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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 June 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                                July 31, 1999
              $.01 par value                                   21,478,998 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
                      June 30, 1999 and December 31, 1998                                                    2

                  Condensed Consolidated Statements of Operations
                      Three Months and Six Months Ended June 30, 1999 and 1998                               3

                  Condensed Consolidated Statements of Cash Flows
                      Six Months Ended June 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 4. Submission of Matters to a Vote of Security Holders                                        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>

                                                                              June 30, 1999         December 31,
                                                                               (Unaudited)              1998
<S>                                                                       <C>                 <C>
                                     ASSETS
Current assets:
         Cash and cash equivalents                                         $           10,091    $           13,871
         Accounts receivable, net                                                      62,274                51,375
         Management fees receivable                                                     9,287                 8,490
         Due from affiliated medical groups                                             9,948                 8,399
         Deferred tax benefit                                                           2,206                 2,206
         Prepaid expenses and other current assets                                     14,235                13,043
                                                                           ------------------    ------------------
                  Total current assets                                                108,041                97,384
                                                                           ------------------    ------------------
Property and equipment, net                                                            20,909                15,125
Intangible assets, net                                                                188,523               153,402
Long term receivables                                                                  43,650                40,429
Other assets                                                                            3,478                 3,133
                                                                           ------------------    ------------------
                  Total assets                                             $          364,601    $          309,473
                                                                           ==================    ==================

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
         Accounts payable                                                  $            4,674    $            4,683
         Payable to affiliated medical groups                                          10,511                 9,455
         Accrued salaries, wages and benefits                                           8,722                 8,146
         Accrued purchased medical services                                             5,289                 6,087
         Accrued expenses and other current liabilities                                 6,110                 6,741
         Current maturities of long term debt                                           3,879                 3,232
         Current portion of obligations under capital leases                              584                   557
         Current portion of deferred purchase price                                     2,628                 2,137
         Income taxes payable                                                           1,538                   847
                                                                           ------------------    ------------------
                  Total current liabilities                                            43,935                41,885
                                                                           ------------------    ------------------
Long term debt, net of current maturities                                             124,751                58,130
Obligations under capital leases, net of current portion                                  432                   701
Deferred purchase price, net of current portion                                         9,306                25,290
Convertible subordinated notes payable                                                  7,564                 7,635
Deferred income tax liability                                                           4,058                 2,872
Other long term liabilities                                                               393                   312
                                                                           ------------------    ------------------
                  Total liabilities                                                   190,439               136,825
                                                                           ------------------    ------------------

Stockholders' equity:
         Common stock                                                                     215                   211
         Additional paid-in capital                                                   155,104               152,786
         Common stock to be issued                                                        155                 6,005
         Treasury stock                                                                (2,077)               -
         Stockholder notes receivable                                                    (250)                 (370)
         Retained earnings                                                             21,015                14,016
                                                                           ------------------    ------------------
                  Total stockholders' equity                                          174,162               172,648
                                                                           ------------------    ------------------
                  Total liabilities and stockholders' equity               $          364,601    $          309,473
                                                                           ==================    ==================
</TABLE>


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

<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             Six Months Ended
                                                                   June 30,                      June 30,
                                                          --------------------------    ---------------------------
                                                             1999           1998            1999           1998
                                                          -----------    -----------    -----------     -----------
<S>                                                       <C>            <C>            <C>             <C>

Net revenue                                               $    76,021    $    51,994    $   149,113     $    92,606

Operating expenses:
         Clinic salaries and benefits                          27,277         17,715         52,983          31,055
         Clinic rent and lease expense                          7,134          3,862         13,380           7,061
         Clinic supplies                                        8,970          6,337         17,559          11,195
         Purchased medical services                             9,751         10,656         21,663          18,788
         Other clinic costs                                     9,870          5,636         18,689           9,958
         General corporate expenses                             2,253          1,292          4,263           2,375
         Depreciation and amortization                          3,110          1,749          5,886           3,043
         Interest expense                                       1,266           (170)         2,277             302
                                                          -----------    ------------   -----------     -----------
                  Total                                        69,631         47,077        136,700          83,777
                                                          -----------    -----------    -----------     -----------

