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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 March 31, 1998

                                       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 0-21373

                           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                              April 30, 1998
            $.01 par value                                 13,519,565 shares


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<PAGE>



              PROMEDCO MANAGEMENT COMPANY AND SUBSIDIARIES

                                   INDEX

                                                                         Page
                                                                          No.

Part I. Financial Information

    Item 1. Financial Statements

        Condensed Consolidated Balance Sheets
            March 31, 1998 and December 31, 1997                           2

        Condensed Consolidated Statements of Operations
            Three Months Ended March 31, 1998 and 1997                     3

        Condensed Consolidated Statements of Cash Flows
            Three Months Ended March 31, 1998 and 1997                     4

        Notes to Condensed Consolidated Financial Statements               5

    Item 2. Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                        9

Part II. Other Information

         Item 6. Exhibits and Reports on Form 8-K                          14

Signatures                                                                 15




<PAGE>



               PROMEDCO MANAGEMENT COMPANY AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>


                                                                             March 31, 1998          December 31,
                                                                               (Unaudited)              1997
                                                      ASSETS
<S>                                                                        <C>                   <C>
Current assets:
         Cash and cash equivalents                                         $       12,140,802    $       15,760,920
         Accounts receivable, net                                                  27,980,501            22,463,689
         Management fees receivable                                                 4,414,354             1,938,464
         Due from affiliated physician groups                                       1,189,837             2,870,607
         Prepaid expenses and other current assets                                  8,062,422             6,917,675
                                                                           ------------------    ------------------
                  Total current assets                                             53,787,916            49,951,355
                                                                           ------------------    ------------------

Property and equipment, net                                                        11,031,861            10,590,561
Intangible assets, net                                                             80,358,935            77,195,351
Long term receivables                                                              23,466,293            23,915,884
Other assets                                                                        1,548,016             1,312,999
                                                                           ------------------    ------------------
                  Total assets                                             $      170,193,021    $      162,966,150
                                                                           ==================    ==================

                            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
         Accounts payable                                                  $        1,996,814    $        3,185,208
         Payable to affiliated physician groups                                     7,922,342             6,562,903
         Accrued salaries, wages and benefits                                       3,656,958             2,895,023
         Accrued expenses and other current liabilities                             9,413,032             6,014,729
         Deferred income tax liability                                                118,000               174,101
         Current maturities of notes payable                                        3,610,438             3,676,365
         Current portion of obligations under capital leases                          596,353               609,591
         Current portion of deferred purchase price                                 5,345,500             5,265,713
         Income taxes payable                                                       1,032,958             1,051,050
                                                                           ------------------    ------------------
                  Total current liabilities                                        33,692,395            29,434,683
                                                                           ------------------    ------------------

Notes payable, net of current maturities                                           42,343,313            39,688,325
Obligations under capital leases, net of current portion                              963,451             1,073,886
Deferred purchase price, net of current portion                                     5,777,423             7,318,526
Convertible subordinated notes payable                                              1,404,931             1,765,058
Deferred income tax liability                                                       1,700,788             1,103,876
Other long term liabilities                                                           741,918             1,963,059
                                                                           ------------------    ------------------
                  Total liabilities                                                86,624,219            82,347,413
                                                                           ------------------    ------------------

Stockholders' equity:
         Common stock                                                                 135,028               106,868
         Additional paid-in capital                                                77,041,283            58,946,838
         Common stock to be issued                                                  2,522,991            20,121,059
         Stockholder notes receivable                                                (369,665)             (369,665)
         Retained earnings                                                          4,239,165             1,813,637
                                                                           ------------------    ------------------
                  Total stockholders' equity                                       83,568,802            80,618,737
                                                                           ------------------    ------------------
                  Total liabilities and stockholders' equity               $      170,193,021    $      162,966,150
                                                                           ==================    ==================
</TABLE>


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

<PAGE>



                  PROMEDCO MANAGEMENT COMPANY AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
<TABLE>
<CAPTION>


                                                                                      Three Months Ended
                                                                                           March 31,
                                                                                  1998                  1997
<S>                                                                        <C>                   <C>
Physician groups revenue, net                                              $       61,179,791    $       20,725,577
Less: amounts retained by physician groups                                         20,567,338             9,008,171
                                                                           ------------------    ------------------
Management fee revenue                                                             40,612,453            11,717,406
                                                                           ------------------    ------------------

