<PAGE>
===============================================================================

                                   UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549


                                     FORM 10-Q


[x]               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934

                    For the quarterly period ended June 30, 1997

                                         OR

[ ]              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)


                 For the Transition period from         to        .

                           Commission file number 0-28656

                              KARRINGTON HEALTH, INC.
               (Exact name of registrant as specified in its charter)

                      OHIO                         31-1461482
        (State or other jurisdiction of           (IRS Employer
         incorporation or organization)         Identification No.)



                                919 Old Henderson Road
                                Columbus, Ohio  43220
                       (Address of principle executive offices)
                                           
                                    (614) 451-5151
                 (Registrant's telephone number, including area code)
                                           
    Indicated by check mark whether registrant (1) has filed all reports 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 registrant was 
required to file such reports), and (2) has been subject to such filing 
requirements for the past 90 days.

                              Yes    X      No        
                                  -------      -------
Shares of Registrant's common shares, without par value, outstanding at 
August 12, 1997 was 6,837,363.

===============================================================================

<PAGE>

                             KARRINGTON HEALTH, INC.
                                     INDEX

PART I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements

         Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . .1

         Consolidated Statements of Operations
         Three and Six Months Ended June 30, 1997 and 1996 . . . . . . . . . .2

         Consolidated Statements of Cash Flows
         Six Months Ended June 30, 1997 and 1996 . . . . . . . . . . . . . .. 3

         Notes to Consolidated Financial Statements. . . . . . . . . . . . .4-6

         Item 2.   Management's Discussion and Analysis of 
         Financial Condition and Results of Operations . . . . . . . . . . 7-11

PART II. OTHER INFORMATION

         Item 2.   Change in Securities. . . . . . . . . . . . . . . . . . . 12

         Item 6.  Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 12

         Signature Page. . . . . . . . . . . . . . . . . . . . . . . . . . . 13



Note:    Items 1 and 3 through 6 of Part II are omitted because they are not
         applicable.


<PAGE>

PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS


                              KARRINGTON HEALTH, INC.
                                 AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                      ASSETS

                                                   JUNE 30,    DECEMBER 31,
                                                     1997         1996
                                                 ------------  -----------
                                                  (UNAUDITED)
Current assets:
  Cash and cash equivalents. . . . . . . . . . . $  6,146,680  $12,283,185
  Accounts receivable. . . . . . . . . . . . . .      432,927      105,315
  Amounts due from affiliates. . . . . . . . . .    1,163,879      678,893
  Prepaid expenses . . . . . . . . . . . . . . .      194,294      170,254
                                                 ------------  -----------
    Total current assets . . . . . . . . . . . .    7,937,780   13,237,647
Property and equipment -- net. . . . . . . . . .   89,220,498   52,011,748
Other assets -- net. . . . . . . . . . . . . . .   11,997,603    4,300,546
                                                  -----------  -----------
    Total assets . . . . . . . . . . . . . . . . $109,155,881  $69,549,941
                                                 ------------  -----------
                                                 ------------  -----------

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable and accrued liabilities . . . $  1,701,332  $   788,981
  Construction payables. . . . . . . . . . . . .    3,520,322    3,181,560
  Notes payable - banks and affiliate. . . . . .    8,915,794          ---
  Payroll and related taxes. . . . . . . . . . .    1,287,639      735,337
  Unearned resident fees . . . . . . . . . . . .      834,265      325,111
  Interest payable . . . . . . . . . . . . . . .      233,802      158,103
  Current portion of long-term obligations . . .      250,736      242,211
                                                 ------------  -----------
    Total current liabilities. . . . . . . . . .   16,743,890    5,431,303

Long-term obligations. . . . . . . . . . . . . .   60,378,145   32,758,692
Deferred income taxes. . . . . . . . . . . . . .      584,000      683,000
Shareholders' equity:
  Common shares. . . . . . . . . . . . . . . . .   33,484,712   31,984,712
  Accumulated deficit. . . . . . . . . . . . . .   (2,034,866)  (1,307,766)
                                                 ------------  -----------
    Total shareholders' equity . . . . . . . . .   31,449,846   30,676,946
                                                 ------------  -----------
Total liabilities and shareholders' equity . . . $109,155,881  $69,549,941
                                                 ------------  -----------
                                                 ------------  -----------


                           SEE ACCOMPANYING NOTES.