Income before provision for income taxes                        6,390          4,917         12,413           8,829

Provision for income taxes                                      2,428          1,868          4,717           3,355
                                                          -----------    -----------    -----------     -----------

Net income                                                $     3,962    $     3,049    $     7,696     $     5,474
                                                          ===========    ===========    ===========     ===========


Earnings per share:
         Basic                                            $      0.19    $      0.17    $      0.36     $      0.35
                                                          ===========    ===========    ===========     ===========
         Diluted                                          $      0.18    $      0.15    $      0.34     $      0.30
                                                          ===========    ===========    ===========     ===========

Weighted average number of common shares outstanding:
         Basic                                                 20,867         17,841         21,163          15,784
                                                          ===========    ===========    ===========     ===========
         Diluted                                               22,572         20,555         22,952          18,511
                                                          ===========    ===========    ===========     ===========

</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)
                    (All amounts are expressed in thousands)

<TABLE>
<CAPTION>

                                                                                   Six Months Ended June 30,
                                                                                  1999                  1998
<S>                                                                       <C>                   <C>
Cash flows from operating activities:
     Net income                                                            $            7,696    $            5,474
     Adjustments  to  reconcile  net  income to
     net cash  provided  by (used in)
     operating activities (net of effects
     of purchase transactions):
         Depreciation and amortization                                                  5,886                 3,043
         Provision for deferred income taxes                                              786                   582
         Changes in assets and liabilities:
              Accounts receivable                                                      (5,875)               (9,923)
              Management fees receivable                                                 (797)               (5,283)
              Due from affiliated medical groups                                         (745)                1,349
              Prepaid expenses and other assets                                        (2,127)               (1,883)
              Accounts payable                                                         (1,507)               (1,210)
              Payable to medical groups                                                   (20)                 (231)
              Accrued expenses and other liabilities                                   (1,883)                1,251
                                                                           ------------------    ------------------
Net cash provided by (used in) operating activities                                     1,414                (6,829)
                                                                           ------------------    ------------------

Cash flows from investing activities:
     Purchases of property and equipment                                               (2,765)               (2,136)
     Purchases of clinic assets, net of cash                                          (67,316)              (29,648)
     Collection of notes receivable                                                     1,462                 -
                                                                           ------------------    ------------------
Net cash used in investing activities                                                 (68,619)              (31,784)
                                                                           ------------------    ------------------

Cash flows from financing activities:
     Borrowings under long-term debt                                                   69,000                32,020
     Payments on long-term debt                                                        (2,512)              (63,236)
     Payments on capital lease obligations                                               (242)                 (247)
     Payment of deferred financing costs                                                 (313)                -
     Proceeds from issuance of common stock, net                                          286                72,788
     Purchase of treasury shares                                                       (2,914)                -
     Collection of stockholder note receivable                                            120                 -
                                                                           ------------------    ------------------
Net cash provided by financing activities                                              63,425                41,325
                                                                           ------------------    ------------------

Increase (decrease) in cash and cash equivalents                                       (3,780)                2,712

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

Cash and cash equivalents, end of period                                   $           10,091    $           18,473
                                                                           ==================    ==================
Supplemental disclosure of cash flow information
     Cash paid during the period for -
         Interest expense                                                  $            3,125    $            1,781
         Income taxes                                                      $            3,153    $            2,640

</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,  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.

Net Revenue

Net revenue  represents  medical  groups and other revenues less amounts paid to
medical  groups.  The amounts paid to medical  groups  (typically  80-85% of the
medical  groups'  operating  income)   represents   distributions  paid  to  the
physicians  pursuant  to the  service  agreements  between  the  Company and the
medical groups and primarily  consists of the cost of the  affiliated  physician
services. 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-physician personnel utilized by the group.






