<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

             [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 EXCHANGE ACT OF 1934

                          Commission File No.: 0-28390

                  PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
             (Exact name of registrant as specified in its Charter)

        Pennsylvania                                      23-2795795
   (State of incorporation                             (I.R.S. Employer
       or organization)                             Identification Number)

                    651 East Park Drive, Harrisburg, PA 17111
                    (Address of Principal Executive Offices)

               Registrant's Telephone Number, including area code:
                                 (800) 671-7747

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 the filing
requirements for at least the past 90 days.

                                   Yes   X     No       ,
                                      -------    -------

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

         4,087 shares of Class A common stock, $.01 par value per share

         1,074 shares of Class B common stock, $.01 par value per share

                              (as of July 31, 1999)

                 Transitional Small Business Disclosure Format:
Yes  X     No
   -----     -----
<PAGE>

PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.

Consolidated Balance Sheets

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                                                          June 30,            December 31,
Assets                                                                     1999                  1998
---------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                 <C>
Current assets:
     Cash and cash equivalents                                            $ 523,749          $ 2,608,269
     Short-term investment securities                                       199,250              400,750
     Accrued interest income                                                103,591              145,654
     Premiums receivable, net                                                68,914              171,766
     Income taxes receivable                                                 28,853               28,853
     Other assets                                                           566,578              245,056
---------------------------------------------------------------------------------------------------------

Total current assets                                                      1,490,935            3,600,348
---------------------------------------------------------------------------------------------------------

Long-term investment securities                                           6,061,082            6,860,624
Equipment (net of accumulated depreciation of $801,768
     and $684,830, respectively)                                            557,368              571,911
---------------------------------------------------------------------------------------------------------

Total assets                                                              8,109,385           11,032,883
---------------------------------------------------------------------------------------------------------

Liabilities and Stockholders' Equity
---------------------------------------------------------------------------------------------------------
Current liabilities:
     Medical claims liabilities                                           3,845,484            1,945,722
     Accounts payable                                                        48,788              152,558
     Accrued expenses                                                       176,620               44,350
     Other liabilities                                                      193,000               29,075
---------------------------------------------------------------------------------------------------------

Total current liabilities                                                 4,263,892            2,171,705
---------------------------------------------------------------------------------------------------------

Stockholders' Equity:
Class A common voting stock, $.01 par value, 40,000 shares
     authorized;  4,087 shares issued and outstanding                            41                   41
Class B common non-voting stock, $.01 par value, 100,000 shares
     authorized;  1,074 shares issued and outstanding                            11                   11
Additional paid in capital                                               21,220,777           21,220,777
Accumulated deficit                                                     (17,324,675)         (12,364,727)
Net unrealized gain (loss) on investment securities, net of taxes           (50,661)               5,076
---------------------------------------------------------------------------------------------------------

Total stockholders' equity                                                3,845,493            8,861,178
---------------------------------------------------------------------------------------------------------

Total liabilities and stockholders' equity                              $ 8,109,385         $ 11,032,883
---------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       2
<PAGE>

PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.

Consolidated Statements of Income and Comprehensive Income

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                         Three Months        Three Months          Six Months          Six Months
                                                            Ended              Ended                 Ended              Ended
                                                        June 30, 1999       June 30, 1998        June 30, 1999       June 30, 1998
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                  <C>                  <C>                  <C>
Revenues:
     Premiums                                           $  5,757,343         $  1,141,256         $ 10,733,929         $  2,069,494
     Consulting                                                 --                 65,000                 --                 65,000
     Investment income, net                                  114,700              156,861              233,380              337,549
-----------------------------------------------------------------------------------------------------------------------------------

Total Revenue                                              5,872,043            1,363,117           10,967,309            2,472,043
-----------------------------------------------------------------------------------------------------------------------------------

Expenses:
     Health care services                                  7,386,398            1,287,491           12,582,492            2,000,567
     Salary and benefits                                     886,681              662,554            1,867,967            1,350,334
     Operating  expenses                                     672,152              456,061            1,205,192              846,414
     Professional services                                    55,815              135,480              143,475              213,344
     Other taxes                                                 549                1,072               11,192                3,557
     Depreciation                                             59,917              100,608              116,939              199,741
-----------------------------------------------------------------------------------------------------------------------------------

Total expenses                                             9,061,512            2,643,266           15,927,257            4,613,957
-----------------------------------------------------------------------------------------------------------------------------------


Net loss                                                $ (3,189,469)        $ (1,280,149)        $ (4,959,948)        $ (2,141,914)
-----------------------------------------------------------------------------------------------------------------------------------

Other comprehensive income, net of income taxes:
     Unrealized (loss) on investments                        (39,021)                --                (55,737)                --

Comprehensive loss                                        (3,228,490)          (1,280,149)          (5,015,685)          (2,141,914)

Net loss per common share                               $    (617.99)        $    (248.04)        $    (961.04)        $    (415.02)

Weighted average common shares                                 5,161                5,161                5,161                5,161
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.