                                    1

<PAGE>

                              KARRINGTON HEALTH, INC.
                                 AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF OPERATIONS
                  THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996

                                     (UNAUDITED)

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED            SIX MONTHS ENDED
                                                               JUNE 30                       JUNE 30
                                                      -------------------------     -------------------------
                                                         1997           1996           1997           1996
                                                      ----------     ----------     ----------    -----------
<S>                                                   <C>            <C>           <C>            <C>
Revenues:
    Residence operations . . . . . . . . . . . . . .  $4,230,302     $2,016,630     $7,169,790    $ 3,838,794
    Development and management fees. . . . . . . . .     341,966        303,981        536,118        425,987
                                                      ----------     ----------     ----------    -----------
         Total revenues. . . . . . . . . . . . . . .   4,572,268      2,320,611      7,705,908      4,264,781
Expenses:
    Residence operations . . . . . . . . . . . . . .   3,098,597      1,448,140      5,173,795      2,760,092
    General and administrative . . . . . . . . . . .     924,701        683,203      1,814,883      1,258,097
    Rent expense . . . . . . . . . . . . . . . . . .      51,939         16,385         99,531         31,960
    Depreciation and amortization. . . . . . . . . .     606,367        292,711        981,480        586,869
                                                      ----------     ----------     ----------    -----------
         Total expenses. . . . . . . . . . . . . . .   4,681,604      2,440,439      8,069,689      4,637,018
                                                      ----------     ----------     ----------    -----------
 
Operating loss . . . . . . . . . . . . . . . . . . .    (109,336)      (119,828)      (363,781)      (372,237)
 
Interest expense . . . . . . . . . . . . . . . . . .    (588,504)      (519,150)      (737,494)      (833,934)
Interest income. . . . . . . . . . . . . . . . . . .     118,289             --        273,349             --
Equity in net earnings
  (loss) of unconsolidated entities. . . . . . . . .     (19,223)           124        (43,174)        16,623
                                                      ----------     ----------     ----------    -----------
 Loss before income taxes. . . . . . . . . . . . . .    (598,774)      (638,854)      (871,100)    (1,189,548)
 Deferred income taxes . . . . . . . . . . . . . . .      35,000             --        144,000             --
                                                      ----------     ----------     ----------    -----------
 Net loss. . . . . . . . . . . . . . . . . . . . . .  $ (563,774)    $ (638,854)    $ (727,100)   $(1,189,548)
                                                      ----------     ----------     ----------    -----------
                                                      ----------     ----------     ----------    -----------
 Proforma information:
 Net loss per share. . . . . . . . . . . . . . . . .  $     (.08)    $     (.15)       $  (.11)       $  (.27)
 Weighted average common shares outstanding. . . . .   6,792,000      4,350,000      6,746,000     4,350,000 
</TABLE>


                            SEE ACCOMPANYING NOTES.

                                     2

<PAGE>
                                KARRINGTON HEALTH, INC.
                                   AND SUBSIDIARIES
                                           
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                       SIX MONTHS ENDED JUNE 30, 1997 AND 1996
                                           
                                     (UNAUDITED)

<TABLE>
<CAPTION>
                                                            SIX MONTHS ENDED
                                                                JUNE 30,
                                                       ---------------------------
                                                            1997         1996
                                                       ------------    -----------
<S>                                                    <C>             <C>
OPERATING ACTIVITIES
Net loss . . . . . . . . . . . . . . . . . . . . . .   $   (727,100)   $(1,189,548)
Adjustments to reconcile net loss to net
 cash provided by (used in) operating activities:
    Depreciation and amortization. . . . . . . . . .        981,480        586,869
    Deferred income taxes. . . . . . . . . . . . . .       (144,000)            --
    Straight-line rent expense . . . . . . . . . . .          5,327          7,877
    Equity in net (earnings) loss of                                  
     unconsolidated entities . . . . . . . . . . . .         43,174        (16,623)
    Change in operating assets and liabilities:                       
      Accounts receivable. . . . . . . . . . . . . .       (812,598)       (40,871)
      Prepaid expenses . . . . . . . . . . . . . . .         (8,015)       (49,118)
      Accounts payable and accrued liabilities . . .        912,351       (126,230)
      Other liabilities. . . . . . . . . . . . . . .        575,662       (157,678)
                                                       ------------    -----------
    Net cash provided by (used in) operating
      activities . . . . . . . . . . . . . . . . . .        826,281       (985,322)