<PAGE>



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

                                                              Three Months Ended             Six Months Ended
                                                                   June 30,                      June 30,
                                                          --------------------------    ---------------------------
                                                             1999           1998            1999           1998
                                                          -----------    -----------    -----------     -----------
<S>                                                       <C>           <C>            <C>            <C>
         Medical groups revenue, net                      $   107,133    $    71,537    $   211,049     $   131,216
         Other revenue                                          1,381          1,525          4,249           3,025
                                                          -----------    -----------    -----------     -----------
         Total revenue                                        108,514         73,062        215,298         134,241
         Less- Amounts paid to medical groups                 (32,493)       (21,068)       (66,185)        (41,635)
                                                          -----------    -----------    -----------     -----------
         Net revenue                                      $    76,021    $    51,994    $   149,113     $    92,606
                                                          ===========    ===========    ===========     ===========
</TABLE>

Medical groups revenue  represents the revenue of the medical groups reported at
the estimated  realizable amounts from patients,  third-party payors, and others
for services rendered,  net of contractual and other adjustments.  Revenue under
certain  third-party  payor  agreements  is  subject  to audit  and  retroactive
adjustments.  Provisions for third-party  payor  settlements and adjustments are
estimated in the period the related services are rendered and adjusted in future
periods as 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.   Other  revenue   represents  fees  from   management   consulting,
supplemental  implementation  and transitional  management  services,  and other
miscellaneous revenues.


2.       ACQUISITIONS:

Through  June 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

1998:    Berkshire Physicians & Surgeons             April 1998 (c)                     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 (d)                  Clearwater, FL
</TABLE>

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


<PAGE>



(b)           Boca Raton Medical Associates was operated by the Company 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  with the  medical  group  effective
              February 1, 1999.

(c)           Berkshire  Physicians  and  Surgeons  was  operated by the Company
              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  with the medical group  effective
              April 1, 1998.

(d)           Medical  Associates  of Pinellas was operated by the Company 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  with the  medical  group  effective
              November 1, 1998.

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  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 clinics 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             Six Months Ended
                                                                   June 30,                      June 30,
                                                          --------------------------    ---------------------------
                                                             1999           1998            1999           1998
                                                          -----------    -----------    -----------     -----------
<S>                                                       <C>           <C>             <C>             <C>
         Net revenue                                      $    77,735    $    64,760    $   156,934     $   122,115
                                                          ===========    ===========    ===========     ===========
         Net income                                       $     4,069    $     3,963    $     8,442     $     7,276
                                                          ===========    ===========    ===========     ===========
         Earnings per share
                  Basic                                   $      0.19    $      0.22    $      0.40     $      0.45
                                                          ===========    ===========    ===========     ===========
                  Diluted                                 $      0.18    $      0.19    $      0.37     $      0.39
                                                          ===========    ===========    ===========     ===========

         Weighted average number of common shares outstanding
                  Basic                                        20,867         17,867         21,163          16,007
                                                          ===========    ===========    ===========     ===========
                  Diluted                                      22,572         20,581         22,952          18,734
                                                          ===========    ===========    ===========     ===========
</TABLE>



<PAGE>



The pro  forma  information  presented  above  does not take  into  account  the
Company's public offering of 6,9000,000  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>

                                                                                June 30,            December 31,
                                                                                  1999                  1998
<S>                                                                        <C>                   <C>
         Borrowings under bank credit facility                             $          123,500    $           54,500
         Notes payable issued to medical groups                                         4,939                 6,654
         Other long-term debt                                                             191                   208
                                                                           ------------------    ------------------
                                                                                      128,630                61,362
         Less- current maturities                                                      (3,879)               (3,232)
                                                                           ------------------    ------------------
         Long-term debt, net of current maturities                         $          124,751    $           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 quarter of 1999, the Company  converted  approximately  $71,000 of
convertible  subordinated  notes payable to a medical group into 7,824 shares of
the Company's common stock.