Operating expenses:
         Clinic salaries and benefits                                              13,340,225             4,639,895
         Clinic rent and lease expense                                              3,199,036             1,079,862
         Clinic supplies                                                            4,857,545             1,513,716
         Purchased medical services                                                 8,131,910               685,158
         Other clinic costs                                                         4,321,958             1,778,472
         General corporate expenses                                                 1,083,158               818,772
         Depreciation and amortization                                              1,294,260               435,875
         Interest expense                                                             472,219               115,949
                                                                           ------------------    ------------------
                                                                                   36,700,311            11,067,699
                                                                           ------------------    ------------------

Income before provision for income taxes                                            3,912,142               649,707

Provision for income taxes                                                          1,486,614               194,912
                                                                           ------------------    ------------------

Net income                                                                 $        2,425,528    $          454,795
                                                                           ==================    ==================

Net earnings per share:
         Basic                                                             $             0.18    $             0.05
                                                                           ==================    ==================
         Diluted                                                           $             0.15    $             0.04
                                                                           ==================    ==================

Weighted average number of common shares outstanding:
         Basic                                                                     13,615,887             8,669,343
                                                                           ==================    ==================
         Diluted                                                                   16,490,851            11,617,229
                                                                           ==================    ==================
</TABLE>













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


<PAGE>



                   PROMEDCO MANAGEMENT COMPANY AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                      Three Months Ended
                                                                                           March 31,
                                                                                  1998                  1997
<S>                                                                        <C>                   <C>
Cash flows from operating activities:
     Net income                                                            $        2,425,528    $          454,795
     Adjustments to reconcile net income to net cash provided by
         (used in) operating activities (net of effects of
         purchase transactions):
         Depreciation and amortization                                              1,294,260               435,875
         Provision for deferred income taxes                                          340,811               121,820
         Changes in assets and liabilities:
              Accounts receivable                                                  (6,266,812)             (148,679)
              Management fees receivable                                           (2,475,890)             (392,335)
              Due from affiliated physician groups                                  1,680,770              (414,258)
              Other assets                                                         (1,410,323)             (153,971)
              Accounts payable                                                     (1,188,394)             (199,447)
              Payable to physician groups                                           1,359,439               670,241
              Accrued expenses and other liabilities                                2,221,005               (53,807)
                                                                           ------------------    -------------------
Net cash provided by (used in) operating activities                                (2,019,606)              320,234
                                                                           -------------------   ------------------

Cash flows from investing activities:
     Purchases of property and equipment                                           (1,212,692)             (477,907)
     Purchases of clinic assets, net of cash                                       (3,648,493)           (1,189,144)
                                                                           -------------------   -------------------
Net cash used in investing activities                                              (4,861,185)           (1,667,051)
                                                                           -------------------   -------------------

Cash flows from financing activities:
     Borrowings under long-term debt                                                2,625,000             2,076,242
     Payments on long-term debt                                                       (36,075)           (2,299,382)
     Payments on capital lease obligations                                           (123,673)             (132,346)
     Proceeds from issuance of common stock, net                                      795,421            33,363,110
                                                                           ------------------    ------------------
Net cash provided by financing activities                                           3,260,673            33,007,624
                                                                           ------------------    ------------------

Increase (decrease) in cash and cash equivalents                                   (3,620,118)           31,660,807

Cash and cash equivalents, beginning of period                                     15,760,920             1,633,534
                                                                           ------------------    ------------------

Cash and cash equivalents, end of period                                   $       12,140,802    $       33,294,341
                                                                           ==================    ==================
Supplemental disclosure of cash flow information
     Cash paid during the period for -
         Interest expense                                                  $          917,723    $          221,743
         Income taxes                                                      $          951,700    $           71,518

</TABLE>


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


<PAGE>



                   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,  1997.
Certain  prior period  amounts have been  reclassified  to conform with the 1998
presentation.