INVESTING ACTIVITIES
Purchases of property and equipment. . . . . . . . .    (20,874,145)    (7,990,652)
Decrease (increase) in restricted cash balances. . .        680,984     (2,101,677)
Acquisition of Kensington - net of cash acquired . .     (2,785,468)            --
Equity contribution to unconsolidated entities . . .             --     (1,062,773)
Payments of pre-opening costs. . . . . . . . . . . .       (548,678)      (257,001)
Payments for organization costs and other. . . . . .        (92,580)       (48,492)
                                                       ------------    -----------
    Net cash used in investing activities. . . . . .    (23,619,887)   (11,460,595)

FINANCING ACTIVITIES
Proceeds from notes payable. . . . . . . . . . . . .      8,915,794             --
Proceeds from mortgages. . . . . . . . . . . . . . .      7,712,917      8,236,368
Repayment of mortgages . . . . . . . . . . . . . . .       (141,856)      (576,072)
Proceeds from debentures due partner . . . . . . . .            ---      5,501,535
Payment for financing fees . . . . . . . . . . . . .        (54,754)      (558,920)
Distributions from unconsolidated entity . . . . . .        225,000        339,766
                                                       ------------    -----------
    Net cash provided by financing activities. . . .     16,657,101     12,942,677
                                                       ------------    -----------
Increase (decrease) in cash and cash equivalents . .     (6,136,505)       496,760
Cash and cash equivalents at beginning of period . .     12,283,185        144,833
                                                       ------------    -----------
Cash and cash equivalents at end of period . . . . .   $  6,146,680    $   641,593
                                                       ------------    -----------
                                                       ------------    -----------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION 
Cash paid for interest . . . . . . . . . . . . . . .   $  1,776,818    $   937,804
                                                       ------------    -----------
                                                       ------------    -----------
</TABLE>

                            SEE ACCOMPANYING NOTES.

                                     3

<PAGE>

                               KARRINGTON HEALTH, INC.
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         FOR THE UNAUDITED THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996



1.  BASIS OF PRESENTATION

    The consolidated financial statements as of June 30, 1997 and for the 
three and six months ended June 30, 1997 and 1996 are unaudited; however, in 
the opinion of management, all adjustments (consisting of only normal 
recurring items) necessary for a fair presentation of the consolidated 
financial statements for these interim periods have been included.  The 
results for the interim period ended June 30, 1997 are not necessarily 
indicative of the results to be obtained for the full fiscal year ending 
December 31, 1997.  Certain information and note disclosures which would 
duplicate the disclosures normally included in annual financial statements 
have been condensed or omitted pursuant to the rules and regulations of the 
Securities and Exchange Commission.

2.  PER SHARE INFORMATION

    The net loss per share for the three and six months ended June 30, 1997 
is computed based on the weighted average number of shares outstanding during 
each period.  For the three and six months ended June 30, 1996, a proforma 
net loss per share calculation is presented.  The proforma net loss per share 
is computed based on the weighted average number of shares outstanding during 
the period based on 4,350,000 common shares outstanding following the July 
1996 reorganization.

    In February 1997, the FASB issued Statement No. 128, "Earnings Per 
Share," which eliminates the presentation of primary earnings per share (EPS) 
and requires the presentation of basic EPS (the principal difference being 
that common stock equivalents are not considered in the computation of basic 
EPS). It also requires dual presentation of basic and diluted EPS on the face 
of the income statement for all entities with complex capital structures.  
The Company is required to adopt Statement No. 128 for its year ending 
December 31, 1997, but is not permitted to apply its provisions to 1997 
interim financial statements.  Basic EPS calculated under the provisions of 
Statement No. 128 would not differ from the net loss per share as disclosed 
in the accompanying statements of operations.