In the first six 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>

                                                                              Three Months           Six Months
                                                                                  Ended                 Ended
                                                                              June 30, 1998         June 30, 1998
<S>                                                                        <C>                   <C>
         Supplemental net earnings per share
              Basic                                                        $             0.16    $             0.30
                                                                           ==================    ==================
              Diluted                                                      $             0.14    $             0.26
                                                                           ==================    ==================


         Supplemental weighted average number of common shares outstanding (in
              thousands)
              Basic                                                                    21,049                20,827
                                                                           ==================    ==================
              Diluted                                                                  23,762                23,554
                                                                           ==================    ==================
</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 $260,000 and $0.01,  respectively,  in the second quarter of 1998.
In the six  months  ending  June  30,  1998,  amortization  expense  would  have
increased and diluted  earnings per share would have decreased by  approximately
$480,000 and $0.02,  respectively due to the change in the estimated life of its
service agreement rights intangible assets.

<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.

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 775 physicians and
155 mid-level providers. In addition, we are associated with approximately 1,080
physicians in independent practice association ("IPA") networks, including those
managed by  Primergy,  Inc.  ("Primergy").  In March  1999,  we  entered  into a
management  agreement with Kingston,  New York-based Primergy, a medical network
management company which owns and operates five IPAs in the Hudson Valley of New
York and has under  contract  more than 500  physicians  and covers  over 35,000
managed care capitated  lives.  The management  contract also includes an option
for  ProMedCo  to acquire  Primergy  based on  satisfaction  of  certain  future
conditions.

When  affiliating  with a medical group,  we generally  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.  Our  agreements  with medical  groups are  structured to provide a
common incentive for growth. 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%.

Our net revenue  represents the medical  groups and other revenues  (reported at
the estimated  realizable  amounts from patients,  third-party payors and others
for services rendered,  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>




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 six months of 1999,  we entered three  additional  communities.
Changes in results of operations  were caused  primarily by expanding into these
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             Six Months Ended
                                                                   June 30,                      June 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                          35.9            34.1           35.5           33.5
         Clinic rent and lease expense                          9.4             7.4            9.0            7.6
         Clinic supplies                                       11.8            12.2           11.8           12.1
         Purchased medical services                            12.8            20.4           14.5           20.3
         Other clinic costs                                    12.9            10.8           12.5           10.8
         General corporate expenses                             3.0             2.5            2.9            2.6
         Depreciation and amortization                          4.1             3.4            3.9            3.3
         Interest expense                                       1.7            (0.3)           1.5            0.3
                                                            -------        --------       --------        -------
Income before provision for income taxes                        8.4             9.5            8.4            9.5
Provision for income taxes                                      3.2             3.6            3.2            3.6
                                                            -------        --------       --------        -------
Net income                                                      5.2%            5.9%           5.2%           5.9%
                                                            =======        ========       ========        =======

Other Financial Information:
     Total revenue, amounts in thousands (1)              $ 108,514       $  73,062      $ 215,298      $ 134,241
     Payor breakdown (2)
         Commercial and discounted fee-for-service             38.9%           42.7%          38.5%          41.1%
         Medicare/Medicaid                                     29.5            27.2           29.0           27.2
         Capitation                                            15.2            18.0           17.0           18.8
         Other                                                 16.4            12.1           15.5           12.9
                                                            -------        --------       --------        -------
                                                              100.0%          100.0%         100.0%         100.0%
                                                            =======        ========       ========        =======
</TABLE>

(1)  Total revenue  represents  medical group and other revenues reported at the
     estimated  realizable amounts from patients,  third-party payors and others
     for services rendered, net of contractual and other adjustments.
(2) As a percentage of total revenue.


<PAGE>

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

Net revenue  increased by 46.2% to $76.0  million for the quarter ended June 30,
1999,  from $52.0  million for the quarter  ended June 30,  1998.  Approximately
74.9% of this increase was  attributable  to  communities we entered since March
31, 1998, with the balance coming from  communities in which we began operations
prior to April 1, 1998.  Same market  growth in net revenue for  communities  in
which we operated  for longer  than one year was over 15% for the quarter  ended
June 30, 1999 compared with the quarter ended June 30, 1998.