In March 1997, the Company completed its merger with Western Medical  Management
Corp., Inc. ("Reno"), a physician management company.  This transaction has been
accounted  for as a pooling of  interests,  as defined by APB No. 16,  "Business
Combinations." The accompanying financial statements are based on the assumption
that the  companies  were  combined  for the full  periods  presented  and prior
financial statements have been restated to give effect to the combination.

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.

Management Fee Revenue

Management fee revenue represents physician groups revenue less amounts retained
by physician  groups.  The amounts  retained by physician  groups (80-85% of the
physician groups' operating  income)  represents  amounts paid to the physicians
pursuant to the service agreements between the Company and the physician groups.
Under the service agreements, the Company provides each physician 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-physician personnel utilized by the group.


<PAGE>



The Company's management fee revenues are dependent upon the operating income of
the physician  groups.  As discussed  previously,  the physician groups retain a
fixed  percentage  (typically  80-85%)  of  physician  group  operating  income.
Physician  group  operating  income is defined in the service  agreements as the
physician  group's net medical  revenue less certain  contractually  agreed-upon
clinic expenses,  including  non-physician  clinic salaries and benefits,  rent,
insurance,  interest  and  other  direct  clinic  expenses.  The  amount  of the
physician  groups  revenue  retained and paid to the physician  group  primarily
consists of the cost of the  affiliated  services.  The remaining  amount of the
physician groups operating income (typically 15-20%) and an amount equal to 100%
of the clinic  expenses are  reflected as management  fee revenue  earned by the
Company. Other revenue represents fees from management consulting,  supplemental
implementation services and other miscellaneous revenues:
<TABLE>
<CAPTION>

                                                                                 Three Months Ended March 31,
                                                                                  1998                  1997
<S>                                                                        <C>                   <C>
         Component based upon percentage of physician groups
              operating income                                             $        4,830,520    $        1,589,677
         Reimbursement of clinic expenses                                          31,904,683             9,927,729
         Revenue from non-affiliated physician groups                               2,377,250                -
         Other revenue                                                              1,500,000               200,000
                                                                           ------------------    ------------------
         Management fee revenue                                            $       40,612,453    $       11,717,406
                                                                           ==================    ==================
</TABLE>


2.       ACQUISITIONS:

Through  March 31, 1998 and during 1997,  the Company,  through its wholly owned
subsidiaries,  acquired  certain  operating  assets  of  the  following  medical
clinics:
<TABLE>
<CAPTION>

                    Physician Group                     Effective Date                      Location
<S>                                                  <C>                                <C>
1997:    Naples Medical Center                       March 1, 1997                      Naples, FL
         Abilene Diagnostic Clinic                   June 1, 1997 (a)                   Abilene, TX
         Intercoastal Medical Group                  August 1, 1997                     Sarasota, FL
         Beacon Medical Group                        October 1, 1997 (b)                Harrisburg, PA
         Cowley Medical Associates (c)               November 1, 1997                   Harrisburg, PA
         Thomas-Spann Clinic                         December 1, 1997                   Corpus Christi, TX
         HealthStar, Inc.                            December 1, 1997                   Knoxville, TN
</TABLE>

         (a)  Abilene  Diagnostic  Clinic was  operated by the Company  under an
              interim service agreement  effective December 1, 1995. The Company
              completed its acquisition of certain  operating  assets on June 5,
              1997,  and entered  into a long term  service  agreement  with the
              physician group effective June 1, 1997.

         (b)  Beacon  Medical Group was operated by the Company under an interim
              service  agreement  effective April 1, 1997. The Company completed
              its  acquisition of certain  operating  assets on October 1, 1997,
              and entered into a long term service  agreement  effective on that
              date.

         (c) Cowley  Medical  Associates  merged  with Beacon  Medical  Group in
             December 1997.

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.



<PAGE>



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  acquisition,  the Company
entered into a long-term service agreement with the related physician group. The
service agreements are 40 years in length.

In  addition  to the  medical  clinics  acquired,  the  Company,  completed  its
acquisition of Health Plans,  Inc., in December 1997 and renamed the company PMC
Medical  Management,  Inc.  ("PMC").  PMC  provides a full range of managed care
services  to  capitated   providers,   including  clinical  quality  assessment,
credentialing,   claims   processing  and  payment,   referral  and  utilization
management, and case management.