3.  KENSINGTON ACQUISITION

    On April 30, 1997, the Company completed the acquisition, except for one 
entity which was completed on July 1, 1997, of Kensington Management Group, 
Inc. and affiliates (Kensington) of Golden Valley, Minnesota.  Kensington 
operates innovative Alzheimer's care communities under the name Kensington 
Cottages which provide Alzheimer's care programs using medical directors with 
geriatric and dementia specialties.
    
    As of August 11, 1997, Kensington had 11 residences open and one 
residence under construction for a total of  406 licensed beds in three 
states. Development is in progress for 112 additional beds on its Rochester, 
Minnesota campus, and for the establishment of new campus communities with 
approximately 100 beds each in Jacksonville, Florida, and Phoenix, Arizona. 

    The aggregate purchase price approximated $28 million, including cash, 
the issuance of  137,363 of the Company's common shares, and approximately 
$23 million in new and assumed bank debt financing. The transaction was 
accounted for using the purchase method of accounting.  Accordingly, the 
Company began including the operating results of Kensington in its 
consolidated statement of operations subsequent to April 30, 1997 for seven 
of the entities and after July 1, 1997 for the remaining entity.

                                     4

<PAGE>


    As a result of the Kensington acquisition, certain accounts in the June 
30, 1997 consolidated balance sheet increased significantly.  These increases 
included approximately  $17 million in property and equipment, other asset 
increases of approximately $8 million related to costs in excess of net 
assets acquired and deferring financing costs, increases in long-term 
obligations of approximately $20 million and the issuance of $1.5 million of 
common shares of the Company.  On July 1, 1997, the Company completed the 
acquisition of the remaining entity for $1.3 million in cash and the 
assumption of $1.7 million in long-term debt.

    The following unaudited proforma consolidated results of operations for 
the six months ended June 30, 1997 and 1996 reflect the proforma effects of 
the Kensington acquisition as if such transaction had occurred at the 
beginning of the periods presented below.  The unaudited proforma information 
does not purport to be indicative of the Company's results of operations that 
actually would have occurred had the acquisition of Kensington taken place at 
the beginning of the periods presented below, or that may be expected to 
occur in the future.

                                 Six Months Ended
                                    June 30,
                            -------------------------
                                1997          1996
                            -----------    ----------
    Revenues                $10,400,000    $7,380,000
                            -----------    ----------
                            -----------    ----------
    Net loss                $(1,500,000)  $(1,900,000)
                            -----------    ----------
                            -----------    ----------
    Net loss per share      $      (.22)   $     (.42)
                            -----------    ----------
                            -----------    ----------


4.  INVESTMENTS IN UNCONSOLIDATED ENTITIES

    The Company and Catholic Health  Initiatives ("CHI"), have entered into 
joint venture agreements to develop, own and operate assisted living 
residences in Ohio, New Mexico and Colorado.  Each project is owned jointly 
by the Company and CHI, with the Company typically owning approximately 20% 
of the equity of each venture.  As of June 30, 1997, the Company has 
guaranteed $1 million of joint venture debt financing.

    As of June 30, 1997, four residences were open (one stabilized residence 
and three residences in the fill-up phase), two residences were under 
construction, and five other sites were under development.  One residence was 
open at June 30, 1996.  Summarized income statement information of these 
joint ventures is presented below.

<TABLE>
<CAPTION>
                                             Three months ended       Six months ended
                                                  June 30,                 June 30,
                                          -----------------------   ----------------------
                                             1997          1996        1997         1996
                                          ----------     --------   ----------    --------
<S>                                       <C>            <C>        <C>           <C>
Statements of Operations
  Residence revenues . . . . . . . .      $1,112,895     $490,275   $2,182,150    $994,005