Consolidated Statements of Changes In Stockholders' Equity

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Accumulated
                                     Common             Common Stock       Additional                       Other
                                  Stock Shares            Par Value          Paid In      Accumulated    Comprehensive
                              Class A     Class B    Class A    Class B      Capital        Deficit        Income          Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>         <C>        <C>        <C>       <C>            <C>              <C>         <C>
Balance, December 31, 1997     4,087       1,074      $ 41       $ 11      $21,220,777    $ (6,274,244)    $    --     $14,946,585

Comprehensive Loss
     Net loss                                                                               (6,090,483)                 (6,090,483)

Other Comprehensive Income
     Unrealized gains on
     investments                                                                                               5,076         5,076
-----------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1998     4,087       1,074        41         11       21,220,777     (12,364,727)        5,076     8,861,178
-----------------------------------------------------------------------------------------------------------------------------------

Comprehensive Loss
     Net loss                                                                               (4,959,948)                 (4,959,948)

Other Comprehensive Income
     Unrealized losses on
     investments                                                                                             (55,737)      (55,737)
-----------------------------------------------------------------------------------------------------------------------------------

Balance, June 30, 1999         4,087       1,074      $ 41       $ 11      $21,220,777    $(17,324,675)    $ (50,661)  $ 3,845,493
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.

Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                            Three Months        Three Months       Six Months          Six Months
                                                               Ended               Ended             Ended               Ended
                                                            June 30, 1999      June 30, 1998      June 30, 1999     June 30, 1998
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                <C>                <C>                <C>
Cash flows from operating activities:
     Net loss                                               $ (3,189,469)      $ (1,280,149)      $ (4,959,948)      $ (2,141,914)
     Adjustments to reconcile net loss to net cash
          provided by (used in) operating activities:
         Depreciation, amortization and accretion                 62,641            100,608            124,098            199,741
         Net loss on sale of invetment securities                    198               --                  220               --
         Change in assets and liabilities:
             Accrued interest income                             (47,343)            11,053             42,063             17,085
             Premiums receivable                                 (68,914)            12,398            102,852             21,819
             Other assets                                       (243,093)            32,829           (321,522)            25,472
             Medical claims liabilities                        1,265,722            279,249          1,899,762            431,231
             Accounts payable                                    (71,561)            83,841           (103,770)            74,168
             Accrued expenses                                    120,458             10,832            132,270             (7,555)
             Other liabilities                                    (4,300)           (55,325)           163,924            (55,325)
----------------------------------------------------------------------------------------------------------------------------------

Net cash used in operating activities                         (2,175,661)          (804,664)        (2,920,051)        (1,435,278)
----------------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
     Purchases of investment securities                       (1,560,709)              --           (3,711,902)              --
     Proceeds from maturities of investment securities           400,000               --            4,400,000               --
     Proceeds from sale of investment securities                 149,812               --              249,828               --
     Purchases of equipment                                      (17,908)           (66,778)          (102,395)          (129,929)
----------------------------------------------------------------------------------------------------------------------------------

 Net cash received from (used in) investing activities        (1,028,805)           (66,778)           835,531           (129,929)
----------------------------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents          (3,204,466)          (871,442)        (2,084,520)        (1,565,207)
Cash and cash equivalents, beginning of period                 3,728,215         13,556,875          2,608,269         14,250,640
----------------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of period                    $    523,749       $ 12,685,433       $    523,749       $ 12,685,433
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.

Notes to Consolidated Financial Statements.
-------------------------------------------------------------------------------

 (1)     Description of Business

         Pennsylvania Physician Healthcare Plan, Inc. (the Company) was formed
         as a Pennsylvania for-profit corporation on February 15, 1995, under
         the direction of private practicing physicians to develop a physician
         owned and controlled managed care organization in Pennsylvania.

         The Company received a third party administrator (TPA) license in March
         1997 and a license to operate a preferred provider organization (PPO)
         in April 1997. The Company received a license to operate a health
         maintenance organization (HMO) on March 22, 1999.