Overall clinic costs,  including purchased medical services,  as a percentage of
net revenue decreased to 82.9% for the quarter ended June 30, 1999,  compared to
85.0% for the quarter ended June 30, 1998.  Purchased  medical  services reflect
the cost of services required under managed care contracts that are not provided
by our medical  groups.  Changes in overall clinic costs and individual  expense
categories  as  percentages  of net revenue are due to changes in the mix of our
medical  groups.  The primary  reason for the decrease was a change in purchased
medical  services,  which  decreased to 12.8% as a percentage of net revenue for
the second quarter of 1999 compared to 20.4% in the second quarter of 1998. This
change  resulted  from the  relative  decrease in full  professional  and global
capitation  revenue caused by our affiliation with additional medical groups and
from the conversion of one of our payor contracts from a global  capitation to a
discounted  fee-for-service  payment contract. The decrease in purchased medical
services was  partially  offset by increases  in clinic  salaries and  benefits,
clinic rent and lease  expense and other clinic costs which  increased to 35.9%,
9.4% and 13.0%,  respectively,  in the second quarter of 1999 compared to 34.1%,
7.4% and 10.8%, 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 3.0% for
the quarter ended June 30, 1999, compared to 2.5% for the quarter ended June 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 4.1%
for the quarter ended June 30, 1999, compared to 3.3% for the quarter ended June
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
our recent  affiliations  having a  relatively  higher  amount of  property  and
equipment.

Net interest  expense as a percentage  of net revenue  increased to 1.7% for the
quarter  ended June 30, 1999,  compared to (0.3)% for the quarter ended June 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 second  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.


<PAGE>


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

Six Months Ended June 30, 1999 Compared With Year Ended June 30, 1998

Net revenue  increased by 61.0% to $149.1  million for the six months ended June
30,  1999,  from $92.6  million  for the six months  ended June 30,  1998.  Over
two-thirds 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 six months  ended June 30, 1999  compared  with the six months ended
June 30, 1998.

Overall clinic costs,  including purchased medical services,  as a percentage of
net revenue decreased to 83.3% for the six months ended June 30, 1999,  compared
to 84.3% for the six months  ended June 30,  1998.  Purchased  medical  services
reflect the cost of services  required under managed care contracts that are not
provided by our medical  groups.  Changes in overall clinic costs and individual
expense  categories as  percentages of net revenue are due to changes in the mix
of our medical  groups.  The  primary  reason for the  decrease  was a change in
purchased  medical  services,  which  decreased to 14.5% as a percentage  of net
revenue  for the six months  ending  June 30, of 1999  compared  to 20.3% in the
first six months of 1998.  This change  resulted  from the relative  decrease in
full professional and global  capitation  revenue caused by our affiliation with
additional  medical  groups and from the  conversion  of one of our larger payor
contracts  from a  capitation  basis  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 35.5%,  9.0% and 12.5%,  respectively,  in
the six  months  ending  June 30,  1999  compared  to  33.5%,  7.6%  and  10.8%,
respectively,  in the six months  ending June 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 six months ended June 30, 1999,  compared to 2.6% for the quarter ended June
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 3.9%
for the six months  ended  June 30,  1999,  compared  to 3.3% for the six months
ended June 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 our  recent  affiliations  having a  relatively  higher  amount of
property and equipment.


<PAGE>

Net interest  expense as a percentage  of net revenue  increased to 1.5% for the
six months ended June 30,  1999,  compared to 0.3% for the six months ended June
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 six months  ending June 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  addressing  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 and
updates the Board 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 but  four of our  most  recent  affiliations  that is Year  2000
compliant.  The remaining  four  locations are  scheduled for  installation  and
training  during the third and fourth  quarters  of 1999.  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.

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.


<PAGE>

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 plan to have this effort completed during the third quarter of 1999.