  Operating expenses . . . . . . . .         912,633      351,404    1,790,281     682,113
  Depreciation and amortization 
    expense. . . . . . . . . . . . .         195,592       46,077      390,134      88,632
  Interest expense . . . . . . . . .         171,305       92,544      361,100     190,014
                                          ----------     --------   ----------    --------
      Total expenses . . . . . . . .       1,279,530      490,025    2,541,515     960,759
                                          ----------     --------   ----------    --------
  Net income (loss). . . . . . . . .      $ (166,635)    $    250   $ (359,365)   $ 33,246
                                          ----------     --------   ----------    --------
                                          ----------     --------   ----------    --------
</TABLE>

                                     5

<PAGE>


5.  NOTES PAYABLE

    In February 1997, the Company entered into a $3,000,000 revolving credit 
agreement expiring on March 31, 1998.  Interest is payable monthly and 
accrues at the bank's prime rate or LIBOR plus 2% if certain financial ratios 
are met. The company is required to pay a commitment fee of .25% on the 
unused portion of the total credit allowed under the agreement and is 
required to maintain minimum net worth and current ratio amounts.  At June 
30, 1997, $3,000,000 was outstanding under this agreement. 

    In March 1997, the Company entered into a $5,000,000 line of credit 
expiring February 25, 1998.  Interest is payable monthly and, at the 
Company's option, accrues at the bank's prime rate or LIBOR rate plus 2%.  
The Company is required to maintain a minimum current ratio amount, as 
defined, and may borrow up to the lesser of $5,000,000 or the Company's total 
aggregate balance of cash and cash equivalents at the time of borrowing.  At 
June 30, 1997, $4,916,000 was outstanding under this agreement.

    The note payable-affiliate outstanding as of June 30, 1997 represents an 
advance payable to JMAC, Inc., the Company's largest shareholder.  Subsequent 
to June 30, 1997, the entire amount outstanding was repaid.

6.  LONG-TERM OBLIGATIONS

    The Company entered into non-binding financing commitment letters with 
Meditrust Mortgage Investments, Inc. ("MMI"), an affiliate of Meditrust (a 
large health care REIT).  Under the letters, MMI is to provide up to 
approximately $100 million in financing for one existing and approximately 13 
new residences, subject to various terms and conditions.  The financings, 
which may be mortgage or lease financings, are to be entered into on a 
residence-by-residence basis, and are to be for terms of up to 14 years (with 
two additional five-year extension periods for the lease transactions).  
Interest during construction accrues at 2% above the prime rate.  On 
completion of each residence, payments are to be set at an amount equal to 
3.25% over the yield at that time on ten-year U.S. Treasury notes.  
Additional interest or lease payments are contingent on increased revenues of 
a financed residence during specified periods.  As of June 30, 1997, the 
Company has completed mortgage agreements for one existing and three new 
residences and one lease transaction totaling $29 million. Subsequent to June 
30, 1997, the Company completed two lease transactions totaling $13 million.

    On April 30, 1997, the Company entered into a $27.6 million promissory 
note in conjunction with its acquisition of Kensington (see Note 3) and the 
build out of six Kensington cottages on the Rochester, Minnesota campus.  
Interest accrues at 10% and is payable monthly.   Principal and interest 
installments are payable monthly (based on a 25-year amortization period) 
beginning in June 1999 through April 2007 at which time the entire 
outstanding principal balance becomes due. The amount outstanding under the 
agreement was approximately $19.9 million as of June 30, 1997.  The remaining 
funds will be disbursed in two phases at such time that the six cottages 
achieve certain debt service coverage ratios.


                                     6

<PAGE>

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

The following discussion of results of operations and financial condition 
contains forward-looking information that involves risks and uncertainties.  
The Company's actual results could differ materially from those anticipated. 
Factors that could cause or contribute to such differences include, but are 
not limited to, development activity and construction process risks, 
availability of financing for development, government regulations, 
competition, and the challenge to manage rapid growth and business expansion.

OVERVIEW

    The Company derives its revenues from two primary sources: (i) resident 
fees for the delivery of assisted living services and (ii) development fees 
and management services income for development and management of residences 
in which the Company does not own a controlling interest.  Resident fees 
include revenue derived from basic care, community fees, extended care, 
Alzheimer's care and other sources.  Community fees are one-time fees 
generally payable by a resident upon admission, and extended care and 
Alzheimer's care fees are paid by residents who require personal care in 
excess of services provided under the basic care program.  Development fees 
and management services income consist of development fees recognized over 
the development and construction period and management fees which are a 
percentage of the managed residence's total operating revenues.