         Through June 30, 1997 the Company was in the developmental stage and
         activities consisted primarily of raising capital through a public
         stock offering, hiring a management team, applying for the necessary
         licenses to operate as a managed care organization and developing a
         business plan. In the third quarter of 1997, the Company became
         operational and, accordingly, all developmental stage references in the
         accompanying financial statements were removed.

 (2)     Summary of Significant Accounting Policies

         Unaudited Financial Statements
         The unaudited consolidated financial statements should be read in
         conjunction with the audited consolidated financial statements as of
         December 31, 1998 and reflect, in the opinion of management, all
         adjustments necessary to fairly state the results of operations for
         such periods.

         The results of operations for the three and six month periods ended
         June 30, 1999 and 1998 are not necessarily indicative of the results of
         operations expected for the full year.

         The notes to the financial statements are condensed and may not include
         all information that is required to be disclosed by generally accepted
         accounting principles.

         Principles of Consolidation
         The consolidated financial statements include the financial statements
         of Pennsylvania Physician Healthcare Plan, Inc. and its three
         wholly-owned subsidiaries, Physicians Care HMO, Inc., Physicians Care
         PPO, Inc., and Pennsylvania Physicians Care Service Corp. All
         significant intercompany balances and transactions have been eliminated
         in consolidation.

                                       6
<PAGE>

         Cash and Cash Equivalents
         Cash and cash equivalents include cash and investments with maturities
         of less than three months when purchased. The cost of these investments
         approximates fair market value.

         Investments
         The investment securities portfolio is classified as
         available-for-sale, and carried at fair value. Such fair value is based
         upon values obtained from independent third parties or quoted market
         prices of comparable instruments. Temporary changes in the fair value
         of investments are reflected as a component of other comprehensive
         income.

         Premiums and discounts are amortized and accreted over the term of the
         related securities using a method that approximates the interest
         method, adjusted for prepayments. Realized gains and losses on the sale
         of investment securities (determined by the specific identification
         method) are shown separately in the consolidated statement of
         operations. A decline in the fair value of any investment below cost
         that is deemed other than temporary results in a reduction of the
         carrying amount to fair value through a charge to income. Dividends and
         interest income are recognized when earned.

         Equipment
         Equipment, consisting of furniture and office equipment, data
         processing equipment, leasehold improvements and capitalized software,
         is carried at cost. Depreciation is calculated on the accelerated cost
         recovery method for both financial reporting and income taxes purposes
         over the estimated useful lives of the assets.

         When changes in business circumstances warrant, the Company reviews the
         recoverability of long-lived assets to determine if there has been any
         permanent impairment. This assessment is based on estimated future
         undiscounted cash flows compared with the assets' carrying value. If
         impairment is indicated, a write-down to fair value (normally measured
         by discounting estimated cash flows) would be taken.

         Medical Claims Liability
         Medical claims liabilities consist of actual claims reported but not
         paid and estimates of health care services incurred but not reported.
         The estimated claims incurred but not reported are based on historical
         data, current enrollment, health service utilization statistics, and
         other related information. These accruals are continually monitored and
         reviewed, and, as settlements are made or accruals adjusted,
         differences are reflected in current operations. Changes in assumptions
         for medical costs caused by changes in actual experience could cause
         these estimates to change in the near term.

         Revenue Recognition
         Premiums are recorded as revenue in the month in which members are
         entitled to service. Premiums collected in advance are recorded as
         deferred revenue. Interest income is recorded in the period it is
         earned.

                                       7
<PAGE>

         Reinsurance
         Premiums paid to reinsurers are reported as health care services
         expense and the related reinsurance recoveries, if any, are reported as
         deductions from health care services expense.

         Income Taxes
         Income taxes are accounted for under the asset and liability method.
         Deferred tax assets and liabilities are recognized for the future tax
         consequences attributable to differences between the financial
         statement carrying amounts of existing assets and liabilities and their
         respective tax bases and to operating loss and tax credit
         carryforwards. Deferred tax assets and liabilities are measured using
         enacted tax rates expected to apply to taxable income in the years in
         which those temporary differences are expected to be recovered or
         settled. The effect on deferred tax assets and liabilities of a change
         in tax rates is recognized in income in the period that includes the
         enactment date.

         Earnings Per Common Share
         Earnings per common share have been computed based upon the weighted
         average number of common shares outstanding during each period.

