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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       June 30, 1997

                                       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
                         (State or other jurisdiction of
                         incorporation or organization)

                                   88-0200415
                                (I.R.S. Employer
                               Identification No.)

                              2724 NORTH TENAYA WAY
                                  LAS VEGAS, NV
                    (Address of principal executive offices)
                                      89128
                                   (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 July 31, 1997 there were 18,079,000 shares of common stock outstanding.


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<PAGE>



                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

                                      INDEX

                                                                       Page No.

Part I - FINANCIAL INFORMATION

      Item l.     Financial Statements

                  Condensed Consolidated Balance Sheets --
                    June 30, 1997, and December 31, 1996...............      3

                  Condensed Consolidated Statements of Operations--
                    Three and six months ended June 30, 1997
                    and June 30, 1996..................................      4

                  Condensed Consolidated Statements of Cash Flows--
                    Six months ended June 30, 1997
                    and June 30, 1996..................................      5

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

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

      Item 3.     Quantitative and Qualitative Disclosures
                    About Market Risk .................................     13


Part II - OTHER INFORMATION

      Item l.     Legal Proceedings....................................     14

      Item 2.     Changes in Securities................................     14

      Item 3.     Defaults upon Senior Securities......................     14

      Item 4.     Submission of Matters to a Vote
                  of Security Holders..................................     14

      Item 5.     Other Information....................................     15

      Item 6.     Exhibits and Reports on Form 8-K.....................     15

Signature..............................................................     17


                                     Page 2


<PAGE>



                         PART I - FINANCIAL INFORMATION

ITEM 1.        FINANCIAL STATEMENTS


                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                          June 30           December 31
                                                                                           1997                 1996
CURRENT ASSETS:
<S>                                                                                     <C>                <C>
   Cash and Cash Equivalents.....................................................       $ 59,396,000       $103,587,000
   Short-term Investments........................................................         70,310,000         83,688,000
   Accounts Receivable (Less: Allowance for Doubtful
      Accounts: 1997 - $7,318,000; 1996 - $7,324,000 ............................         33,012,000         31,849,000
   Prepaid Expenses and Other Assets.............................................         54,354,000         33,811,000
      Total Current Assets.......................................................        217,072,000        252,935,000

LAND, BUILDING AND EQUIPMENT.....................................................        162,019,000        140,130,000
   Less: Accumulated Depreciation................................................         45,526,000         40,326,000
      Land, Building and Equipment - Net.........................................        116,493,000         99,804,000

LONG-TERM INVESTMENTS ...........................................................        212,224,000        160,482,000
RESTRICTED CASH AND INVESTMENTS .................................................         14,572,000         13,648,000
REINSURANCE RECOVERABLE,
   NET OF CURRENT PORTION........................................................         16,705,000         14,721,000
GOODWILL   ...........................................................                    43,726,000         44,602,000
OTHER ASSETS.....................................................................         39,670,000         43,270,000
TOTAL ASSETS.....................................................................       $660,462,000       $629,462,000

CURRENT LIABILITIES:
   Accounts Payable and Other Accrued Liabilities................................       $ 55,990,000       $ 50,153,000
   Medical Claims Payable........................................................         53,090,000         46,969,000
   Current Portion of Reserves for Losses and
      Loss Adjustment Expense ...................................................         62,861,000         52,878,000
   Unearned Premium Revenue......................................................         15,523,000         24,210,000
   Current Portion of Long-term Debt.............................................          4,206,000          2,195,000
      Total Current Liabilities..................................................        191,670,000        176,405,000

RESERVES FOR LOSSES AND LOSS
   ADJUSTMENT EXPENSE (Less Current Portion)  ...................................        130,895,000        134,898,000
LONG-TERM DEBT (Less Current Portion)............................................         79,949,000         66,189,000
OTHER LIABILITIES ...............................................................          9,653,000         17,488,000
TOTAL LIABILITIES................................................................        412,167,000        394,980,000
STOCKHOLDERS' EQUITY:
   Preferred Stock, $.01 Par Value, 1,000,000 Shares
      Authorized, None Issued
   Common Stock, $.005 Par Value, 40,000,000 Shares Authorized;
      Shares Issued: 1997 - 18,013,000; 1996 - 17,910,000;.......................             90,000             89,000
   Additional Paid-in Capital....................................................        160,576,000        152,035,000
   Treasury Stock: 1997 - 284,500; 1996 - 100,200 Common Shares..................         (5,601,000)          (130,000)
   Unrealized Holding (Loss) Gain on
      Available-for-Sale Investments.............................................           (730,000)           487,000
   Retained Earnings.............................................................         93,960,000         82,001,000
      Total Stockholders' Equity.................................................        248,295,000        234,482,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......................................       $660,462,000       $629,462,000
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                     Page 3