    The following table sets forth certain information regarding Karrington 
residences as of August 11, 1997:

                                 Company      Jointly          Total
                               Residences      Owned          System
                               ----------     -------         ------
Open                              18             4              22
Under Construction                22             2              24
In Development:
  Under Contract & Zoned           2             1               3
  Under Contract & In Zoning      17             3              20
  In Negotiation                  17             1              18



                                     7

<PAGE>

RESULTS OF OPERATIONS

    The following table sets forth certain data from the respective 
consolidated statements of operations as a percentage of total revenues:

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED            SIX MONTHS ENDED
                                                                JUNE 30,                      JUNE 30,
                                                         ----------------------        ---------------------
                                                           1997           1996           1997          1996
                                                         -------        -------        -------       -------
<S>                                                      <C>            <C>            <C>           <C>
Total revenues. . . . . . . . . . . . . . . . .           100.0%         100.0%         100.0%        100.0%
Expenses:
   Residence operations . . . . . . . . . . . .            67.8           62.4           67.1          64.7
   General and administrative . . . . . . . . .            20.2           29.5           23.6          29.5
   Rent expense . . . . . . . . . . . . . . . .             1.1             .7            1.3            .7
   Depreciation and amortization. . . . . . . .            13.3           12.6           12.7          13.8
                                                         -------        -------        -------       -------
Total expenses. . . . . . . . . . . . . . . . .           102.4          105.2          104.7         108.7
                                                         -------        -------        -------       -------
Operating income (loss) . . . . . . . . . . . .            (2.4)%         (5.2)%         (4.7)%        (8.7)%
                                                         -------        -------        -------       -------
                                                         -------        -------        -------       -------
Average stabilized occupancy percentage . . . .              93%            92%            94%           93%
End of period:
Company owned:
   Number of residences . . . . . . . . . . . .              15              5             15             5
   Number of units. . . . . . . . . . . . . . .             593            245            593           245

Total system, including joint ventures:
   Number of residences . . . . . . . . . . . .              19              6             19             6
   Number of units. . . . . . . . . . . . . . .             802            298            802           298
</TABLE>

THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996

    Total revenue increased $2.3 million, or 97%, to $4.6 million in the 
second quarter of 1997 from $2.3 million in the second quarter of 1996 
primarily due to the growth in resident revenues.  Resident revenues 
increased $2.2 million, or 110%, primarily due to the acquisition of 
Kensington Management Group, Inc. and affiliates ("Kensington") on April 30, 
1997 ($1.1 million), the opening of new residences (total of $.7 million), 
the increased occupancy of residences in the fill-up phase in 1996 ($.3 
million) and an increase resulting from higher average daily resident rates.  
The average daily resident rate, excluding Kensington, increased 6% to $98.25 
in the second quarter of 1997 compared to $92.68 for the same period in 1996.

    Development and project management fees increased $38,000, or 12%, to 
$342,000 in the second quarter of 1997 from $304,000 in the second quarter of 
1996 primarily due to consulting fees associated with third party assisted 
living providers.

    Residence operating expenses increased $1.7 million, or 114%, to $3.1 
million in the second quarter of 1997 from $1.4 million in the second quarter 
of 1996.  As a percentage of residence operating revenues, residence 
operating expenses increased from 72% in the second quarter of 1996 to 73% in 
the second quarter of 1997.

    General and administrative expenses increased $241,000, or 35%, to 
$925,000 in the second quarter of 1997 from $683,000 in the second quarter of 
1996 primarily due to increased compensation, payroll taxes and 

                                    8
<PAGE>

related benefits as a result of hiring additional management and staff at the 
Company's headquarters and the acquisition of Kensington.  The Company 
expects the rate of increase in its general and administrative expenses will 
continue to decrease as new staff needs have been reduced by recent hires.  
In addition, the Company expects general and administrative expenses will 
continue to decrease as a percentage of total operating revenues due to 
anticipated economies of scale resulting from the Company's development 
program.