         Effective January 1, 1997, the Company adopted Statement of Financial
         Accounting Standards Number 128 "Earnings Per Share" (FASB No. 128).
         FASB No. 128 requires the presentation of basic earnings per share
         (EPS), calculated by dividing income available to common shareholders
         by the weighted-average number of common shares outstanding during the
         period, and diluted EPS, calculated the same as basic EPS except that
         the denominator is increased to include the number of additional common
         shares that would have been issued if all dilutive potential common
         shares had been issued. FASB No. 128 requires the restatement of EPS
         for all periods presented. The adoption of FASB No. 128 had no effect
         on the Company's calculation of earnings per share in the accompanying
         financial statements.

         Use of Estimates
         Management has made a number of estimates and assumptions relating to
         the reporting of assets and liabilities to prepare these consolidated
         financial statements in conformity with generally accepted accounting
         principles. Actual results could differ from those estimates.

         New Accounting Standard
         In June 1997, the Financial Accounting Standards Board (FASB) issued
         FASB No. 130 "Reporting Comprehensive Income". This statement, which
         establishes standards for reporting and disclosure of comprehensive
         income, is effective for annual periods beginning after December 15,
         1997. The adoption of FASB No. 130 has not had any material impact on
         the Company's financial position or results of operations.

                                       8
<PAGE>

         In June 1997, the FASB issued Statement No. 131, "Disclosures about
         Segments of an Enterprise and Related Information," which became
         effective in 1998. This statement establishes standards for reporting
         selected information about operating segments in the Company's interim
         and annual financial statements. Adoption of this statement did not
         impact the presentation of the Company's financial information.

         In June 1998, the FASB issued Statement No. 133, "Accounting for
         Derivative Instruments and Hedging Activities," which is effective for
         the Company's fiscal year ending December 31, 2001. This statement
         establishes accounting and reporting standards for derivative
         instruments, including those embedded in other contracts, and for
         hedging activities. It requires recognizing derivatives as assets or
         liabilities at fair value on the balance sheet. Management is currently
         evaluating the effects of FASB No. 133 on the Company's financial
         condition and results of operations.

         Year 2000
         Costs incurred by the Company to address Year 2000 issues, to include
         costs for assessment, renovation, testing, verification, and
         implementation, are charged to expense as incurred.

 (3)     Going Concern Matters

         The accompanying financial statements have been prepared on a going
         concern basis, which contemplates the realization of assets and the
         satisfaction of liabilities in the normal course of business. As shown
         in the financial statements for the three month and six month periods
         ended June 30, 1999, the Company incurred comprehensive losses of
         $3,228,490 and $5,015,685, respectively. The Company's net worth at
         June 30, 1999 was $3.8 million. Pennsylvania managed care laws require
         that the Company possess an initial minimum net worth of $1,175,000 to
         operate a PPO and an additional $1,500,000 for a HMO. These factors
         among others may indicate that the Company will be unable to continue
         as a going concern for a reasonable period of time.

         The financial statements do not include any adjustments relating to the
         recoverability and classification of liabilities that might be
         necessary should the Company be unable to continue as a going concern.
         The Company's continuation as a going concern is dependent upon its
         ability to generate sufficient cash flow to meet its obligations on a
         timely basis and to comply with the Pennsylvania managed care
         requirements. The Company is actively seeking out alternative
         opportunities that would likely involve a fundamental change in its
         structure and ownership, including the sale of the Company or the
         merger of the Company into another entity. Any such transaction would
         require state and other regulatory approval, as well as, a two-thirds
         vote of all shareholders entitled to vote in accordance with the
         Company's bylaws.

                                       9
<PAGE>

 (4)     Reinsurance

         The Company has a reinsurance agreement for portions of the risk that
         it has underwritten through its products. PPO risk was reinsured to
         $2,000,000 per member per lifetime in excess of maximum loss retention
         of $75,000 per member per year. Coinsurance ranges from 50% to 90%
         depending on the type of service, age of the member, and service
         facility.

         There were no reinsurance recoveries for the six month periods ended
         June 30, 1999 and 1998.