<PAGE>



                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                               Three Months Ended     Six Months Ended
                                                                          June 30                           June 30
                                                                 1997              1996             1997               1996
OPERATING REVENUES:
<S>                                                          <C>              <C>               <C>              <C>
  Medical Premiums....................................       $125,250,000     $ 93,431,000      $247,589,000     $184,036,000
  Specialty Product Revenues..........................         37,079,000       33,348,000        71,792,000       64,287,000
  Professional Fees...................................          7,538,000        7,723,000        15,059,000       15,295,000
  Investment and Other Revenues.......................          6,454,000        6,860,000        12,459,000       13,756,000
    Total ............................................        176,321,000      141,362,000       346,899,000      277,374,000

OPERATING EXPENSES:
  Medical Expenses....................................        101,813,000       75,866,000       201,489,000       149,817,000
  Specialty Product Expenses..........................         36,348,000       33,660,000        70,999,000        64,183,000
  General, Administrative and
    Marketing Expenses ...............................         23,057,000       17,316,000        45,066,000        34,479,000
  Merger and Related Expenses ........................                                            11,000,000
    Total ............................................        161,218,000      126,842,000       328,554,000       248,479,000

OPERATING INCOME......................................         15,103,000       14,520,000        18,345,000        28,895,000

INTEREST EXPENSE AND OTHER, NET  .....................         (1,207,000)        (832,000)       (2,609,000)       (1,641,000)

INCOME BEFORE INCOME TAXES ...........................         13,896,000       13,688,000        15,736,000        27,254,000

PROVISION FOR INCOME TAXES............................          3,335,000        3,477,000         3,777,000         6,879,000

NET INCOME ...........................................        $10,561,000      $10,211,000        $11,959,000      $20,375,000

EARNINGS PER COMMON SHARE.............................               $.59             $.58              $.67             $1.15

WEIGHTED AVERAGE
  COMMON SHARES OUTSTANDING...........................         17,970,000       17,706,000        17,909,000        17,667,000
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                     Page 4


<PAGE>



                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                            Six Months Ended
                                                                                        June 30            June 30
                                                                                         1997               1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                  <C>                 <C>
  Net Income..............................................................           $ 11,959,000        $ 20,375,000
  Adjustments to Reconcile Net Income to Net Cash
     Provided by Operating Activities:
        Depreciation and Amortization.....................................              6,602,000           5,022,000
        Provision for Doubtful Accounts...................................              2,198,000           1,251,000
  Changes in Assets and Liabilities ......................................             (3,358,000)        (11,934,000)
     Net Cash Provided by Operating Activities ...........................             17,401,000          14,714,000

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital Expenditures, Net of Equipment Dispositions.....................            (22,003,000)         (6,977,000)
  Decrease in Short-term Investments......................................             13,356,000           9,929,000
  (Increase) Decrease in Long-term Investments............................            (52,832,000)         10,349,000
  Increase in Restricted Cash and Investments.............................             (1,063,000)           (166,000)
  Loan to Third Party.....................................................            (16,750,000)
     Net Cash (Used for) Provided by Investing Activities.................            (79,292,000)         13,135,000

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from Borrowings................................................             17,000,000             500,000
  Payments on Debt and Capital Leases.....................................             (1,229,000)         (8,035,000)
  Exercise of Stock in Connection with Stock Plans........................              7,400,000           2,400,000
  Purchase of Treasury Stock .............................................             (5,471,000)
     Net Cash Provided by (Used for) Financing Activities.................             17,700,000          (5,135,000)
NET (DECREASE) INCREASE IN CASH
  AND CASH EQUIVALENTS....................................................            (44,191,000)         22,714,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR............................            103,587,000          57,044,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................           $ 59,396,000        $ 79,758,000


                                                                                            Six Months Ended
Supplemental Condensed Consolidated                                                     June 30            June 30
        Statements of Cash Flows Information:                                            1997               1996
Cash paid during the period for interest
  (net of amount capitalized).............................................           $  2,217,000          $2,806,000
Cash paid during the period for income taxes..............................              4,989,000           6,887,000

Non-cash Investing and Financing Activities:
  Tax benefits of stock issued for exercise of options ...................              1,142,000           1,009,000
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                     Page 5


<PAGE>



                  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, 1996 and 1995. 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.         In the  second  quarter  of 1997,  the line of credit  agreement  the
           ("Credit  Agreement"),  among Sierra,  Bank of America National Trust
           and Savings Association as Agent, and other lenders,  was amended and
           increased to $100 million.  In March 1997, the Company borrowed $17.0
           million  on its  line  of  credit  for  general  corporate  purposes.
           Currently the interest  rate is 6.3%.  The amount owed on the line of
           credit is included in long-term  debt at June 30, 1997. The remaining
           line of  credit  may be  used  for  additional  working  capital,  if
           necessary.

