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

                                                     Form 10-Q


(Mark One)
                                                         X

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

For the quarterly period ended       March 31, 1999                          

                                                        OR

          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934


For the transition period from                          to                     

Commission File Number 1-8865


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

                          NEVADA                         88-0200415
              (State or other jurisdiction of           (I.R.S. Employer
              incorporation or organization)            Identification No.)


                   2724 NORTH TENAYA WAY
                       LAS VEGAS, NV                         89128
         (Address of principal executive offices)         (Zip Code)

                                 (702) 242-7000
              (Registrant's telephone number, including area code)

     N/A (Former name,  former  address and former fiscal year, if changed since
last report)

     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


     As of April  30,  1999,  there  were  26,785,000  shares  of  common  stock
outstanding.


------------------------------------------------------------------------------






                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES
                                    FORM 10-Q
                    FOR THE THREE MONTHS ENDED MARCH 31, 1999

                                      INDEX
<TABLE>

<CAPTION>
                                                                                                           Page No.

Part I - FINANCIAL INFORMATION

      Item l.     Financial Statements

                  Condensed Consolidated Balance Sheets -
<S>                       <C> <C>               <C> <C>                                                                         <C>
                    March 31, 1999 and December 31, 1998...................................................................     3
 
                  Condensed Consolidated Statements of Operations -
                    three months ended March 31, 1999 and March 31, 1998...................................................     4

                  Condensed Consolidated Statements of Cash Flows -
                    three months ended March 31, 1999 and March 31, 1998...................................................     5

                  Notes to Condensed Consolidated Financial Statements.....................................................     6

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

      Item 3.     Quantitative and Qualitative Disclosures
                    about Market Risk......................................................................................    15

</TABLE>

<TABLE>

Part II - OTHER INFORMATION

                                                           
<S>                                                                                                                            <C>
      Item l.     Legal Proceedings.......................................................................................     15

      Item 2.     Changes in Securities...................................................................................     15

      Item 3.     Defaults Upon Senior Securities.........................................................................     15

      Item 4.     Submission of Matters to a Vote of Security Holders.....................................................     16

      Item 5.     Other Information.......................................................................................     16

      Item 6.     Exhibits and Reports on Form 8-K........................................................................     16

Signature.................................................................................................................     17
</TABLE>



                                                     Page 2

                                               PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements
                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>

<CAPTION>
                                                                                        March 31          December 31
                                                                                            1999              1998      
CURRENT ASSETS:
<S>                                                                                <C>                  <C>            
     Cash and Cash Equivalents..............................................       $    18,126,000      $    83,910,000
     Short-term Investments.................................................            98,543,000          110,008,000
     Accounts Receivable (Less:  Allowance for Doubtful
         Accounts 1999 - $8,868,000; 1998 - $10,540,000)                                48,730,000           44,100,000
     Military Accounts Receivable...........................................            85,960,000           69,552,000
     Reinsurance Recoverable................................................            39,093,000           32,076,000
     Prepaid Expenses and Other Current Assets..............................            60,404,000           54,285,000
         Total Current Assets...............................................           350,856,000          393,931,000

PROPERTY AND EQUIPMENT, NET.................................................           237,594,000          229,164,000
LONG-TERM INVESTMENTS.......................................................           197,940,000          180,816,000
RESTRICTED CASH AND INVESTMENTS.............................................            17,009,000           17,758,000
REINSURANCE RECOVERABLE, Net of Current Portion.............................            43,785,000           34,946,000
GOODWILL ...................................................................           141,013,000          142,471,000
OTHER ASSETS................................................................            46,634,000           46,034,000
TOTAL ASSETS................................................................        $1,034,831,000       $1,045,120,000

                                            LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts Payable and Other Accrued Liabilities............................      $     88,210,000      $    89,226,000
    Medical Claims Payable....................................................            84,593,000           78,022,000
    Current Portion of Reserve for
         Losses and Loss Adjustment Expense ..................................            79,756,000           79,869,000
    Unearned Premium Revenue..................................................            19,976,000           39,968,000
    Military Health Care Payable..............................................            49,287,000           53,820,000
    Current Portion of Long-term Debt.........................................             4,451,000            5,263,000
         Total Current Liabilities............................................           326,273,000          346,168,000

RESERVE FOR LOSSES AND
    LOSS ADJUSTMENT EXPENSE (Less Current Portion)                                       132,234,000          132,394,000
LONG-TERM DEBT (Less Current Portion) ........................................           263,209,000          242,398,000
OTHER LIABILITIES ............................................................            21,131,000           20,446,000
TOTAL LIABILITIES.............................................................           742,847,000          741,406,000

STOCKHOLDERS' EQUITY:
    Preferred Stock, $.01 Par Value, 1,000,000
         Shares Authorized; None Issued or Outstanding
    Common Stock, $.005 Par Value, 40,000,000
         Shares Authorized; Shares Issued:  1999 - 28,308,000;
         1998 - 28,236,000....................................................               142,000              141,000
    Additional Paid-in Capital................................................           174,821,000          173,583,000
    Treasury Stock; 1999 - 1,427,500; 1998 - 966,900
         Common Shares........................................................           (21,613,000)         (14,821,000)
    Accumulated Other Comprehensive Income:
         Unrealized Holding Loss on Available-for-Sale
            Investment. (6,498,000)     (1,027,000)
    Retained Earnings.........................................................           145,132,000          145,838,000
         Total Stockholders' Equity...........................................           291,984,000          303,714,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..............................              $1,034,831,000       $1,045,120,000
</TABLE>

          See accompanying notes to consolidated financial statements.