(5)      Income Taxes

         The net deferred amounts reported by the Company at June 30, 1999 and
         December 31, 1998 are as follows:

<TABLE>
<CAPTION>
                                                                 1999              1998
                                                          ---------------------------------
<S>                                                        <C>                 <C>
                Deferred tax assets:
                   Start up costs                            $    767,582      $  1,039,158
                   Net operating loss carryforward              5,071,597          2,377696
                   Other assets                                     8,022            27,293
                                                          ---------------------------------
                Deferred tax asset                              5,847,201         3,444,147

                Valuation allowance                           (5,847,201)        (3,444,147)
                                                          ---------------------------------
                Net deferred tax asset                       $        --       $        --
                                                          ---------------------------------
</TABLE>

         The Company has Federal net operating losses of approximately
         $12,492,000 available to offset future income before taxes, which
         expire in the period from 2011 to 2019. Management recorded the
         valuation allowance to reduce the deferred income tax benefit to its
         estimated realizable value in light of the Company's lack of profitable
         operating history.

 (6)     Recapitalization

         At a Special Meeting of Shareholders held on January 9, 1999, the
         holders of the Company's Class A voting common stock and Class B
         non-voting common stock approved a Plan of Recapitalization and Amended
         and Restated Articles of Incorporation of the Company. The
         recapitalization changed the voting rights of the Class A shares,
         created new classes of both common and preferred stock, provided for
         the conversion of the outstanding Class A shares and Class B shares to
         shares of a new class of voting common stock and simplified the shares
         of the Company by eliminating the Class C common stock and Class D
         common stock of the Company (no shares of which had been outstanding).

                                       10
<PAGE>

         The Class A shares and Class B shares were changed to permit the
         voluntary conversion into a new class of voting common stock on or
         after January 11, 1999 at the election of the holder and to require
         conversion effective as of January 1, 2000. The conversion ratio is 400
         shares of common stock for each Class A share and 100 shares of common
         stock for each Class B share. The conversion ratio is subject to
         adjustment in the event of a stock split, stock dividend, distribution
         or other transaction affecting the common stock prior to conversion.
         All Class A and Class B shares will also automatically convert to
         shares of common stock on the day before the occurrence of any of the
         following events:

         o        a  reclassification or change of the outstanding common stock
                  (except a stock split or a combination of shares);

         o        a consolidation or merger of the Company (except a merger in
                  which the Company survives without a reclassification or
                  change of the Company's common stock, except for a split or
                  combination of shares); or

         o        the sale or conveyance (except if the sale or conveyance is
                  for cash followed by the immediate distribution of such cash
                  to the shareholders of the Company) to another corporation of
                  all or substantially all of the Company's property.

         Holders who elect to convert their Class A shares or Class B shares to
         common stock must convert all of such shares. As of June 30, 1999, no
         Class A shares or Class B shares had been converted by the holders
         thereof into shares of common stock.

(7)      Restrictions on Cash

         The Company received a license to operate an HMO on March 22, 1999,
         which eliminated certain restrictions on its use of cash proceeds from
         its 1995-1996 stock offering.












                                       11
<PAGE>

Item 2. Management's Discussion and Analysis or Plan of Operation.

        During the second quarter of 1999 the Company incurred significantly
        larger underwriting losses than anticipated. These losses were primarily
        the result of over-utilization of health care services by a relatively
        small number of employer groups. These losses have threatened the
        Company's viability. As a result of these losses and the anticipation of
        future losses, the Company must obtain additional financing in an amount
        in excess of $3 million to sustain its operations and fund its operation
        losses through the foreseeable future. However, the Company's external
        cash requirements exceed its internally generated cash by an amount in
        excess of its ability to borrow or to access the capital markets.

        Consequently, the Company is actively seeking out alternative
        opportunities that would likely involve a fundamental change in its
        structure and ownership, including the sale of the Company or the merger
        of the Company into another entity. To date, however, no definitive
        opportunities have been presented and the Company is unable to predict
        whether such opportunities will be available to it before its financial
        condition deteriorates to the point where it is required to cease
        operations or seek protection from its creditors. Any such transaction
        would likely be subject to state and other regulatory approvals.
        Furthermore, the Company's bylaws require a two-thirds vote of all
        shareholders entitled to vote to approve such a transaction. Receipt of
        such approvals could be an extremely lengthy procedure.

        The Company's net worth at June 30, 1999 was $3.8 million. Pennsylvania
        managed care laws require that the Company possess an initial minimum
        net worth of $1,175,000 to operate a preferred provider organization
        (PPO) and an additional $1,500,000 for a health maintenance organization
        (HMO). The Company is prevented from employing in its operations the
        cash that makes up these reserves. If the Company becomes unable to meet
        the foregoing deposit and net worth requirements its PPO and HMO
        licenses may revoked.