3.         During the first quarter of 1997, the Company recorded $11.0 million,
           $8.4 million after taxes,  for certain  estimated  costs and expenses
           incurred  in  association  with a  merger  agreement  with  Physician
           Corporation  of America  ("PCA"),  such  agreement was  terminated on
           March 18, 1997, as disclosed in the Company's  Annual Report filed on
           Form 10-K for the fiscal year ended December 31, 1996.

4.        During 1997 the Financial  Accounting  Standards Board ("FASB") issued
          the following  statements of financial  accounting  standards ("FAS"):
          FAS No.  128,  "Earnings  per  Share",  FAS No.  129,  "Disclosure  of
          Information  about  Capital   Structure",   FAS  No.  130,  "Reporting
          Comprehensive  Income", and FAS No. 131, "Disclosure About Segments of
          an Enterprise and Related Information".

           FAS No. 128 and FAS No. 129 are  effective  for periods  ending after
           December  15,  1997,  and  establish   standards  for  computing  and
           presenting earnings per share ("EPS"), and for disclosing information
           about  an  entity's  capital  structure,   respectively.   Management
           believes that these  standards will not have a significant  impact on
           its EPS or financial  statement  disclosure.  FAS No. 130 and FAS No.
           131 are effective for periods  beginning after December 15, 1997. FAS
           No. 130 requires  companies to classify items of other  comprehensive
           income by their nature in a financial statement.  Management does not
           believe this statement  will have a material  impact on the Company's
           financial  statements.  FAS No. 131 establishes  additional standards
           for segment disclosures in the financial  statements.  Management has
           not  determined  the  effect  of  this  statement  on  its  financial
           statement disclosure.

5.         In the  second  quarter of 1997,  the  Company's  Board of  Directors
           authorized a stock repurchase  program of up to one million shares of
           the Company's outstanding stock. As of June 30, 1997, the Company had
           repurchased 184,300 shares for $5.5 million.

6.         Amounts  in  the  accompanying   Condensed   Consolidated   Financial
           Statements  for the three  months and six months  ended June 30, 1996
           have  been   reclassified   to  conform   with  the  current   period
           presentation.

                                     Page 6


<PAGE>



                  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  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  should be  considered  in  connection  with  certain  cautionary
statements  contained in the Company's  Current  Report on Form 8-K filing dated
March 28,  1997.  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 June 30,  1997,  compared to three
months ended June 30, 1996.

The Company's total operating  revenues for the three months ended June 30, 1997
increased  24.7% to $176.3 from $141.4  million for the three  months ended June
30, 1996. The increase was primarily due to medical premium revenue increases of
$31.8 million,  or 34.1%, from the Company's HMO and managed indemnity insurance
subsidiaries.  Such additional premium revenue resulted principally from a 30.3%
increase  in  member  months  (the  number  of  months  of each  period  that an
individual is enrolled in a plan). The Company's HMO and insurance subsidiaries'
premium rates increased  approximately  3.8% primarily due to an increase in its
capitation  rate for its  Medicare  members as  established  by the Health  Care
Financing Administration ("HCFA"). The increase was due in part to the Company's
participation  in HCFA's social HMO program.  The Company realized 1% to 3% rate
increases for its existing HMO  subsidiaries'  commercial groups and the managed
indemnity  subsidiary.  However,  these  increases  were offset in part by lower
rates  realized by MedOne  Health  Plan,  an HMO  acquired on December 31, 1996.
Specialty product revenue increased $3.7 million, or 11.2%, for the three months
ended June 30, 1997 compared to the same  three-month  period in the prior year.
The  increase  was due to  specialty  product  revenue  growth  in the  workers'
compensation  insurance market of $1.9 million and an increase in administrative
services of $1.8 million due primarily to the acquisition of Prime Health,  Inc.
at the end of 1996. Some of this increase in administrative services revenue may
be offset  in the  future  by the loss of a  portion  of the  State of  Nevada's
self-insured  business.  Professional  fee revenue  decreased  slightly from the
comparable period in the prior year.  Investment and other revenue decreased due
to certain investment gains recognized in the second quarter of 1996.

Total medical expenses  increased $25.9 million over the same three-month period
last year. This 34.2% increase resulted  primarily from the consolidated  member
month growth discussed  previously.  Medical expenses as a percentage of medical
premiums and  professional  fees ("Medical Loss Ratio")  increased from 75.0% to
76.7% due primarily to member growth and expansion in areas with higher  medical
expenses, such as northern Nevada and Texas. In addition, MedOne Health Plan has
a higher  Medical Loss Ratio,  which further  contributed to the increase in the
Company's overall Medical Loss Ratio.  Specialty product expenses increased $2.7
million,  or 8.0%,  due  primarily to the 11.2%  increase in  specialty  product
revenue discussed previously. Specialty product revenue and expense is primarily
related to the workers' compensation insurance business.


