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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, 1998

                                                        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 August 3, 1998  there were  27,661,000  shares of common
stock outstanding.


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<PAGE>




                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES
                                    FORM 10-Q
                     FOR THE SIX MONTHS ENDED JUNE 30, 1998

                                                                         INDEX
                                    Page No.

Part I - FINANCIAL INFORMATION

      Item l.     Financial Statements

                  Condensed Consolidated Balance Sheets -
                    June 30, 1998 and December 31, 1997...................    3

                  Condensed Consolidated Statements of Operations -
                    three and six months ended June 30, 1998
                    and June 30, 1997.....................................    4

                  Condensed Consolidated Statements of Cash Flows -
                    six months ended June 30, 1998 and June 30, 1997......    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.....................................   16



Part II - OTHER INFORMATION

      Item l.     Legal Proceedings...................................       17

      Item 2.     Changes in Securities...............................       17

      Item 3.     Defaults Upon Senior Securities.....................       17

      Item 4.     Submission of Matters to a Vote of
                    Security Holders..................................       17

      Item 5.     Other Information...................................       18

      Item 6.     Exhibits and Reports on Form 8-K....................       18

Signature.............................................................       20



                                                     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
                                                                                            1998                  1997
CURRENT ASSETS:
<S>                                                                                     <C>                   <C>
  Cash and Cash Equivalents...................................................          $  73,273,000         $  96,841,000
  Short-term Investments......................................................            120,676,000           115,498,000
  Accounts Receivable (Less: Allowance for Doubtful
     Accounts:  1998 - $9,173,000; 1997 - $7,916,000).........................             87,048,000            42,041,000
 Prepaid Expenses and Other Assets............................................             45,516,000            46,226,000
     Total Current Assets.....................................................            326,513,000           300,606,000

LAND, BUILDINGS AND EQUIPMENT.................................................            218,564,000           197,917,000
  Less-Accumulated Depreciation...............................................            (56,611,000)          (49,086,000)
     Land, Buildings and Equipment - Net......................................            161,953,000           148,831,000

  LONG-TERM INVESTMENTS.......................................................            168,504,000           155,153,000
  RESTRICTED CASH AND INVESTMENTS.............................................             17,174,000            16,540,000
  REINSURANCE RECOVERABLE (Less Current Portion)                                           19,246,000            20,245,000
  GOODWILL ...................................................................             41,870,000            42,803,000
  OTHER ASSETS................................................................             48,028,000            39,758,000
TOTAL ASSETS..................................................................           $783,288,000          $723,936,000

CURRENT LIABILITIES:
  Accounts Payable and Other Accrued Liabilities..............................           $ 63,496,000          $ 58,439,000
  Medical Claims Payable......................................................             75,426,000            55,943,000
  Current Portion of Reserves for Losses and
     Loss Adjustment Expense .................................................             71,399,000            63,358,000
  Unearned Premium Revenue....................................................             20,750,000            29,763,000
  Current Portion of Long-term Debt...........................................              6,079,000             4,726,000
     Total Current Liabilities................................................            237,150,000           212,229,000

RESERVES FOR LOSSES AND LOSS ADJUSTMENT
  EXPENSE (Less Current Portion) .............................................            132,844,000           139,341,000
LONG-TERM DEBT (Less Current Portion).........................................             95,330,000            90,841,000
OTHER LIABILITIES.............................................................             21,825,000            15,843,000
TOTAL LIABILITIES.............................................................            487,149,000           458,254,000

STOCKHOLDERS' EQUITY:
  Preferred Stock, $.01 Par Value,
    1,000,000 Shares Authorized; None Issued
  Common Stock, $.005 Par Value
    60,000,000 Shares Authorized;
    Shares Issued:  1998 - 28,025,000; 1997 - 27,709,000......................                140,000              139,000
  Additional Paid-in Capital..................................................            169,774,000          164,247,000
  Treasury Stock: 426,750 Common Shares.......................................             (5,601,000)          (5,601,000)
  Unrealized Holding Gain on
      Available-for-Sale Securities ..........................................                846,000              655,000
  Retained Earnings...........................................................            130,980,000          106,242,000
TOTAL STOCKHOLDERS' EQUITY....................................................            296,139,000          265,682,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....................................           $783,288,000         $723,936,000
</TABLE>