The  following   unaudited  pro  forma   information   reflects  the  effect  of
acquisitions  of  medical  clinics  and  PMC  on  the  consolidated  results  of
operations  of the  Company  had the  acquisitions  occurred at January 1, 1997.
Future  results may differ  substantially  from pro forma  results and cannot be
considered indicative of future results.

<TABLE>
<CAPTION>
                                                                                 Three Months Ended March 31,
                                                                                  1998                  1997
<S>                                                                        <C>                   <C>
         Physician groups revenue, net                                     $       61,179,791    $       37,025,274
         Less: amounts retained by physician groups                                20,567,338            14,128,813
                                                                           ------------------    ------------------
         Management fee revenue                                            $       40,612,453    $       22,896,461
                                                                           ==================    ==================

         Net income                                                        $        2,425,528    $          807,787
                                                                           ==================    ==================

         Net earnings per share
                  Basic                                                    $             0.18    $             0.08
                                                                           ==================    ==================
                  Diluted                                                  $             0.15    $             0.06
                                                                           ==================    ==================

         Weighted average number of common shares outstanding
                  Basic                                                            13,615,887            10,307,089
                                                                           ==================    ==================
                  Diluted                                                          16,490,851            13,254,975
                                                                           ==================    ==================
</TABLE>


3.       LONG-TERM DEBT:

Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
                                                                                March 31,           December 31,
                                                                                  1998                  1997
<S>                                                                        <C>                   <C>
         Borrowings under bank credit facility                             $       35,593,000    $       32,968,000
         Note payable issued to physician groups                                   10,220,775            10,220,775
         Other long-term debt                                                         139,976               175,915
                                                                           ------------------    ------------------
                                                                                   45,953,751            43,364,690
         Less current maturities                                                   (3,610,438)           (3,676,365)
                                                                           -------------------   -------------------
         Long-term debt, net of current maturities                         $       42,343,313    $       39,688,325
                                                                           ==================    ==================
</TABLE>


<PAGE>



4.       SUPPLEMENTAL CASH FLOW INFORMATION:

In March 1998,  an officer of the Company  surrendered  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 $359,991 of convertible  subordinated notes
payable to a physician group into 39,999 shares of the Company's common stock.


5.       SUPPLEMENTAL NET EARNINGS PER SHARE DATA:

In May 1998, the Company  completed a public offer of 6,000,000 shares of common
stock  at a price of  $11.00  per  share,  and in March  1997 the  Company  sold
4,000,000 shares of common stock at a price of $9.00 in a registration statement
(collectively the "Offerings").  The unaudited  supplemental  earnings per share
data has been calculated  assuming the Offerings occurred as of the beginning of
each respective period.

                                                   Three Months Ended March 31,
                                                  1998                  1997
    Supplemental net earnings per share
         Basic                                 $     0.12            $     0.03
         Diluted                               $     0.11            $     0.02

    Supplemental weighted average number 
      of common shares outstanding
        Basic                                  19,615,887            17,869,343
                                               ==========            ==========
        Diluted                                22,490,851            20,817,229
                                               ==========            ==========


6.       SUBSEQUENT EVENT:

On April 17, 1998, the Company, through a wholly owned subsidiary,  acquired all
of  the  outstanding  stock  of  Berkshire   Physicians  &  Surgeons,   P.C.,  a
Massachusetts professional corporation ("Berkshire"). The Company had previously
entered into an interim service agreement with Berkshire  effective  February 1,
1998.  Concurrent  with the  acquisition,  the Company  entered into a long-term
service  agreement  (the "Service  Agreement")  with  Berkshire.  Berkshire is a
multi-specialty physician group based in Pittsfield, Massachusetts, comprised of
79  physicians,  15 mid-level  providers  and 15  physicians  in an  independent
practice  association  network.  The total consideration for the transaction was
approximately $29.5 million, which consisted of a $16.1 million of cash, $7.6 of
convertible  subordinated  notes and $5.8 million of the Company's  common stock
(to be issued in 1999).  The cash portion of the purchase  price was funded with
borrowings from the Company's revolving credit facility. The acquisition will be
accounted for using the purchase method of accounting.