                                     Page 7


<PAGE>


                  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 June 30,  1997,  compared to three
months ended June 30, 1996 (continued).

The combined ratio for the workers'  compensation  insurance business was 101.7%
compared to 105.1% for the  comparable  prior year  period.  The  reduction  was
primarily  due to a 4.7  percentage  point  decrease in the loss ratio which was
partially  offset by a 1.3  percentage  point  increase  in the  expense  ratio.
Incurred  losses for the current  accident  year were reduced as a result of the
Company's  ability to overlay  and  implement  managed  care  techniques  to the
workers'  compensation claims as well as net favorable loss development on prior
accident years totaling $2.6 million  compared to net favorable loss development
of $3.1  million  for the  comparable  prior  year  period.  The losses and loss
adjustment  expense  ratio for the three months ended June 30, 1997 reflects the
Company's  current  projection of the ultimate costs of claims  occurring in the
current as well as prior accident years.  Workers'  compensation claims are paid
over  several  years.  Until  payment is made,  the Company  invests the monies,
earning a yield on the invested balance.

General,  administrative and marketing ("G&A") costs increased $5.7 million,  or
33.2%, compared to the second quarter of 1996. As a percentage of revenues,  G&A
costs for the second  quarter of 1997  increased  to 13.1% from 12.2% during the
comparable  period in 1996.  Of the $5.7 million  increase in G&A,  $2.2 million
consisted of increased  compensation expense resulting primarily from additional
employees supporting expanded services. Broker, third-party administration,  and
premium tax  expenses  increased  approximately  $2.1  million due to  increased
membership.  Amortization  increased  approximately  $400,000. The remaining G&A
increase  is  due  to  additional  expenses  in  several  areas  including  data
processing  maintenance.  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 June 30,  1997,  the  Company's  ten
largest  commercial HMO employer groups were, in the aggregate,  responsible for
less than 15% of its  total  revenues.  Although  none of such  employer  groups
accounted for more than 3% 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 approximately $400,000 over the same period
in the prior year  primarily  due to the almost  $600,000  benefit for  minority
interests  recorded  in  1996,  offset  in part by an  increase  in  capitalized
interest related to various construction projects in 1997. In November 1996, the
Company  acquired  complete  ownership of a Texas HMO in which it had previously
held a 50%  interest.  That HMO began  business  in March  1995 and  experienced
losses in both three-month  periods. In the prior period,  these losses resulted
in a benefit from minority interests.

The decrease in the effective tax rate for the second quarter of 1997 from 25.4%
to 24.0% resulted from the Company's investment in tax-preferred investments and
the change in the deferred tax  valuation  allowance,  which is due primarily to
the ability to use a portion of net operating loss carryovers.

Net income for the three months ended June 30, 1997 increased  $400,000 to $10.6
million  over the  comparable  prior year  period.  The increase in earnings was
primarily due to increased  operating  revenues  offset by a higher Medical Loss
Ratio and increased G&A expenses as a percentage  of revenues.  In addition,  as
discussed previously,  the Company recorded  approximately  $600,000 in minority
interest in the prior year  period.  Excluding  the effects of the prior  period
benefit  related to minority  interests  income  before  income taxes  increased
approximately $800,000.

                                     Page 8


<PAGE>


                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES


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

Results of  Operations,  six months ended June 30, 1997,  compared to six months
ended June 30, 1996.

The Company's  total  operating  revenues for the six months ended June 30, 1997
increased 25.1% to $346.9 million, from $277.4 million, for the six months ended
June 30,  1996.  The  increase  was  primarily  due to medical  premium  revenue
increases of approximately  $63.6 million,  or 34.5%, from the Company's HMO and
managed  indemnity  insurance  subsidiaries.  Such  additional  premium  revenue
resulted  principally from a 31.2% increase in member months.  The Company's HMO
and insurance  subsidiaries' premium rates increased approximately 3.4% overall,
primarily due to an increase in its capitation rate for its Medicare  members as
established by HCFA. The increase was due in part to the Company's participation
in HCFA's social HMO program.  The Company  realized 1% to 3% rate increases for
its  existing  HMO  subsidiaries'  commercial  groups and the managed  indemnity
subsidiary. However, these increases were offset in part by lower rates realized
by MedOne Health Plan, an HMO acquired on December 31, 1996.  Specialty  product
revenue increased $7.5 million,  or 11.7%, in the six months ended June 30, 1997
compared to the same six-month period in the prior year. The increase was due to
specialty  product  revenue growth of $4.3 million in the workers'  compensation
insurance market and an increase in administrative  services of $3.2 million due
primarily to the  acquisition of Prime Health,  Inc. at the end of 1996. Some of
this increase in administrative  services revenue may be offset in the future by
the  loss  of  a  portion  of  the  State  of  Nevada's  self-insured  business.
Professional fee revenue  decreased  slightly from the comparable  period in the
prior year. Investment and other revenue decreased $1.3 million, or 9.4%, due to
certain investment gains recognized in the first six months of 1996.

