value to 00. The issue is whether  computer systems will properly
recognize date-sensitive information when the year changes to 2000. Systems that
do not properly  recognize such  information  could  generate  erroneous data or
cause a system to fail.

We have  developed  a written  plan with  respect to the Year 2000  problem.  We
formed a committee headed by our Director of Information  Technology to evaluate
the readiness of both the systems we use  internally and those used by companies
conducting business with us. Our plan was presented to and approved by the Board
of  Directors.  Senior  management  is  actively  involved  with  the  committee
including  reviewing test results and contingency plans and updates the Board of
Directors on Year 2000 compliance progress at each Board meeting.

We  continue  to assess  the  impact of the Year 2000  issue on our  information
systems and operations using both internal and external resources.  In doing so,
we have divided our internal  processing  software into three broad  categories:
financial (including general ledger, accounts payable, fixed assets,  purchasing
and inventory  control),  practice  management  (including  billing and accounts
receivable)  and managed care.  We have  installed a common  financial  software
package at all of our affiliations  that is Year 2000 compliant.  Our philosophy
with respect to our practice  management systems is to utilize the legacy system
in place as long as it can  capably  serve  the  physicians'  needs.  All of our
affiliated  medical groups are utilizing  practice  management  systems that are
Year 2000 compliant.  Our Year 2000 assessment  process  continues with each new
affiliation.  Inadequate or noncompliant  practice  management  systems could be
acquired  in a new  affiliation,  which  would  require  system  remediation  or
replacement.  Based on our current  strategy of  replacing  inadequate  practice
management  systems,  we do not  believe  that Year  2000  issues  will  cause a
conversion of one or more of our practice  management systems to be more or less
difficult than a typical system conversion.  Our primary managed care technology
resides at our risk management  subsidiary,  PMC Medical Management ("PMC"). PMC
completed  upgrading its systems to be Year 2000 compliant in the second quarter
of 1999.
<PAGE>
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)

Our plan also  requires  that  Year  2000  assessments  be  included  in the due
diligence process on future medical group affiliations. Any necessary upgrade or
replacement identified in due diligence is added to our Year 2000 plan after the
affiliation is completed.

We are  also in the  process  of  gathering  information  about  the  Year  2000
compliance  status of our  significant  suppliers and vendors.  The inability of
these suppliers and vendors to complete their Year 2000 resolution  processes in
a  timely  fashion  could   materially   affect  our  business.   We  have  used
questionnaires,  phone  surveys and Internet web sites to  investigate  the Year
2000 status of key  external  vendors and service  providers.  We use  responses
received to assess the business  risks posed to us. We have  received  responses
from all of our major  vendors that provide our most critical  business  systems
and services. To date, no significant risks have been identified. If such a risk
is identified,  we will prioritize the issues and develop  contingency  plans to
deal with noncompliance. These contingency plans will range from the development
of additional manual processes to contracting for temporary  services from third
parties. We are in the process of finalizing contingency plans.

We have used a combination of our medical group personnel, major accounting firm
consultants and vendor personnel to perform Year 2000 testing.  To date, we have
spent  approximately $3.6 million on our Year 2000 effort and estimate less than
$500,000 to be incurred through the remainder of the year.

We believe that we have  implemented  an  effective  program to resolve the Year
2000 issue in a timely manner. In the event that we do not complete this program
or  any  necessary  remediation,  our  ability  to  record  revenue  or  process
collections  in a timely  fashion could be adversely  affected  after January 1,
2000.  In  addition,  disruptions  in the  general  economy due to the Year 2000
problem could also materially adversely affect us.

Liquidity and Capital Resources

At September  30, 1999,  we had working  capital of $56.5  million,  compared to
$55.5 million at December 31, 1998.  This increase in working  capital  resulted
from the acquisition of net current assets in recent  affiliations  and from our
net cash provided by  operations.  Net cash provided by operations  for the nine
months ended  September  30, 1999 was $7.6  million.  Net income,  combined with
depreciation  and  amortization and deferred taxes and an increase in payable to
affiliated  physician  groups,  provided  $22.7 million in cash flows.  This was
offset by uses of cash of $15.1 million that resulted from increases in accounts
receivable,  management fees receivable,  due from affiliated medical groups and
other assets, and decreases in accounts payable,  and accrued expenses and other
liabilities.
<PAGE>
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)

Our accounts receivable  increased $5.9 million,  net of the effects of purchase
accounting since December 31, 1998.  Approximately $1.9 million of this increase
resulted  from an increase in revenues in the third  quarter of 1999 compared to
the fourth  quarter of 1998.  Another $2.0 million  resulted  from  increases in
accounts  receivable in recent  affiliations  where we did not acquire assets in
the affiliation and from changes in provider numbers (for reimbursement purposes
of certain of our affiliated  physicians).  The remaining $2.0 million  resulted
from an increase  in accounts  receivable  days  outstanding  from 47 days to 49
days.  During  the third  quarter,  we reduced  the  number of days in  accounts
receivable from 50 days as of June 30, 1999 to 49 days as of September 30, 1999.
While our days outstanding compares favorably within the healthcare industry, we
are nonetheless  focusing  significant efforts at all of our clinics to continue
to improve the collections and the overall business office processes.