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  $2.8 million on our Year 2000 effort and estimate  another
$700,000 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 June 30, 1999,  we had working  capital of $64.1  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 six months ended
June 30, 1999 was $1.4  million.  Net income,  combined  with  depreciation  and
amortization and deferred taxes,  provided $14.4 million in cash flows. This was
offset by uses of cash of $13.0 million that resulted from increases in accounts
receivable,  management fees receivable,  due from affiliated medical groups and
other assets,  and decreases in accounts payable,  amounts payable to affiliated
groups and accrued expenses and other liabilities.

Our accounts receivable  increased $5.9 million,  net of the effects of purchase
accounting since December 31, 1998.  Approximately $1.7 million of this increase
resulted from an increase in revenues in the second  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 $2.2 million
resulted from an increase in accounts  receivable days  outstanding from 47 days
to 50 days, most of which is related to two affiliated groups.  Although 50 days
outstanding   compares  favorably  within  the  healthcare   industry,   we  are
nonetheless  focusing  significant  efforts  at these  clinics  to  improve  the
collections and the overall business office processes.


<PAGE>


We had  aggregate  cash  expenditures  for  purchases of clinic  assets of $67.3
million for the six months ended June 30, 1999.  Of this amount,  $23.6  million
related  primarily to deferred  payments  associated with  previously  completed
acquisitions  and $43.7 million related to  acquisitions  completed in the first
six months of 1999.  Our capital  expenditures  amounted to $2.8 million for the
six months ended June 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 six 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 $152.5 million for  acquisitions and
general working  capital.  This  commitment can increase to $165.0 million.  The
current  commitment  is comprised of a $137.5  million  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 June
30, 1999,  the effective  interest rate under the credit  facility was 7.1%. 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, we paid a commitment fee and
other closing costs of approximately $1.3 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 June 30,  1999,  we had $123.5  outstanding  and $28.7
million available, subject to certain conditions under the agreement.

We had cash and cash  equivalents of $10.1 million at June 30, 1999. In addition
to this,  our  principal  sources of  liquidity  at June 30, 1999 were  accounts
receivable of $62.3 million and  availability  of $28.7 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.

<PAGE>


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 June 1999,  the Company  issued  400,301 shares of Common Stock to the former
stockholders of a medical group as post-closing adjustments to the consideration
payable by the  Company in  connection  with its  acquisition  by the Company in
April 1998. This issuance was exempt from registration under the Securities Act,
pursuant to section 4(2) of the Act as it did not involve any public offering.


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

The Company held its annual  meeting of  stockholders  on May 14,  1999.  At the
meeting,  the stockholders elected David T. Bailey, M.D. and Jack W. McCaslin as
Class II members of the Board of Directors  with terms  expiring in 2002.  Other
members of the Board of Directors whose terms continue after the meeting include
James F. Herd, M.D. and Charles J. Buysse,  M.D., who are Class I directors with
terms expiring in 2001, and Richard E. Ragsdale,  E. Thomas Chaney, and H. Wayne
Posey, who are Class III directors with terms expiring in 2000.

The voting results of the election of directors are as follows:

                                                   Votes              Withheld
               Nominee:                             For               Authority
        David T. Bailey, M.D.                      14,659,190         1,581,674
        Jack W. McCaslin                           14,454,378         1,786,486

In  addition,  the  stockholders  approved an amendment to the 1996 Stock Option
Plan to  increase  the  number of shares of common  stock  that  might be issued
pursuant to stock options granted under the plan by 1,000,000 shares.

The  voting  results  for the  amendment  to the 1996 stock  option  plan are as
follows:

         For                                        11,520,490
         Against                                     4,602,924
         Abstain                                       117,450


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           August 16, 1999
                                                Officer, and Director
                                                (Chief Executive Officer)

/s/ ROBERT D. SMITH
Robert D. Smith                                 Senior Vice President - Finance and            August 16, 1999
                                                Chief Financial Officer
                                                (Chief Accounting Officer)

</TABLE>