Total medical expenses increased by $51.7 million over the same six-month period
last year. This 34.5% increase resulted  primarily from the consolidated  member
month growth discussed  previously.  The Medical Loss Ratio increased from 75.2%
to 76.7% due  primarily  to member  growth and  expansion  in areas with  higher
medical expenses, such as northern Nevada and Texas. In addition,  MedOne Health
Plan has a higher Medical Loss Ratio, which further  contributed to the increase
in  the  Company's  overall  Medical  Loss  Ratio.  Specialty  product  expenses
increased  $6.8  million,  or 10.6%,  due  primarily  to the 11.7%  increase  in
specialty  product revenue discussed  previously.  Specialty product revenue and
expense is primarily related to the workers' compensation insurance business.

The combined ratio for the workers'  compensation  insurance business was 103.1%
compared to 104.9% for the  comparable  prior year  period.  The  reduction  was
primarily due to a 1.1 percentage  point decrease in the loss ratio along with a
0.7 percentage  point decrease in the expense ratio.  Compared to the prior year
period,  incurred losses for the current  accident year were reduced as a result
of the Company's ability to overlay and implement managed care techniques to the
workers'  compensation  claims. In addition,  the Company had net favorable loss
development totalling $4.4 million compared to net favorable loss development of
$7.1 million for the  comparable  prior year period.  There can be no assurances
that  favorable  development,  or the  magnitude  thereof,  will continue in the
future.  The losses and loss  adjustment  expense ratio for the six months ended
June 30, 1997 reflects the Company's current projection of the ultimate costs of
claims  occurring  in  the  current  as  well  as  prior  accident  years.  Such
projections  are  subject  to change and any change  would be  reflected  in the
income statement.



                                     Page 9


<PAGE>


                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES


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

Results of  Operations,  six months ended June 30, 1997,  compared to six months
ended June 30, 1996 (continued).

G&A costs increased $10.6 million, or 30.7%, compared to the first six months of
1996.  As a percentage  of revenues,  G&A costs for the first six months of 1997
increased to 13.0% from 12.4% during the comparable period in 1996. Of the $10.6
million  increase  in  G&A,  $3.4  million  consisted  of  compensation  expense
resulting  primarily from additional  employees  supporting  expanded  services.
Broker,   third-party   administration,   and  premium  tax  expenses  increased
approximately $4.6 million due to increased membership.  Amortization  increased
$700,000.  The remaining  G&A increase is due to additional  expenses in several
areas  including data processing  maintenance.  The Company markets its products
primarily  to  employer  groups and labor  unions  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 six months  ended June 30,  1997,  the  Company's  ten largest
commercial HMO employer groups were, in the aggregate, responsible for less than
15% of its total revenues.  Although none of such employer groups  accounted for
more than 3% 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.

In the first quarter of 1997, the Company recorded  estimated  expenses of $11.0
million,  $8.4 million after tax, for  merger-related  costs. On March 18, 1997,
the Company  announced  it had  terminated  its merger  agreement  with PCA. The
original  agreement  had been entered into in November  1996. On March 18, 1997,
prior to termination of the merger  agreement,  PCA filed a lawsuit  against the
Company in the United States District Court for the Southern District of Florida
(the "District Court"), seeking, among other things, specific performance of the
merger  agreement and monetary  damages.  Although the Company  believes the PCA
lawsuit is without merit, there can be no assurance as to the outcome of the PCA
lawsuit.  The  Company  has  filed a motion  in the  District  Court  seeking  a
dismissal  of the PCA lawsuit.  The Company has also  initiated a lawsuit in the
Court of  Chancery of the State of Delaware  seeking a  declaratory  judgment as
well as other remedies.  The Company  intends to vigorously  pursue all remedies
available  to it;  however,  there can be no  assurance  that the  Company  will
prevail in such  litigation  or that PCA will have  sufficient  funds to pay any
damages that the Company may be awarded.

Interest  expense  and  other  increased  approximately  $1.0  million  from the
comparable  prior year period  primarily due to the almost $1.0 million  benefit
for minority  interests recorded in 1996. In November 1996, the Company acquired
complete  ownership  of a  Texas  HMO  in  which  it had  previously  held a 50%
interest.  That HMO began business in March 1995 and experienced  losses in both
six-month periods. In the prior period,  these losses resulted in a benefit from
minority interests.