                                                     Page 3


SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>


<CAPTION>
                                                                                                  Three Months Ended
                                                                                                         March 31          
 
                                                                                                     1999                     1998  
 
OPERATING REVENUES:
<S>                                                                                            <C>                     <C>         
  Medical Premiums  ................................................................           $207,311,000            $137,818,000
  Military Contract Revenues........................................................           70,088,000                18,536,000
  Specialty Product Revenues........................................................           20,679,000                36,161,000
  Professional Fees.................................................................           14,017,000                10,923,000
  Investment and Other Revenues.....................................................               5,979,000              6,971,000
    Total ..........................................................................            318,074,000             210,409,000

OPERATING EXPENSES:
  Medical Expenses (Note 2).........................................................           189,042,000              114,316,000
  Military Contract Expenses........................................................           67,644,000                16,981,000
  Specialty Product Expenses........................................................           19,396,000                36,241,000
  General, Administrative and Marketing Expenses....................................             33,897,000              25,208,000
  Impairment and Other Costs (Note 2)...............................................               5,106,000                       
    Total ..........................................................................                315,085,000         192,746,000

OPERATING  INCOME...................................................................           2,989,000                 17,663,000

INTEREST EXPENSE AND OTHER, NET  ...................................................              (4,049,000)            (1,281,000)

(LOSS) INCOME BEFORE INCOME TAXES ..................................................           (1,060,000)               16,382,000

BENEFIT (PROVISION) FOR INCOME TAXES................................................                   354,000           (4,195,000)

NET (LOSS) INCOME ..................................................................    $         (706,000)           $  12,187,000

NET (LOSS)  INCOME PER COMMON SHARE  ...............................................              $(.03)                       $.44
NET (LOSS)  INCOME PER COMMON SHARE ASSUMING DILUTION...............................              $(.03)                       $.44

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING..........................................           27,186,000                27,406,000

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
 ASSUMING DILUTION..................................................................         27,186,000                  27,855,000
 
</TABLE>



     See accompanying notes to condensed consolidated financial statements.

                                                     Page 4

                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES
 
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>

<CAPTION>
                                                                                       Three Months Ended  March 31     
 
                                                                                         1999                 1998    

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                <C>                   <C>         
   Net (Loss) Income.......................................................        $   (706,000)         $ 12,187,000
   Adjustments to Reconcile Net Income to Net Cash
       Used For Operating Activities:
          Depreciation and Amortization....................................            6,823,000            4,048,000
          Provision for Doubtful Accounts..................................            1,306,000            1,215,000
   Changes in Assets and Liabilities ......................................          (57,200,000)         (20,368,000)
       Net Cash Used for Operating Activities .............................          (49,777,000)          (2,918,000)

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital Expenditures, Net of Equipment Dispositions.....................          (14,160,000)           (9,159,000)
   Changes in Short-term Investments.......................................           10,442,000           (24,247,000)
   Changes in Long-term Investments........................................          (24,456,000)          (29,475,000)
   Changes in Restricted Cash and Investments..............................              721,000              (567,000)
   Corporate Disposition, net of cash disposed.............................                                  1,373,000
   Corporate Acquisition...................................................           (3,000,000)                     
       Net Cash Used for Investing Activities..............................          (30,453,000)          (62,075,000)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from Borrowings................................................           21,000,000            15,000,000
   Payments on Debt and Capital Leases.....................................           (1,001,000)          (11,207,000)
   Purchase of Treasury Stock..............................................           (6,792,000)
   Exercise of Stock in Connection with Stock Plans........................            1,239,000             3,797,000
          Net Cash Provided by Financing Activities........................           14,446,000             7,590,000

NET DECREASE IN CASH AND CASH EQUIVALENTS..................................          (65,784,000)          (57,403,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............................           83,910,000            96,841,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................................          $18,126,000          $ 39,438,000


                                                                                        Three Months Ended March 31        
 
Supplemental Condensed Consolidated
    Statements of Cash Flows Information:                                               1999                 1998      
Cash Paid During the Period for Interest
   (Net of Amount Capitalized).............................................           $5,387,000            $2,292,000
Cash Paid During the Period for Income Taxes...............................               27,000             1,532,000

Non-cash Investing and Financing Activities:
   Tax Benefits of Stock Issued for Exercise of Options ...................                                    466,000
   Additions to Capital Leases.............................................                                  3,070,000
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                                     Page 5

                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


     1.The accompanying  unaudited financial statements include the consolidated
accounts of Sierra Health Services, Inc. ("Sierra", a holding company,  together
with its subsidiaries,  collectively  referred to herein as the "Company").  All
material  intercompany  balances and transactions  have been  eliminated.  These
statements  have  been  prepared  in  conformity  with  the  generally  accepted
accounting   principles   used  in  preparing  the  Company's   annual   audited
consolidated  financial statements but do not contain all of the information and
disclosures  that  would be  required  in a complete  set of  audited  financial
statements.  They should,  therefore,  be read in conjunction with the Company's
annual audited  consolidated  financial statements and related notes thereto for
the years ended  December 31,  1998 and 1997. In the opinion of management,  the
accompanying  unaudited condensed  consolidated financial statements reflect all
adjustments,  consisting only of normal recurring  adjustments,  necessary for a
fair presentation of the financial results for the interim periods presented.