    Depreciation and amortization increased $314,000, or 107%, to $606,000 in 
the second quarter of 1997 from $293,000 in the second quarter of 1996 
primarily due to the opening of two new residences (total of $241,000) and 
the acquisition of Kensington.

    Interest expense increased $69,000, or 13%, to $589,000 in the second 
quarter of 1997 from $519,000 in the second quarter of 1996 primarily due to 
the opening of two new residences (total of $222,000) and the acquisition of 
Kensington ($283,000), offset by increased capitalization of interest related 
to the Company's increased level of construction activity.

    Interest income resulted primarily from the investment of the Company's 
net proceeds from its initial public offering in July 1996.

SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996

    Total revenue increased $3.4 million, or 81%, to $7.7 million in the 
first six months of 1997 from $4.3 million in the first six months of 1996 
primarily due to the growth in resident revenues.  Resident revenues 
increased $3.3 million, or 87%, primarily due to the acquisition of 
Kensington ($1.1 million), the opening of new residences (total of $1.1 
million), the increased occupancy of residences in the fill-up phase in 1996 
($.8 million) and an increase resulting from higher average daily resident 
rates.  The average daily resident rate, excluding Kensington, increased 7% 
to $97.82 in the first six months of 1997 from $91.35 in the first six months 
of 1996.

    Development and project management fees increased $110,000, or 26%, to 
$536,000 in the first six months of 1997 from $426,000 in the first six 
months of 1996 primarily due to consulting fees associated with third party 
assisted living providers.

    Residence operating expenses increased $2.4 million, or 87%, to $5.2 
million in the first six months of 1997 from $2.8 million in the first six 
months of 1996.   Residence operating expenses were 72% of residence 
operating revenues in the first six months of 1997 and 1996.

    General and administrative expenses increased $557,000, or 44%, to $1.8 
million in the first half of 1997 from $1.3 million in the first half of 1996 
primarily due to increased compensation, payroll taxes and related benefits 
as a result of hiring additional management and staff at the Company's 
headquarters and the acquisition of Kensington.

    Depreciation and amortization increased $395,000, or 67%, to $981,000 in 
the first six months of 1997 from $587,000 in the first six months of 1996 
primarily due to the opening of new residences (total of $366,000) and the 
acquisition of Kensington, offset by lower amortization of preopening costs.

    Interest expense decreased $96,000, or 12%, to $737,000 in the first six 
months of 1997 from $834,000 in the first six months of 1996 primarily due to 
capitalization of interest related to the Company's increased level of 
construction activity ($794,000), offset by the opening of two new residences 
(total of $309,000) and the acquisition of Kensington.

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<PAGE>

    Interest income resulted primarily from the investment of the Company's 
net proceeds from its initial public offering in July 1996.

    The $144,000 deferred tax benefit recorded for the six months ended June 
30, 1997 represents an effective tax rate of 17% resulting from limitations 
associated with the recognition of operating loss carryforwards.  Deferred 
tax assets, including operating loss carryforwards, can be realized by offset 
to existing taxable temporary differences that will reverse in the 
carryforward period.

LIQUIDITY AND CAPITAL RESOURCES

    In July 1996, the Company completed its initial public offering for the 
sale of 2,350,000 common shares. The net proceeds to the Company were 
approximately $27.8 million.  Approximately $5.7 million of the net proceeds 
were used to pay the outstanding principal and accrued interest of 
subordinated debentures payable to a partner.  The balance of the net 
proceeds are being used to finance the development and acquisition of 
additional assisted living residences and for working capital and general 
corporate purposes.  The Company has no current agreements or understandings 
with respect to any acquisition of residences.  Pending such uses, the 
Company has invested the net proceeds in short-term, investment grade, 
interest-bearing securities or certificates of deposit.