<PAGE>


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


Overview

ProMedCo   Management   Company,   ("ProMedCo"  or  the  "Company")  a  Delaware
corporation,  is a physician  practice  management company that consolidates its
affiliated physician groups into primary-care-driven  multi-specialty  networks.
ProMedCo  commenced  operations in December 1994 and affiliated with its initial
physician  group in June 1995.  The  Company's  rapid growth since June 1995 has
resulted  primarily from its affiliation with additional  physician groups.  The
Company  currently is affiliated  with  multi-specialty  physician  groups in 11
states,  comprised of 440  physicians  and 115  mid-level  providers  (primarily
physician  assistants  and  nurse  practitioners),  and is  associated  with 540
physicians in independent practice  associations  ("IPA") networks.  The Company
also  provides a full range of managed  care  services to  capitated  providers,
including  clinical quality  assessment,  credentialing,  claims  processing and
payment, referral and utilization management,  and case management.  The Company
is currently  providing  such services to the Company's  associated  IPAs and to
those of its affiliated  groups that have entered into capitation  arrangements,
together covering over 100,000 managed care capitated lives.

When affiliating with a physician group, the Company generally  acquires at fair
market  value the group's  non-real  estate  operating  assets and enters into a
40-year service agreement with the group in exchange for a combination of common
stock,  cash, other securities of the Company,  and/or the assumption of certain
liabilities.   Under  the  service  agreement,  the  Company  receives  a  fixed
percentage  (typically  15-20%) of the physician  groups'  operating  income (as
defined) and shares between 25% and 50% of the group's  surplus or deficit under
risk-sharing arrangements pursuant to capitated managed care contracts. Although
the  group's  physicians  retain full  control  over the  practice of  medicine,
ProMedCo  manages all day-to-day  operations other than the provision of medical
services.  The Company is continually  seeking additional  physician groups with
which to affiliate and is currently  engaged in  negotiations  with several such
groups.

ProMedCo  focuses on pre-managed  care  secondary  markets  located  principally
outside of or  adjacent to large  metropolitan  areas.  The key  elements of the
Company's  strategy are to (i) continue to penetrate  pre-managed-care  markets;
(ii) affiliate with  primary-care-oriented  multi-specialty groups; (iii) expand
its  affiliated  groups'  market  presence  through  addition of physicians  and
selected  ancillary  services;  (iv) optimize managed care opportunities for its
groups;  and (v)  align  the  Company's  economic  interests  with  those of its
physician partners.

Results of Operations

The Company commenced  operations in December 1994 and affiliated with its first
physician  group in June 1995 and its second group in December 1995. The Company
entered into  affiliations with five additional groups in 1996, seven additional
groups  during  1997,  and one  additional  group in the first  quarter of 1998.
Changes in results of  operations  were caused  primarily by  affiliations  with
these additional physician groups.




<PAGE>




The  following  table sets forth the  percentages  of physician  groups  revenue
represented by certain items reflected in the Company's  condensed  consolidated
statements of operations.

                                                 Three Months Ended March 31,
                                                  1998                  1997
Physician groups revenue, net                     100.0%                100.0%
Less: amounts retained by physician groups         33.6                  43.5
                                               --------               -------
Management fee revenue                             66.4                  56.5
Operating expenses:
         Clinic salaries and benefits              21.8                  22.4
         Clinic rent and lease expense              5.2                   5.2
         Clinic supplies                            7.9                   7.3
         Purchased medical services                13.3                   3.3
         Other clinic costs                         7.1                   8.6
         General corporate expenses                 1.8                   4.0
         Depreciation and amortization              2.1                   2.1
         Interest expense                           0.8                   0.5
                                               --------               -------
Income before provision for income taxes            6.4%                  3.1%
Provision for income taxes                          2.4                   0.9
                                               --------               -------
Net income                                          4.0%                  2.2%
                                               ========               =======

Physician  groups  revenue  increased  by 195% to $61.2  million for the quarter
ended March 31, 1998,  from $20.7  million for the quarter ended March 31, 1997.
Approximately  80% of this growth in physician groups revenue is attributable to
new affiliations since March 31, 1997, with the balance coming from increases in
revenues from affiliated  physician  groups in place prior to March 31, 1997 and
from an increase in other revenues.