We had  aggregate  cash  expenditures  for  purchases of clinic  assets of $84.5
million for the nine months  ended  September  30, 1999.  Of this amount,  $25.6
million  related  primarily  to deferred  payments  associated  with  previously
completed  acquisitions  and $58.9 million related to acquisitions  completed in
the first nine months of 1999. Our capital expenditures amounted to $4.9 million
for the nine months  ended  September  30,  1999.  Although  each of the service
agreements with our affiliated medical groups requires us to provide capital for
equipment,  expansion,  additional  physicians and other major expenditures,  we
have not committed a specific amount in advance.  Capital  expenditures are made
based  partially  upon  the   availability  of  funds,  the  sources  of  funds,
alternative projects and an acceptable repayment period.

In November 1998, we authorized a common stock repurchase program whereby we may
repurchase up to $10.0 million of our common stock. During the first nine months
of 1999, we purchased 693,103 shares at an average price of $4.21 per share.

On December 17, 1998, we entered into a new credit  facility,  which was amended
on June 28, 1999. The facility currently provides for a three-year commitment to
fund revolving  credit  borrowings of up to $157.5 million for  acquisitions and
general working  capital.  The commitment is comprised of $142.5 million maximum
commitment  that expires  December 31, 2001 and a $15.0 million  commitment that
expires June 27, 2000.  The interest  rate is set at our option and varies based
on our leverage,  as follows: (i) the higher of the federal funds rate plus 0.5%
to 1.25% or the prime rate plus 0.0% to 0.75%,  or (ii) the Eurodollar rate plus
1.25% to 2.25%. As of September 30, 1999, the effective  interest rate under the
credit  facility was 7.4%.  The credit  facility  includes  certain  restrictive
covenants,  including  limitations  on the  payment  of  dividends,  as  well as
requirements for the maintenance of certain  financial  ratios. In obtaining the
credit  facility and subsequent  amendments,  we paid  commitment fees and other
closing costs of approximately $1.7 million, which has been capitalized in other
assets on our  consolidated  balance sheets and is amortized as an adjustment to
interest  expense using the effective  interest  method.  At our option,  we can
convert the  outstanding  balance  under the credit  facility to a term loan due
December 17, 2003. The credit  facility is secured by  substantially  all of our
assets.  As of September 30, 1999, we had $139.5  outstanding  and $18.0 million
available, subject to certain conditions under the agreement.
<PAGE>
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)

In connection  with the  affiliation  of a physician  group,  the Company issued
convertible subordinated notes totaling $1,850,000. The notes accrue interest at
a rate of 5% paid  annually on July 30 and can be  converted  into shares of the
Company's  common stock at a conversion  price of $5.08,  subject to  adjustment
under the note agreement.

We had cash and cash  equivalents  of $11.1  million at September  30, 1999.  In
addition to this, our principal  sources of liquidity at September 30, 1999 were
accounts receivable of $61.4 million and availability of $18.0 million under the
credit  facility.  We believe that this will be  sufficient  to meet our working
capital  needs for at least the next  twelve  months.  Our  future  acquisition,
expansion and capital  expenditure  programs may, however,  require  substantial
amounts of additional capital resources. To meet the additional capital needs of
these programs,  we will continue to evaluate  alternative sources of financing,
including short- and long-term bank  indebtedness,  additional  equity and other
forms of financing,  the availability and terms of which will depend upon market
and other  conditions.  There can be no assurance that we will be able to obtain
additional financing at acceptable terms.


Forward-Looking Statements

This report includes  "forward-looking  statements" under the Private Securities
Litigation Reform Act of 1995 about anticipated results, including statements as
to operating results,  liquidity and capital  resources,  and expansion into and
within additional communities.  These forward-looking  statements are based upon
our  internal  estimates,  which are  subject  to change  because  they  reflect
preliminary  information and our  assumptions.  Thus, a variety of factors could
cause  our  actual  results  and  experience  to  differ   materially  from  the
anticipated   results  or  other   expectations   we  have   expressed   in  the
forward-looking  statements.  The  factors  that could cause  actual  results or
outcomes to differ from our expectations include our ability to:

o        continue to operate profitably;

o        expand in our existing communities;

o        establish operations in additional communities; and

o        obtain additional financing upon terms acceptable to us;

along with the  uncertainties  and other factors described in this report and in
the our public filings and reports.

<PAGE>


Item 2. Changes in Securities and Use of Proceeds

In July 1999,  the Company  issued  9,658  shares of Common  Stock to the former
stockholder of a medical group as post-closing  adjustments to the consideration
payable by the  Company in  connection  with its  acquisition  by the Company in
August 1998. In August 1999,  the Company  issued 249,513 shares of Common Stock
to  the  former   stockholders  of a medical  network   management   company  as
consideration in connection with its acquisition in August 1999. These issuances
were exempt from registration under the Securities Act, pursuant to section 4(2)
of the Act as it did not involve any public offering.



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

         (a)      Exhibits:

                  11       Computation of Per Share Earnings

                  27       Financial Data Schedule

         (b)      Reports on Form 8-K

                  None.



<PAGE>



                                            SIGNATURES


Pursuant to the  requirements  of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned  thereunto
duly authorized.
<TABLE>
<CAPTION>

Signature                                                 Title                                    Date

<S>                                            <C>                                          <C>

/s/ H. WAYNE POSEY
H. Wayne Posey                                  Chairman, President, Chief Executive         November 15, 1999
                                                Officer, and Director
                                                (Chief Executive Officer)

/s/ ROBERT D. SMITH
Robert D. Smith                                 Senior Vice President - Finance and          November 15, 1999
                                                Chief Financial Officer
                                                (Chief Accounting Officer)
</TABLE>