    The Company has entered into non-binding financing commitment letters 
with Meditrust Mortgage Investments, Inc. ("MMI"), an affiliate of Meditrust 
(a large health care REIT).  Under the letters, MMI is to provide up to 
approximately $100 million in financing for one existing and approximately 13 
new residences, subject to various terms and conditions.  The financings, 
which may be mortgage or lease financings, are to be entered into on a 
residence-by-residence basis, and are to be for terms of up to 14 years (with 
two additional five-year extension periods for the lease transactions).  
Interest during construction accrues at 2% above the prime rate.  On 
completion of each residence, payments are to be set at an amount equal to 
3.25% over the yield at that time on the ten-year U.S. Treasury notes.  
Additional interest or lease payments are contingent on increased revenues of 
a financed residence during specified periods.  As of June 30, 1997, the 
Company has completed mortgage agreements for one existing and three new 
residences and one lease transaction totaling $29 million.  Subsequent to 
June 30, 1997, the Company completed two lease transactions totaling $13 
million.

    On April 30, 1997, the Company entered into a $27.6 million promissory 
note in conjunction with its acquisition of Kensington and the build out of 
six Kensington cottages on the Rochester, Minnesota campus.  Interest accrues 
at 10% and is payable monthly.   Principal and interest installments are 
payable monthly (based on a 25-year amortization period) beginning in June 
1999 through April 2007 at which time the entire outstanding principal 
balance becomes due. The amount outstanding under the agreement was 
approximately $19.9 million as of June 30, 1997.  The remaining funds will be 
disbursed in two phases at such time that the six cottages achieve certain 
debt service coverage ratios.

    For the six months ended June 30, 1997, cash flows provided by operating 
activities were $826,000 compared to cash flows used by operating activities 
of $985,000 for the six months ended June 30, 1996.  The Company used $23.6 
million and $11.5 million, respectively, to primarily fund residence 
development and acquire Kensington, and received $16.7 million and $12.9 
million, respectively, in cash from financing activities.  At June 30, 1997, 
the Company had restricted cash of $725,000 recorded in other assets on the 
consolidated balance sheet.

    The Company estimates that newly developed residences will generally 
range in cost from $6.5 to $8.0 million, with the development cycle taking up 
to 24 months, from site identification to residence opening.  There can be no 
assurance that financing for the Company's development program will be 
available to the 

                                    10
<PAGE>

Company on acceptable terms, if at all.  Moreover, to the extent the Company 
acquires properties that do not generate positive cash flow, the Company may 
be required to seek additional capital for working capital and liquidity 
purposes.  The Company has been, and will continue to be, dependent on 
third-party financing for its development program.

    The Company expects that the net proceeds from its public offering, 
together with existing financing commitments and additional financing the 
Company anticipates will be available, will be sufficient to fund its 
development programs through December 31, 1997.  Additional financing will be 
required to complete the company's growth plans and to refinance certain 
existing indebtedness. 

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<PAGE>

PART II.  OTHER INFORMATION

Items 1 and 3 through 6 are not applicable.

Item 2.  Change in Securities

         On April 30, 1997, the Company issued 137,363 common shares (valued at
    $1.5 million) to Mr. Jon D. Rappaport as part of its acquisition of
    Kensington Management Group, Inc. and seven affiliated entities.  The
    Company's common shares were issued to Mr. Rappaport in a private placement
    pursuant to Section 4 (2) of the Securities Act of 1933 and Rule 506 of
    Regulation D.  The common shares issued are "restricted" securities and are
    subject to a certain Registration Rights Agreement between Mr. Rappaport
    and the Company.

Item 6.  Exhibits

Exhibit Number       Description

    27.1             Financial Data Schedule, which is submitted electronically
                     to the Securities and Exchange Commission for information
                     only and not filed. 





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<PAGE>

SIGNATURES

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

Dated August 14, 1997


                                            KARRINGTON HEALTH, INC.
                                                      (Registrant)


                                            /S/ RICHARD R. SLAGER
                                            ---------------------------------
                                            Richard R. Slager
                                            Chief Executive Officer


                                            /S/ ALAN B. SATTERWHITE
                                            ---------------------------------
                                            Alan B. Satterwhite
                                            Chief Financial Officer 





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<PAGE>

                             INDEX TO EXHIBITS


Exhibit Number     Description

    27.1           Financial Data Schedule, which is submitted electronically
                   to the Securities and Exchange Commission for information
                   only.









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