Amounts retained by physician groups as a percentage of physician groups revenue
increased by 128% to $20.6  million for the quarter  ended March 31, 1998,  from
$9.0  million  for the quarter  ended March 31,  1997.  This  increase  resulted
primarily from new  affiliations.  As a percentage of physician  groups revenue,
amounts  retained by physician  groups  declined to 33.6% for the quarter  ended
March 31, 1998,  compared to 43.5% for the quarter  ended March 31,  1997.  This
decline  resulted  primarily  from  an  increase  in  revenues  from  capitation
contracts, which generate more aggregate dollars to affiliated physician groups,
but less as a  percentage  of physician  groups  revenue  (primarily  due to the
purchase of medical services not provided by the physician group),  and from the
increase in other revenues noted above.

Overall clinic costs,  including purchased medical services,  as a percentage of
physician  groups  revenue  increased  to 55.3% for the quarter  ended March 31,
1998, compared to 46.8% for the quarter ended March 31, 1997.  Purchased medical
services  created  the largest  increase as a  percentage  of  physician  groups
revenue,  increasing  to 13.3% in the quarter  ended March 31, 1998  compared to
3.3% in the quarter ended March 31, 1997.  This increase is directly  related to
the increase in full professional and global capitation revenues.




<PAGE>



General corporate  expenses as a percentage of physician groups revenue declined
to 1.8% for the quarter  ended March 31, 1998,  compared to 4.0% for the quarter
ended March 31, 1997.  While theses costs  declined as a percentage of physician
groups revenue, the amount of general corporate expenses increased 32.3% to $1.1
million for the quarter  ended March 31, 1998 from $0.8  million for the quarter
ended March 31,  1997.  This  increase in expenses  was  expected as the Company
continued to add management and technology infrastructure.

Depreciation  and  amortization  as a  percentage  of physician  groups  revenue
remained  consistent  at 2.1% for both the quarters  ended March 31,  1998,  and
1997.

Net interest  expense as a percentage of physician  groups revenue  increased to
0.8% for the  quarter  ended  March 31,  1998,  compared to 0.5% for the quarter
ended March 31, 1997. This increase is directly  related to the increase in long
term debt relating to the affiliation with additional physician groups.

Provision  for income  taxes  reflects an effective  rate of 38%, the  Company's
estimated effective rate for all of 1998.

Liquidity and Capital Resources

At March 31, 1998, the Company had working capital of $20.1 million, compared to
$20.5  million at December 31,  1997.  Cash used in  operations  for the quarter
ended March 31, 1998 was $2.0  million.  This is  primarily  attributable  to an
overall increase in accounts  receivable  resulting from the Company's growth in
revenues. Net accounts receivable of $28.0 million at March 31, 1998 amounted to
42 days of net physician groups revenue (excluding other revenues) for the first
quarter of 1998,  compared to 41 days for the fourth quarter of 1997. Net income
combined with  depreciation  and  amortization,  deferred taxes, and in due from
affiliated  physician  groups and an increase in amounts  payable to  affiliated
physician groups and accrued expenses and other liabilities provide $9.3 million
in cash flows.  This was offset by uses of cash of $11.3 million  resulting from
increases in accounts receivable,  management fees receivable,  and other assets
and decreases in accounts payable.

The Company had aggregate  cash  expenditures  for purchases of clinic assets of
$3.6 million for the quarter ended March 31, 1998. This amount relates primarily
to deferred payments associated with previously completed acquisitions.  Capital
expenditures  amounted to $1.2  million for the  quarter  ended March 31,  1998.
Although each of the Company's service agreements with its affiliated  physician
groups  requires  the  Company  to provide  capital  for  equipment,  expansion,
additional physicians and other major expenditures,  no specific amount has been
committed in advance.  Capital  expenditures  are made based  partially upon the
availability  of funds,  the  sources  of  funds,  alternative  projects  and an
acceptable repayment period.