2.         Premium Deficiency, Impairment and Other Charges:

                    Medical Expenses:

     Medical  expenses  reported in the first quarter of 1999 included a premium
deficiency charge of $8.1 million related to losses in under performing  markets
primarily  in Arizona and rural  Nevada.  The Company  incurred  $2.6 million of
these losses in the first quarter of 1999.

                    Impairment and Other Charges:

     In March 1999, the Company closed all inpatient operations at Mohave Valley
Hospital,  a 12-bed acute care facility in Bullhead City, Arizona and terminated
approximately  45  employees.  The  Company  recorded  a charge of $4.3  million
related primarily to the write-off of goodwill associated with the Mohave Valley
operations.

     The  Company  also  incurred  $450,000  for certain  legal and  contractual
settlements  and $400,000 to provide for the Company's  portion of the write-off
of start-up costs at the Company's equity investee, TriWest Healthcare Alliance.
In  accordance  with  Statement  of  Position  98-5,  TriWest is writing off all
remaining start-up costs in their fiscal year beginning April 1, 1999.



                                                     Page 6
                 SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


     3.The  following  table  provides  a  reconciliation  of basic and  diluted
earnings per share ("EPS"):
<TABLE>

<CAPTION>
                                                                                        Dilutive
                                                                          Basic       Stock Options        Diluted

           For the Three Months ended March 31, 1999:
<S>                                                                <C>                               <C>          
             Loss from Continuing Operations                       $  (706,000)                      $   (706,000)
             Shares                                                 27,186,000                         27,186,000
             Per Share Amount                                            $(.03)                             $(.03)

           For the Three Months ended March 31, 1998:
             Income from Continuing Operations                      $12,187,000                       $12,187,000
             Shares                                                  27,406,000          449,000       27,855,000
             Per Share Amount                                              $.44                              $.44
</TABLE>

     CII  Financial,   Inc.,  a  wholly-owned  subsidiary  of  the  Company  has
outstanding convertible subordinated debentures (the "Debentures") due September
15,  2001.  Each $1,000 in principal is  convertible  into 25.382  shares of the
Company's common stock at a conversion price of $39.40 per share. The Debentures
were not  included in the  computation  of EPS  because  their  effect  would be
anti-dilutive.

     4.The  following  table presents  comprehensive  income for the three-month
periods ended March 31, 1999 and 1998:
<TABLE>

<CAPTION>
                                                                         Three Months Ended
                                                                             March 31            
                                                                  1999                     1998    
 
<S>                                                          <C>                       <C>        
           NET (LOSS) INCOME:........................        $   (706,000)             $12,187,000
           Change in net Unrealized Holding
             Gains and Losses on Investments,
                    net of income taxes..............          (5,471,000)                (517,000)
 
           COMPREHENSIVE (LOSS) INCOME...............         $(6,177,000)             $11,670,000
</TABLE>

5.Segment Reporting

     The  Company  has  three  reportable  segments  based on the  products  and
services offered:  managed care and corporate operations,  workers' compensation
operations and military  health  services  operations.  The managed care segment
includes managed health care services  provided through HMOs,  managed indemnity
plans,  third-party  administrative services programs for employer-funded health
benefit plans,  multi-specialty  medical groups,  other  ancillary  services and
corporate  operations.   The  workers'  compensation  segment  insures  workers'
compensation  claims risk in return for premium  revenues.  The military  health
services segment administers a managed care federal contract for the Department
of Defense's TRICARE program in Region 1.  This contract is currently structured
as five one-year option periods. 

     Sierra  evaluates each  segment's  performance  based on segment  operating
profit before  interest  expense and income taxes and not including  charges for
premium  deficiencies,  impairment  and non-  recurring  gains and  losses.  The
accounting  policies  of the  operating  segments  are the  same as those of the
consolidated company.