The decrease in the effective tax rate for the first six months of 1997 to 24.0%
from  25.2%  in the  first  six  months  of 1996  resulted  from  the  Company's
investment  in  tax-preferred  investments  and the change in the  deferred  tax
valuation  allowance,  which is due primarily to the ability to use a portion of
net operating loss carryovers.

Excluding  the  effect  of the  merger-related  costs,  the  gains  on  sales of
securities,  and the prior period benefit related to minority interests,  income
before income taxes  increased  approximately  $1.5 million from the  comparable
prior  year  period.  Net income  for the six  months  ended  June 30,  1997 was
consistent with the prior year period.


                                     Page 10


<PAGE>


                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES


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

Liquidity and Capital Resources

The Company's  cash flow from operating  activities  during the six months ended
June 30, 1997 resulted primarily from $12.0 million of net income,  $6.6 million
in  depreciation  and  amortization  and $2.2 million in provision  for doubtful
accounts  offset  by a $3.4  million  net  change  in  assets  and  liabilities,
excluding  cash and cash  equivalents.  The decrease in cash which resulted from
the change in assets and liabilities was primarily due to a decrease in unearned
premium  revenue  resulting  from early receipt of the  subsequent  month's HCFA
Medicare  capitation  payment as of December 31,  1996,  as well as increases in
accounts  receivable  and other  assets,  offset in part by increases in medical
claims payable,  the reserve for losses and loss adjustment  expense and accrued
and other liabilities.

The $61.6 million used for investing and financing activities since December 31,
1996  primarily  consisted of a $40.5 million net increase in  investments,  and
$22.0  million  in  net  capital  expenditures   including   construction  costs
associated with office and medical  facilities,  computer and medical equipment,
and other  capital  needs to support the  Company's  growth.  Additionally,  the
Company used $5.5 million to purchase treasury stock on the open market and $1.2
million for the  reduction  of debt.  On January 10,  1997,  the Company and PCA
entered into a credit and share pledge  agreement  (the "PCA Loan")  pursuant to
which the Company made a demand loan to PCA in the amount of $16.8  million with
an 8.25% fixed rate of interest.  There can be no  assurance  that PCA will have
sufficient funds to pay the PCA Loan in full. However, during the second quarter
of 1997 PCA  announced  that it had entered  into an agreement to be acquired by
Humana,  Inc., a company with  substantial  assets.  A special  meeting of PCA's
shareholders  is  scheduled  to vote  on the  proposed  merger  with  Humana  on
September  8,  1997.  These  uses of cash were  offset  in part by $7.4  million
received in connection with the sale of stock through the Company's stock plans.

In the second quarter of 1997 the Credit  Agreement was amended and increased to
$100 million.  In March 1997, the Company  borrowed $17.0 million on its line of
credit for general corporate purposes.  The remaining line of credit may be used
for  additional  working  capital,  if necessary.  Also in the second quarter of
1997, the Company's Board of Directors  authorized a $3.0 million line of credit
from the Company to the Company's  Chief  Executive  Officer ("CEO") at a market
interest rate tied to the Company's  borrowing  rate. The line of credit will be
collateralized  by certain  amounts of the CEO's Sierra stock and stock  options
and will be due and payable no later than June 30, 1998.

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 states totaling $14.6 million as of June
30, 1997.  The HMO and insurance  subsidiaries  must also meet  requirements  to
maintain  minimum  stockholder's  equity,  on a statutory  basis,  ranging  from
$200,000  to $5.2  million.  Of the cash and cash  equivalents  held at June 30,
1997,  $45.5 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  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.


                                     Page 11


<PAGE>


                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES


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

Liquidity and Capital Resources (continued)

The Company has  submitted a proposal as the prime  contractor  to the Office of
the Civilian Health and Medical Program of the Uniformed Services ("CHAMPUS") to
provide managed health care coverage to CHAMPUS eligible beneficiaries in Region
1. This region includes more than 600,000 individuals in Connecticut,  Delaware,
Maine,   Maryland,   Massachusetts,   New  Hampshire,   New  Jersey,  New  York,
Pennsylvania,  Rhode Island, Vermont, northern Virginia and Washington, D.C. The
Company expects to incur expenses of approximately $12.0 to $15.0 million during
the Region 1 contract proposal  process.  The Company submitted its final bid on
July 17,  1997 and  anticipates  learning of the result of its bid by October 1,
1997. The contract, if awarded to the Company, will result in approximately $1.8
billion in estimated  revenues  over the  five-year  term of the  contract.  The
expenses  incurred in connection  with the contract are being  deferred.  If the
Company is not  awarded the  contract,  the costs will be expensed in the period
that notification is received.