<PAGE>




In April 1998,  the Company  completed an expansion of its Credit  Facility from
$50 million to $70 million. The Credit Facility provides for working capital and
acquisition financing, subject to certain restrictions. The interest rate is, at
the Company's  option,  either the adjusted  30-day  commercial  paper rate, one
month LIBOR plus 2.31% to 3.25%,  or the bank's  prime rate plus 0.25% to 1.13%,
depending on certain debt levels. The Credit Facility,  which expires January 2,
2004, contains certain restrictive  covenants,  including prohibitions on paying
dividends,  limitations on capital  expenditures  and maintenance of minimum net
worth and certain financial ratios.  At March 31, 1998,  outstanding  borrowings
against  the  Credit  Facility  were $35.6  million  and the  current  effective
interest rate was 8.46%.

On April 17, 1998, the Company, through a wholly owned subsidiary,  acquired all
of  the  outstanding  stock  of  Berkshire   Physicians  &  Surgeons,   P.C.,  a
Massachusetts  professional  corporation  ("Berkshire").   Concurrent  with  the
acquisition,  the  Company  entered  into a  long-term  service  agreement  (the
"Service  Agreement") with Berkshire.  Berkshire is a multi-specialty  physician
group  based  in  Pittsfield,  Massachusetts,  comprised  of 79  physicians,  15
mid-level  providers and 15 physicians in an  independent  practice  association
network.  The total  consideration for the transaction was  approximately  $29.5
million,  which  consisted  of a $16.1  million  of  cash,  $7.6 of  convertible
subordinated  notes and $5.8 million of the Company's common stock (to be issued
in 1999). The cash portion of the purchase price was funded with borrowings from
the Company's  revolving credit facility.  The acquisition will be accounted for
using the purchase method of accounting.

In May 1998, the Company  completed a public offering of 6,000,000 shares of its
common stock at a price of $11.00 per share.  Proceeds of $62.7 million,  net of
underwriters'  discount and expenses of the offering were used  primarily to pay
down outstanding borrowings under the Credit Facility.

The Company had cash and cash equivalents of $12.1 million at March 31, 1998. In
addition to this,  the  Company's  principal  sources of liquidity  are accounts
receivable of $28.0 million at March 31, 1998 and availability under the working
capital portion of the bank line of credit of $7.3 million. The Company believes
that the  combination  of these sources will be sufficient to meet the Company's
working  capital  needs  for  the  next  twelve  months.  The  Company's  future
acquisition, expansion and capital expenditure programs will require substantial
amounts of capital resources.  To meet the capital needs of these programs,  the
Company 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  additional  financing  will  be
available on terms acceptable to the Company.




<PAGE>




Forward-Looking Statements

This  report  includes  certain  forward-looking  statements  about  anticipated
results,  including  statements as to operating  results,  liquidity and capital
resources,  and  negotiations  with and  acquisitions  of  additional  physician
groups. Such forward-looking  statements are based upon internal estimates which
are  subject  to  change  because  they  reflect  preliminary   information  and
management  assumptions,  and a variety of  factors  could  cause the  Company's
actual results and experience to differ materially from the anticipated  results
or other expectations expressed in the forward-looking  statements.  The factors
which could cause  actual  results or outcomes to differ from such  expectations
include the extent of the  Company's  success in (i)  consummating  affiliations
with addition  physician  groups;  (ii)  negotiating  managed care contracts and
managing  the  medical  risk  assumed  thereunder,  (iii)  obtaining  additional
financing upon terms acceptable to the Company,  and (iv) negotiating  favorable
reimbursement  rates with third-party  payors,  along with the uncertainties and
other factors described herein and in the Company's public filings and reports.



<PAGE>



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

                  On May 1,  1998,  the  Company  filed a  report  on  Form  8-K
                  reporting an affiliation  with a physician group in Berkshire,
                  Massachusetts, pursuant to Item 2. of Form 8-K.



<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                                  President, Chief Executive                  May 15, 1998
                                                Officer, and Director
                                                (Chief Executive Officer)

/s/ ROBERT D. SMITH
Robert D. Smith                                 Vice President - Finance                    May 15, 1998
                                                (Chief Accounting Officer)



</TABLE>