                                                     Page 7



                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Information concerning the operations of the reportable segments is as follows:
(Amounts in thousands)
<TABLE>

<CAPTION>
                                                          Managed Care            Workers'              Military
                                                         and Corporate            Compensation        Health Services
                                                         Operations              Operations             Operations          Total   
Three Months Ended March 31, 1999
<S>                                                      <C>                           <C>                    <C>           <C>     
Medical Premiums..................................       $207,311                      0                      0            $207,311
Specialty Product Revenues........................          2,446                $18,233                                     20,679
Professional Fees.................................         14,017                                                            14,017
Military Contract Revenues........................                                                      $70,088              70,088
Investment and Other Revenues.....................          1,707                  4,119                    153               5,979
   Total Revenue..................................       $225,481                $22,352                $70,241            $318,074

Segment Operating Profit..........................     $    8,694                $ 4,904               $  2,597            $ 16,195
Interest Expense and Other........................         (3,034)                  (928)                   (87)             (4,049)
Premium Deficiency, Impairment and Other Costs....        (13,206)                                                          (13,206)
Net Income (Loss) Before Income Taxes                  $   (7,546)               $ 3,976               $  2,510           $  (1,060)

Three Months Ended March 31, 1998
Medical Premiums..................................       $137,818                                                          $137,818
Specialty Product Revenues........................          2,959                $33,202                                     36,161
Professional Fees.................................         10,923                                                            10,923
Military Contract Revenues........................                                                      $18,536              18,536
Investment and Other Revenues.....................          2,231                  4,736                      4               6,971
   Total Revenue..................................       $153,931                $37,938                $18,540            $210,409

Segment Operating Profit..........................      $  12,038                $ 4,066               $  1,559           $  17,663
Interest Expense and Other........................             87                 (1,188)                  (180)             (1,281)
Net Income (Loss) Before Income Taxes.............      $  12,125                $ 2,878               $  1,379           $  16,382
</TABLE>



     6. Certain amounts in the Condensed  Consolidated  Financial Statements for
the three months ended March 31, 1998 have been reclassified to conform with the
current year presentation.


                                                     Page 8
                 SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES


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

     The following discussion and analysis provides information which management
believes  is relevant  for an  assessment  and  understanding  of the  Company's
consolidated  financial  condition  and results of  operations.  The  discussion
should  be  read  in  conjunction  with  the  Condensed  Consolidated  Financial
Statements and Related Notes thereto. Any forward-looking  information contained
in this Management's  Discussion and Analysis of Financial Condition and Results
of  Operations  and any other  sections  of this  Quarterly  Report on Form 10-Q
should be considered in connection with certain cautionary  statements contained
in the Company's  Current Report on Form 8-K dated March 17, 1999,  incorporated
herein by reference.  Such cautionary  statements are made pursuant to the "safe
harbor" provisions of the Private  Securities  Litigation Reform Act of 1995 and
identify important risk factors that could cause the Company's actual results to
differ from those  expressed  in any  projected,  estimated  or  forward-looking
statements relating to the Company.

     Results of Operations, three months ended March 31, 1999, compared to three
months ended March 31, 1998.

     The Company's total operating revenues for the three months ended March 31,
1999,  increased  approximately  51.2% to $318.1 million from $210.4 million for
the three  months  ended March 31,  1998.  The  increase  was  primarily  due to
increases in premium revenue of $69.5 million and military  contract  revenue of
$51.6  million  offset by a decrease  in  specialty  product  revenues  of $15.5
million.

     Of the  $69.5  million  increase  in  medical  premium  revenue,  or 50.4%,
approximately  $42.5 million is attributed to the Company's  Dallas/Ft.  Worth
operations which were acquired in the fourth  quarter of 1998.  On October  31,
1998,  the Company completed  the  acquisition  of  certain  assets of Kaiser 
Foundation  Health Plan of Texas ("Kaiser-Texas"), a health plan operating in
Dallas/Ft. Worth with approximately 109,000 members at October 31, 1998, and 
Permanente Medical Association of Texas ("Permanente"), a medical group with 
approximately 150 physicians. The remaining increase of $27.0 million, or 
19.6%, is due to additional premium revenue at the Company's other HMO  and  
insurance  subsidiaries.  Of such additional premium revenue,  16.2% of the 
increase resulted principally  from additional  member months (the number of
months of each period that an  individual  is  enrolled in a plan).  
Excluding  the  Dallas/Ft.  Worth operations,  Medicare  member 
months increased  25.9% which  contributed to the increase in medical  premium 
revenue.  Such growth in  Medicare  member  months contributes  significantly 
to the increase in premium  revenues as the Medicare per member premium rates 
are over three times higher than the average commercial premium rate.  Excluding
the Dallas/Ft. Worth operations, the Company's HMO and insurance subsidiaries' 
premium rates increased approximately 3.4%.  The Company's HMO commercial  
rates increased  approximately 4% in Nevada and  approximately  7% to 8% in 
Texas.  The Company's  managed  indemnity rates increased  approximately 7% 
and Medicare rates increased approximately 2%.  Over 75% of the  Company's  
Nevada  Medicare  members are enrolled in the Health Care Financing  
Administration's  ("HCFA") Social HMO Medicare program.  HCFA is considering
adjusting the reimbursement factor for the Social HMO members in the future.  
If the  reimbursement  for these members  decreases  significantly  and
related benefit changes are not made timely,  there could be a material  adverse
effect on the Company's business.