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 16.921
shares of the Company's common stock at a conversion price of $59.097 per share.
The Debentures are general  unsecured  obligations of CII and are not guaranteed
by Sierra. During the six months ended June 30, 1997 Sierra purchased $30,000 of
the Debentures on the open market.

The Company has a 1997 capital budget of approximately $45.0 million,  primarily
for the construction of a new 59,000 square-foot  medical facility,  a six-story
180,000 square foot corporate  headquarters  building and  accompanying  parking
structure,  computer hardware and software,  furniture and equipment,  and other
requirements needed for the Company's projected growth and expansion. Completion
of the  medical  facility  is  expected  in the  fourth  quarter  of  1997 at an
estimated total cost of $7.3 million.  Completion of the additional  building at
the corporate  headquarters complex is expected in the fourth quarter of 1997 at
a total cost of $35.0  million.  The  Company  believes  that  existing  working
capital, operating cash flow and, if necessary, mortgage financing and equipment
leasing,  and additional  amounts  available  under its credit  facility will be
sufficient  to fund its capital  expenditures,  debt  service and any  expansion
activities  during the next 12 months.  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  Company's  liquidity  needs over the next 12 months will  primarily  be for
capital items to support  growing  membership,  the Company's  stock  repurchase
program,  as well as debt  service and  expansion of the  Company's  operations,
including potential acquisitions.



                                     Page 12


<PAGE>


                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES


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

Liquidity and Capital Resources (continued)


The Company's membership at June 30, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>

                                                                            Number of Members at Period Ended
                                                                          June 30, 1997            June 30, 1996

HMO
<S>                                                                           <C>                     <C>
  Commercial...................................................               155,900                 123,200
  Medicare.....................................................                32,500                  27,400
Managed Indemnity..............................................                47,300                  33,200
Medicare Supplement............................................                24,800                  19,200
Administrative Services........................................               512,200                 306,700
Total Members..................................................               772,700                 509,700
</TABLE>

Health Care Reform

Numerous  proposals  relating to health care and insurance  reform have been and
may  continue  to be  introduced  in the  United  States  Congress  and in state
legislatures.  At this time, the Company cannot determine which legislation,  if
any, will be enacted or what effect such legislation may have on the Company.

Inflation

Health care costs generally  continue to rise at a rate faster than the Consumer
Price  Index.  The Company  has been able to somewhat  lessen the impact of such
inflation by managing medical costs. There can be no assurance, however, that in
the future the Company's  ability to manage medical costs will not be negatively
impacted  by items  such as  technological  advances,  utilization  changes  and
catastrophic  items,  which could,  in turn,  result in medical  cost  increases
continuing to equal or exceed premium increases.


ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Pursuant  to the  General  Instructions  to  Rule  305 of  Regulation  S-K,  the
quantitative and qualitative  disclosures  called for by this Item 3 and by Rule
305 of Regulation S-K are inapplicable to the Company at this time.

                                     Page 13


<PAGE>



                           PART II - OTHER INFORMATION

ITEM 1.        LEGAL PROCEEDINGS

               On March 18, 1997,  the Company  announced it had  terminated its
               merger  agreement  with  PCA.  The  original  agreement  had been
               entered  into in  November  1996.  On March  18,  1997,  prior to
               termination of the merger agreement,  PCA filed a lawsuit against
               the Company in the District Court,  seeking,  among other things,
               specific   performance  of  the  merger  agreement  and  monetary
               damages. Although the Company believes the PCA lawsuit is without
               merit,  there can be no  assurance  as to the  outcome of the PCA
               lawsuit.  The  Company has filed a motion in the  District  Court
               seeking a  dismissal  of the PCA  lawsuit.  The  Company has also
               initiated  a  lawsuit  in the Court of  Chancery  of the State of
               Delaware  seeking  a  declaratory   judgment  as  well  as  other
               remedies.  The Company intends to vigorously  pursue all remedies
               available  to it;  however,  there can be no  assurance  that the
               Company  will  prevail in such  litigation  or that PCA will have
               sufficient  funds  to pay any  damages  that the  Company  may be
               awarded.

               The Company is subject to various other claims and  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 these  claims and 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

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

               Sierra held its Annual Meeting of Stockholders on May 30, 1997 in
Las Vegas, Nevada.

               The following  persons were elected directors for a two-year term
               ending in 1999 based on the voting results below:
<TABLE>
<CAPTION>

                                                                                                       Broker
               Name                                        For            Withheld        Abstain      Non-votes

<S>                                                      <C>               <C>               <C>           <C>
               Anthony M. Marlon, M.D.                   15,413,874        628,586           0             0
               Thomas Y. Hartley                         15,409,863        632,597           0             0
</TABLE>

               The following  persons'  terms as directors  continued  after the
meeting and end in 1998.