        Year 2000

        The "Year 2000 issue" refers generally to the problem that some software
        may have in determining the correct century for the year. For example,
        software with date-sensitive functions that is not Year 2000 compliant
        may not be able to distinguish whether "00" means 1900 or 2000. To the
        extent that computer programs are unable to properly interpret calendar
        dates beginning in the Year 2000, computers, as well as other
        non-computer equipment using embedded technology, could shut down,
        calculate dates or data based on dates incorrectly, or report
        information inaccurately. Year 2000 issues affect virtually all
        companies and organizations.



                                       12
<PAGE>

        The Company has undertaken a review of its systems infrastructure and
        operations in order to determine the extent to which its computer
        systems will be vulnerable to potential errors and system failures
        arising from the transition of dates from 1999 to 2000. The Company's
        financial and operational computer systems utilize computer software and
        hardware developed by outside vendors. The Company has, through
        communication with its software and hardware vendors, determined which
        internal information technology systems are Year 2000 compliant and
        which systems need updating. Most systems, including the Company's main
        system used to process enrollment, billing and accounts receivable,
        authorizations, and claims payments, and the Company's local area
        network, have been updated to process calendar dates beginning in the
        Year 2000. Updates on the remaining systems are scheduled to be
        completed in August, 1999. Additionally, the Company's telephone system
        has been updated to be Year 2000 compliant. Testing of the various
        systems to verify that dates beginning in the Year 2000 will be
        processed accurately began in June, 1999 and should be completed in
        October, 1999.

        The Company does not expect the costs associated with this upgrade to be
        material to the Company's consolidated financial position, results of
        operations or cash flows. However, the Company is currently unable to
        determine the potential impact, if any, that could result from any of
        its vendors' failure to address this issue adequately. Despite any of
        its vendors' efforts, the Company's system infrastructure, software and
        hardware may still be materially adversely impacted by the transition to
        Year 2000 through the inability to accurately and timely process benefit
        claims, the inability to update customers' accounts, the inability to
        process financial transactions, the inability to bill customers, the
        inability to assess exposure to risks, the inability to determine
        liquidity requirements or report accurate financial data to management,
        shareholders, customers, regulators and others, business interruptions
        or shutdowns, reputational harm, increased scrutiny by regulators, and
        litigation related to Year 2000 issues, any of which events could have a
        material adverse effect on the Company's business, results of operations
        and financial condition.

        In addition, the Company has begun to develop contingency/recovery plans
        aimed at ensuring the continuity of critical business functions before
        December 31, 1999. As part of that process, the Company has begun to
        develop reasonably likely failure scenarios for its critical information
        technology systems and external relationships. Once these scenarios are
        identified, the Company will develop plans that are designed to reduce
        the impact on the Company and provide methods for returning to normal
        operations if one or more of those scenarios occur.

        Year 2000 considerations may also have an effect on some third parties
        with whom the Company does business and thus indirectly affect the
        Company. One or more of the Company's physician providers, other health
        care providers or other contractors or suppliers may encounter errors
        and system failures arising from the transition of dates from 1999 to
        2000, which would be beyond the Company's control. For example, the
        Company could be responsible if a hospital system failed to adequately
        address its Year 2000 issues and a patient insured by the Company were
        to suffer as a result of such failure. The Company has initiated contact
        with many of its providers, contractors and suppliers to determine if
        these third parties are appropriately responding to their Year 2000
        issues. The Company will also review regulatory filings or audited
        financial statements for information on these third parties' state of
        readiness as it relates to Year 2000 issues. It is not possible to
        quantify the cost to the Company with respect to third parties with Year
        2000 problems, although the Company does not anticipate that it will
        have a material adverse effect on its business, results of operations
        and financial condition.


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<PAGE>

                         PART II - OTHER INFORMATION

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

(a)      Exhibits

         10.a     Second Amendment to Executive Employment Agreement of
                  Richard A Felice
         10.a     Executive Employment Agreement of T. Clark Phillip
         27       Financial Data Schedule

(b)      Reports on Form 8-K

         None


                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be filed on its behalf be the undersigned, thereunto duly
authorized:

                               Pennsylvania Physician Healthcare Plan, Inc.
                                               (Registrant)

Date:  August 13, 1999           By: /s/ Richard A. Felice
       -------------------           --------------------------------------
                                     Richard A. Felice, President and Chief
                                     Executive Officer


Date:  August 13, 1999           By: /s/ T. Clark Phillip
       -------------------           --------------------------------------
                                       T. Clark Phillip, Treasurer and Chief
                                       Financial Officer
















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