     Military  contract  revenue  increased from $18.5 million to $70.1 million.
The  increased  revenue is a result of health care  delivery  under the Region 1
TRICARE contract that began in June 1998.  Military contract revenue in the same
period of the prior-year resulted from implementation of the contract. Specialty
product revenue  decreased $15.5 million,  or 42.8%,  for the three months ended
March 31, 1999,  compared to the same  three-month  period in the prior year. Of
the  decrease,  $14.9  million was due to a decrease in revenue in the  workers'
compensation insurance segment, as well as a $600,000 decrease in administrative
services  revenue.   The  workers'   compensation   subsidiary  entered  into  a
reinsurance  agreement in the fourth quarter of 1998,  whereby a greater portion
of premium is ceded,  thus reducing  revenue.  In the first quarter of 1999, the
Company ceded $13.6 million of premiums. In addition, ongoing

                                                     Page 9
                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES


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

     price  competition  in  California  is  contributing  to the  reduction  in
revenue.   The  decrease  in  administrative   services  revenue  was  primarily
attributable  to a decrease in membership.  Professional  fee revenue  increased
approximately  $3.1 million  primarily  due to the Company's  recently  acquired
medical  group  operations  in Dallas/Ft.  Worth.  Investment  and other revenue
decreased   approximately  $1.0  million  over  the  comparable  period  in  the
prior-year  primarily  due to a decrease in invested  balances and a decrease in
capital gains  realized on the sale of  investments  compared to the  prior-year
quarter.

     Total medical  expenses  increased $74.7 million over the same  three-month
period last year. This increase resulted  primarily from the Company's  recently
acquired  Dallas/Ft.  Worth  operations  discussed  previously,  as  well as the
premium  deficiency  charge of $8.1 million related to under performing  markets
primarily in Arizona and rural Nevada (See Note 2 to the Condensed  Consolidated
Financial  Statements).  Excluding the effect of the Company's recently acquired
Dallas/Ft.  Worth operations and the premium deficiency charge, medical expenses
increased $28.5 million, or 24.9%, compared to the same period in the prior-year
quarter.  Medical  expenses as a percentage of medical premiums and professional
fees ("Medical Care Ratio")  increased from 76.9% to 85.4%,  or 81.8%  excluding
the $8.1 million  premium  deficiency  charge,  for the quarter  ended March 31,
1999,  compared to the prior-year period. The increase in the Medical Care Ratio
reflects the acquired  Kaiser-Texas  membership  which has a higher medical care
ratio and the premium  deficiency charge discussed above, as well as an increase
in Medicare members as a percentage of fully-insured members and higher pharmacy
costs. The cost of providing medical care to Medicare members generally requires
a greater percentage of the premiums  received.  Included in medical expenses is
the utilization of $4.6 million of premium  deficiency  reserve to offset losses
on  contracts  from the  Kaiser-  Texas  acquisition.  Also  included in medical
expense is the  utilization  of $2.6  million of premium  deficiency  reserve to
offset losses primarily on Medicare risk members in Arizona and rural Nevada.

     Specialty product expenses decreased $16.8 million, or 46.5%, due primarily
to ceded workers'  compensation  losses resulting from the low level reinsurance
agreement.  In  addition,  the  Company  receives a ceding  commission  from the
reinsurer  as  a  partial  reimbursement  of  operating  expenses.   Under  this
agreement,  in the current year period,  the amount of ceded premiums were $13.6
million,  ceded  losses  were $15.5  million  and ceding  commissions  were $3.3
million.  Specialty  product  revenue and expense are  primarily  related to the
workers' compensation insurance business.

                                                     Page 10
                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES


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

     Results of Operations, three months ended March 31, 1999, compared to three
months ended March 31, 1998 (continued).

     The combined  ratio for the workers'  compensation  insurance  business was
96.4% compared to 102.6% for the comparable prior-year period. The reduction was
due to a 13.3% decrease in the loss ratio,  which was partially offset by a 7.1%
increase in the expense  ratio.  The reduction in the loss ratio was largely due
to a greater portion of losses being  reinsured under the low level  reinsurance
agreement.  The current year period had no development on prior accident  years,
whereas the loss ratio for the prior year period  included  net  favorable  loss
development  on prior  accident  years  totaling $1.9  million.  The prior-year
favorable  loss  development  was largely due to actual paid losses  being below
projected  losses.  The loss and loss  adjustment  expense  ratio  for the three
months ended March 31, 1999,  reflects the Company's  current  projection of the
ultimate  costs of claims  occurring  in the  current as well as prior  accident
years.  The increase in the expense  ratio was largely due to a reduction in the
net earned premium  denominator  base, which resulted from the increase in ceded
reinsurance premiums.  This change was offset by a decrease in expenses due to a
credit for ceding commissions of $3.3 million.  Workers' compensation claims are
paid over  several  years.  Until  payment  is made,  the  Company  invests  the
premiums, earning a yield on the invested balance.