               Charles L. Ruthe
               William J. Raggio
               Erin E. MacDonald

                                     Page 14


<PAGE>




ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (continued)

               The  stockholders  also  ratified the  appointment  of Deloitte &
               Touche LLP as the  Company's  independent  auditors  for the year
               ending 1997. The voting results were as follows:
<TABLE>
<CAPTION>

                                                                                          Broker
                                 For                Against           Abstain             Non-votes

<S>                             <C>                   <C>               <C>                <C>
                                16,029,984            6,702             5,774              0
</TABLE>



ITEM 5.        OTHER INFORMATION

               None

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

               (a)      Exhibits
(10.1)              First  Amendment,  dated  as of  May  31,  1997,  to  Credit
                    Agreement and Waiver among Sierra Health Services,  Inc., as
                    Borrower,   Bank  of  America  National  Trust  and  Savings
                    Association,  as  Agent  and  Issuing  Bank  and  the  Other
                    Financial Institutions Party Hereto,  originally dated as of
                    April 11,  1996 and filed as Exhibit 10 to the  Registrant's
                    Quarterly  Report  on Form 10-Q for the  three-month  period
                    ended March 31, 1996.

(10.2)              Draft of Split Dollar Life Insurance  Agreement effective as
                    of July 1, 1997,  by and  between  Sierra  Health  Services,
                    Inc., and Jonathon W. Bunker,  Ria Marie  Carlson,  Frank E.
                    Collins,  William R.  Godfrey,  Laurence S. Howard,  Erin E.
                    MacDonald,  Anthony M.  Marlon,  M.D.,  Kathleen M.  Marlon,
                    Michael A. Montalvo,  John A. Nanson,  M.D., Marie H. Soldo,
                    and James L. Starr.

(10.3)              Sierra Health  Services,  Inc.  Deferred  Compensation  Plan
                    Effective May 1, 1996 as Amended and Restated Effective July
                    1, 1997, dated as of July 1, 1997.

(10.4)              Sierra  Health   Services,   Inc.   Supplemental   Executive
                    Retirement  Plan  Effective as of July 1, 1997,  dated as of
                    July 7, 1997.

(10.5)              Employment  Agreement  with Jonathon W. Bunker dated May 20,
                    1996, as amended.

(10.6)              Amendment  dated May 1, 1997 to  Employment  Agreement  with
                    Frank E.  Collins.  The original  employment  agreement  was
                    filed as Exhibit 10(3) to the Registrant's  Quarterly Report
                    on Form 10-Q for the period ended September 30, 1996.

(10.7)              Amendment  dated May 1, 1997 to  Employment  Agreement  with
                    William R. Godfrey.  The original  employment  agreement was
                    filed as Exhibit 10(4) to the Registrant's  Quarterly Report
                    on Form 10-Q for the period ended September 30, 1996.



                                     Page 15


<PAGE>



ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K (continued)

(10.8)              Amendment  dated May 1, 1997 to  Employment  Agreement  with
                    Laurence S. Howard.  The original  employment  agreement was
                    filed as Exhibit 10(5) to the Registrant's  Quarterly Report
                    on Form 10-Q for the period ended September 30, 1996.

(10.9)              Employment  Agreement  with Erin E.  MacDonald  dated May 1,
                    1997.

(10.10)             Employment  Agreement with Anthony M. Marlon, M.D. dated May
                    1, 1997.

(10.11)             Amendment  dated May 1, 1997 to  Employment  Agreement  with
                    Michael A. Montalvo.  The original employment  agreement was
                    filed as Exhibit 10(6) to the Registrant's  Quarterly Report
                    on Form 10-Q for the period ended September 30, 1996.

(10.12)             Amendment  dated May 1, 1997 to  Employment  Agreement  with
                    Marie H. Soldo. The original employment  agreement was filed
                    as Exhibit  10(8) to the  Registrant's  Quarterly  Report on
                    Form 10-Q for the period ended September 30, 1996.

(10.13)             Amendment  dated May 1, 1997 to  Employment  Agreement  with
                    James L. Starr. The original employment  agreement was filed
                    as Exhibit  10(9) to the  Registrant's  Quarterly  Report on
                    Form 10-Q for the period ended September 30, 1996.

(11)                Computation of earnings per share.

(27)                Financial Data Schedule

          (b)      Reports on Form 8-K

                        None



                                     Page 16


<PAGE>


                                   SIGNATURES

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



                                   SIERRA HEALTH SERVICES, INC.
                                   (Registrant)



Date  August 14, 1997                    JAMES L. STARR
                                   James L. Starr
                                   Vice President of Finance
                                   Chief Financial Officer and Treasurer
                                   (Principal Financial and
                                   Accounting Officer)


                                     Page 17