     General, administrative and marketing ("G&A") costs increased $8.7 million,
or 34.5%,  compared to the first  quarter of 1998.  As a percentage of revenues,
G&A costs for the first quarter of 1999 decreased to 10.7% from 12.0% during the
comparable period in 1998.  Excluding military revenues,  G&A as a percentage of
revenues was 13.7% for the three-month period ended March 31, 1999,  compared to
13.1% for the first quarter of the prior-year.  Of the $8.7 million  increase in
G&A, $4.6 million was due to additional G&A, including amortization of goodwill,
related to the  acquired  HMO  business in the  Dallas/Ft.  Worth  area,  net of
utilization   of  premium   deficiency   reserves  for   maintenance   costs  of
approximately $2.3 million. The most significant items included in the remaining
portion  of the  increase  consisted  of  $900,000  of  additional  compensation
expense,  resulting  primarily from  additional  employees  supporting  expanded
services; increased depreciation expense of $700,000 and increased broker, third
party  administration  and premium tax expense of approximately  $300,000 due to
increased  membership.  The Company  markets its products  primarily to employer
groups, labor unions and individuals enrolled in Medicare,  through its internal
sales  personnel  and  independent   insurance  brokers.  Such  brokers  receive
commissions  based on the  premiums  received  from each  group.  The  Company's
agreements  with its member groups are usually for twelve months and are subject
to annual  renewal.  For the quarter  ended March 31, 1999,  the  Company's  ten
largest  commercial HMO employer groups were, in the aggregate,  responsible for
less than 10% of its  total  revenues.  Although  none of such  employer  groups
accounted for more than 2% of total revenues for that period, the loss of one or
more  of the  larger  employer  groups  could,  if  not  replaced  with  similar
membership,  have a material adverse effect on the Company's business.  Interest
expense and other  increased $2.8 million for the  three-months  ended March 31,
1999,  compared to the same period in the  prior-year  due to an increase in the
Company's cost of borrowing as well as an increase in debt primarily  related to
the Kaiser-Texas acquisition.

     In the first quarter of 1999,  the Company  recorded  impairment  and other
charges  of $5.1  million,  of  which  $4.3  million  related  primarily  to the
write-off of goodwill  associated  with Mohave Valley  Hospital,  a 12-bed acute
care facility in Bullhead City, Arizona for which all inpatient  operations were
closed in March 1999.  The Company also incurred  $450,000 for certain legal and
contractual  settlements,  as well as  $400,000  to  provide  for the  Company's
portion of the  write-off of start-up  costs at the Company's  equity  investee,
TriWest Healthcare Alliance.


                                                     Page 11
                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES


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

     Results of Operations, three months ended March 31, 1999, compared to three
months ended March 31, 1998 (continued).

     For the period, the Company recorded  approximately $400,000 of tax benefit
for an effective tax rate of 33.4% compared to 25.6% in 1998.  This  significant
increase  in the  effective  tax rate is the  result  of the tax loss  valuation
allowances being fully utilized by the end of 1998. The Company's  effective tax
rate  is less  than  the  35%  statutory  rate  primarily  due to  tax-preferred
investments.

Liquidity and Capital Resources

     The Company had negative cash flows from operations of approximately  $49.8
million for the three months ended March 31, 1999,  resulting  primarily  from a
net change in assets and  liabilities  of $57.2 million offset by $6.8 million
in  depreciation  and  amortization,  $1.3  million in  provision  for  doubtful
accounts and a $700,000 net loss.  The decrease in cash flow  resulting from the
change in assets and  liabilities  was  primarily  due to  increases in military
accounts  receivable  and  reinsurance  recoverable,  as well as a  decrease  in
unearned  revenue.  The increase in military  accounts  receivable is associated
with monies owed to the Company as a result of  providing  health care  services
for a larger  than  expected  beneficiary  population  in TRICARE  Region 1. The
Company  expects  to  receive a  significant  payment  related  to the  military
accounts  receivable in the second  quarter of 1999. The increase in reinsurance
recoverable  is primarily due to the  reinsurance  agreement  implemented by the
Company's  workers'  compensation  subsidiary in the fourth quarter of 1998. The
decrease in unearned  revenue  resulted  primarily from the early receipt of the
subsequent month's HCFA Medicare capitation payments as of December 31, 1998.

     The  $16.0  million  used for  investing  and  financing  activities  since
December 31, 1998  included a $13.3  million net increase in  investments,  $6.8
million used for the purchase of treasury stock and $14.2 million in net capital
expenditures  including costs associated with continued  implementation of three
new computer systems, as well as furniture, equipment and other capital needs to
support the Company's  growth.  In the first quarter of 1999 an additional  $3.0
million was paid to Kaiser  Foundation  Health Plan of Texas, in accordance with
the  purchase  agreement as certain  accreditation  goals were met by the health
plan. The purchase price may increase up to an additional $27 million over three
years if certain goals are met by the health plan.  The Company  borrowed  $21.0
million available under the line of credit which was offset by $1.0 million used
for the reduction of debt. The remaining $40.0 million  available under the line
of credit may be used for additional working capital, if necessary.  In addition
the Company  received $1.2 million in connection  with the sale of stock through
the Company's stock plans.

     The  Company  has a 1999  capital  budget  of  approximately  $60  million,
primarily for computer hardware and software,  furniture and equipment and other
requirements  due to the  Company's  computer  system  conversion  and projected
growth and expansion.  The Company's liquidity needs over the next 9 months will
primarily be for the capital items noted above,  the Company's stock  repurchase
program,  debt service and  expansion  of the  Company's  operations,  including
potential  acquisitions.  The Company  believes that existing  working  capital,
operating cash flow and, if necessary,  mortgage  financing,  equipment leasing,
and amounts  available  under its credit facility will be sufficient to fund its
capital  expenditures and debt service.  Additionally,  subject to unanticipated
cash  requirements,  the Company  believes that its existing working capital and
operating cash flow and, if necessary, its access to new credit facilities, will
enable it to meet its liquidity needs on a longer term basis.

     The  holding  company  may  receive  dividends  from its HMO and  insurance
subsidiaries  which  generally  must be  approved  by  certain  state  insurance
departments.  The Company's HMO and insurance subsidiaries are required by state
regulatory  agencies to maintain certain deposits and must also meet certain net
worth  and  reserve  requirements.   The  HMO  and  insurance  subsidiaries  had
restricted assets on deposit in various

                                                     Page 12
                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES


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

     states  totaling  $17.0 million as of March 31, 1999. The HMO and insurance
subsidiaries  must also meet  requirements  to  maintain  minimum  stockholder's
equity,  on a  statutory  basis,  ranging  from $1.5  million  to $5.2  million.
Additionally,  in conjunction  with the Kaiser-Texas  acquisition,  Texas Health
Choice,  L.C. ("TXHC") entered into a letter agreement with the Texas Department
of Insurance  whereby TXHC agreed to maintain a net worth of $20.0  million.  Of
the  cash  and cash  equivalents  held at  March  31,  1999,  $16.3  million  is
designated  for  use  only  by the  regulated  subsidiaries.  Such  amounts  are
available  for  transfer  to the  holding  company  from  the HMO and  insurance
subsidiaries only to the extent that they can be remitted in accordance with the
terms of existing management agreements and by dividends.  Remaining amounts are
available  on an  unrestricted  basis.  The  holding  company  will not  receive
dividends from its regulated  subsidiaries if such dividend  payment would cause
violation of statutory net worth and reserve requirements.

     CII Financial,  Inc., a California workers'  compensation  company that the
Company  acquired  in  1995,  has  convertible   subordinated   debentures  (the
"Debentures") due September 15, 2001 and bearing interest at 7 1/2% which is due
semi-annually  on  March  15 and  September 15.  Each  $1,000  in  principal  is
convertible  into 25.382  shares of the  Company's  common stock at a conversion
price of $39.40 per share. The Debentures are general  unsecured  obligations of
CII and are not  guaranteed  by Sierra.  During the three months ended March 31,
1999, the Company purchased $25,000 of the Debentures on the open market.

Year 2000

     The Year 2000 issue exists because many computer  systems and  applications
currently  use  two-digit  date fields to designate a year.  As the century date
change occurs,  date-sensitive  systems will recognize the year 2000 as 1900, or
not at all.  This  inability to  recognize  or properly  treat the Year 2000 may
cause  systems  to  process  critical  financial  and  operational   information
incorrectly.

     The Company is  currently  in the process of  modifying  or  replacing  its
mission critical financial and operational computer systems. The Company is also
in the process of testing its  non-information  system  technology for Year 2000
compliance.  The Year 2000  project has been broken down into five  phases:  (1)
inventorying  Year  2000  items;  (2)  assessing  the Year 2000  items  that are
determined to be material to the Company;  (3) renovating or replacing  material
items  that are  determined  not to be Year  2000  compliant;  (4)  testing  and
validating material items; and (5) implementing renovated and validated systems.

     At March 31, 1999,  the inventory and assessment  phases are  substantially
complete as it relates to all  material  computer  systems  and  non-information
system technology. The Company estimates that the replacement/renovation  phases
and the testing/validation  phases will be 95% complete by October 31, 1999. The
Company  estimates that it is approximately  70% complete with the total project
as of March 31,  1999.  Contingency  planning for the mission critical  business
operations  is  expected  to be  completed  by July 1999.  These  plans focus on
business operations  involving  information systems and non-information  systems
technologies.

     The Company has initiated formal  communications with entities with whom it
does business to assess their Year 2000 issues. Evaluations of the most critical
third  parties  have been  initiated,  and  follow-up  reviews will be conducted
through 1999.  Contingency  plans are being developed based on these evaluations
and are  expected  to be  completed  by the  middle  of  1999.  There  can be no
assurances that the systems of other companies or governmental agencies, such as
HCFA and the Department of Defense ("DOD"),  on which the Company relies will be
timely  modified for Year 2000, or that the failure to modify by another company
would not have a material adverse effect on the Company. Based upon two separate
reports  issued by the United States  General  Accounting  Office it is doubtful
that the computer systems at both

                                                     Page 13
                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES


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

     HCFA and the DOD will be fully Year 2000  compliant by the end of 1999. The
Company does not  currently  have  available  data to predict the impact of such
non-compliance on its business  operations.  Should there be any material delays
caused  by Year 2000  issues,  the  Company  anticipates  that the  governmental
entities will make estimated payments.

     The Company is in the process of implementing  three major computer systems
at an  estimated  cost  of  $36  million  to $38  million,  which  includes  the
implementation   costs  related  to  the  recently  acquired  Dallas/Ft.   Worth
operations. To date the Company has spent approximately $26.5 million on the new
computer  systems and other Year 2000 items.  The Company is expensing the costs
to make  modifications to existing computer systems and non-computer  equipment.
Management currently estimates the remaining new computer system costs and other
Year  2000  costs  to be  $12.0  million  to  $14.0  million.  While  this  is a
substantial  effort, it will give the Company the benefits of new technology and
functionality  for many of its financial and  operational  computer  systems and
applications.

     The  failure to correct a material  Year 2000  problem  could  result in an
interruption  of, or a failure of,  certain  business  activities or operations.
Such  failures  could  materially  adversely  affect the  Company's  operations,
liquidity and financial  condition.  Due to the general uncertainty  inherent in
the Year  2000  problem,  resulting  in part from  uncertainty  of the Year 2000
readiness of third parties with which the Company does business,  the Company is
unable to determine at this time whether the consequences of potential Year 2000
failures  will have a  material  adverse  impact  on the  Company's  results  of
operations, liquidity or financial condition. The Company's Year 2000 project is
expected to  significantly  reduce the Company's level of uncertainty  about the
Year 2000 problem. The Company believes that, with the implementation of the new
computer  systems  and  completion  of the  entire  project  as  scheduled,  the
possibility of significant interruptions of operations should be reduced.

     The  above   contains   forward-looking   statements   including,   without
limitation, statements relating to the Company's plans, strategies,  objectives,
expectations,  intentions, and adequate resources, that are made pursuant to the
"safe harbor"  provisions  of the Private  Securities  Litigation  Reform Act of
1995.  Readers are cautioned that  forward-looking  statements  contained in the
Year 2000 disclosure should be read in conjunction with the following disclosure
of the Company:

     The  costs of the  project  and the  dates on which  the  Company  plans to
complete the necessary Year 2000  modifications  are based on management's  best
estimates,  which were derived utilizing  numerous  assumptions of future events
including the continued  availability  of certain  resources and other  factors.
However,  there can be no guarantee  that these  estimates  will be achieved and
actual results could differ  materially from those plans.  Specific factors that
might  cause such  material  differences  include,  but are not  limited to, the
availability,  retention and cost of personnel trained in this area, the ability
to locate and correct all relevant  computer codes, the ability of the Company's
significant  suppliers,  customers  and others with which it conducts  business,
including federal and state governmental agencies, to identify and resolve their
own Year 2000 issues and similar uncertainties.



                                                     Page 14

                   SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

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

Membership

         The Company's membership at March 31, 1999  and 1998 was as follows:
<TABLE>

<CAPTION>
                                                                          Number of Members at Period Ended
                                                                           March 31                March 31
                                                                             1999                    1998      

HMO
<S>                                                                         <C>                      <C>    
  Commercial..................................................              275,500                  158,800
  Medicare....................................................               50,000                   37,200
Managed Indemnity.............................................               42,900                   52,800
Medicare Supplement...........................................               27,400                   24,700
Administrative Services.......................................              298,300                  347,700
TRICARE Eligibles.............................................              606,400                         
Total Members.................................................            1,300,500                  621,200
</TABLE>


ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As of March 31,  1999,  unrealized  holding  losses on  available  for sale
investments  have increased by $5.5 million since year-end due to an increase in
interest  rates,  and thus, a decline in the market value of bonds.  The Company
believes that this increase in interest rates will not have a material impact on
future  earnings or cash flows as it is unlikely  that the Company would need or
choose to substantially liquidate its investment portfolio.

                                              PART II - OTHER INFORMATION

ITEM 1.        LEGAL PROCEEDINGS

     The  Company  is subject to  various  claims  and other  litigation  in the
ordinary  course  of  business.  Such  litigation  includes  claims  of  medical
malpractice, claims for coverage or payment for medical services rendered to HMO
members and claims by providers for payment for medical services rendered to HMO
members.  Also included in such litigation are claims for workers'  compensation
and claims by  providers  for payment for medical  services  rendered to injured
workers. In the opinion of the Company's management,  the ultimate resolution of
pending  legal  proceedings  should  not have a material  adverse  effect on the
Company's financial condition.

ITEM 2.        CHANGES IN SECURITIES

               None

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES

               None


                                                     Page 15

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

               None

ITEM 5.        OTHER INFORMATION

               None

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

               (a)      Exhibits

                        (27)            Financial Data Schedule

                        (99)            Registrant's current report on Form 8-K 
                                        dated March 17, 1999,
                                        incorporated herein by reference.

               (b)      Reports on Form 8-K

     The Company filed a Current Report on Form 8-K, dated March 17, 1999,  with
the Securities  and Exchange  Commission in connection  with certain  cautionary
statements  made  pursuant  to the  "safe  harbor"  provisions  of  the  Private
Securities Litigation Reform Act of 1995.

                                                     Page 16
                                                   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.



                         SIERRA HEALTH SERVICES, INC.
                                 (Registrant)



Date  May 14, 1999          /S/ PAUL H. PALMER              
                         Paul H. Palmer
                         Vice President of Finance,
                         Chief Financial Officer and Treasurer
                         (Principal Financial and Accounting Officer)

                                                     Page 17