                             See  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
                                                                 1998              1997             1998               1997
OPERATING REVENUES:
<S>                                                                      <C>          <C>          <C>           <C>
  Medical Premiums....................................       $143,221,000     $125,250,000      $281,039,000     $247,589,000
  Specialty Product Revenues..........................         40,721,000       37,079,000        76,882,000       71,792,000
  Military Contract Revenues..........................         41,852,000                         60,388,000
  Professional Fees...................................         11,171,000        7,538,000        22,094,000       15,059,000
  Investment and Other Revenues                                 7,580,000        6,454,000        14,551,000       12,459,000
    Total ............................................        244,545,000      176,321,000       454,954,000      346,899,000

OPERATING EXPENSES:
  Medical Expenses....................................        119,482,000      101,813,000       233,798,000       201,489,000
  Specialty Product Expenses..........................         39,518,000       36,348,000        75,759,000        70,999,000
  Military Contract Expenses..........................         40,038,000                         57,019,000
  General, Administrative and Marketing Expenses               26,957,000       23,057,000        52,165,000        45,066,000
  Merger and Related Expenses ........................                                                              11,000,000
    Total ............................................        225,995,000      161,218,000       418,741,000       328,554,000

OPERATING INCOME......................................         18,550,000       15,103,000        36,213,000        18,345,000

INTEREST EXPENSE AND OTHER, NET ......................         (1,619,000)      (1,207,000)       (2,900,000)       (2,609,000)

INCOME BEFORE INCOME TAXES ...........................         16,931,000       13,896,000        33,313,000        15,736,000

PROVISION FOR INCOME TAXES............................          4,380,000        3,335,000         8,575,000         3,777,000

NET INCOME ...........................................       $ 12,551,000     $ 10,561,000      $ 24,738,000      $ 11,959,000

NET INCOME PER COMMON SHARE...........................               $.46             $.39              $.90              $.45
NET INCOME PER COMMON SHARE
 ASSUMING DILUTION....................................               $.45             $.39              $.89              $.44

WEIGHTED AVERAGE COMMON SHARES
 OUTSTANDING..........................................         27,546,000       26,954,000        27,476,000        26,864,000

WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING ASSUMING DILUTION.......................         28,023,000       27,323,000        27,939,000        27,203,000
</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

                                                                                         1998                 1997

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                   <C>                 <C>
   Net Income..............................................................           $24,738,000         $ 11,959,000
   Adjustments to Reconcile Net Income to Net Cash
       Provided by Operating Activities:
          Depreciation and Amortization....................................             8,455,000            6,602,000
          Provision for Doubtful Accounts..................................             3,171,000            2,198,000
   Changes in Assets and Liabilities ......................................           (32,536,000)          (3,358,000)
       Net Cash Provided by Operating Activities                                                              3,828,000  17,401,000

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital Expenditures, Net of Equipment Dispositions............................................         (17,211,000)(22,003,000)
   Changes in Short-term Investments.......................................            (5,318,000)          13,356,000
   Changes in Long-term Investments........................................           (13,062,000)         (52,832,000)
   Changes in Restricted Cash and Investments.....................................................            (674,000)(1,063,000)
   Corporate Disposition, net of cash disposed                                                                1,373,000
   Loan to Third Party.....................................................            __________          (16,750,000)
       Net Cash Used for Investing Activities..............................           (34,892,000)         (79,292,000)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from Borrowings................................................            15,450,000           17,000,000
   Payments on Debt and Capital Leases.....................................           (12,678,000)          (1,229,000)
   Exercise of Stock in Connection with Stock Plans...............................................           4,724,000     7,400,000
   Purchase of Treasury Stock..............................................                                 (5,471,000)
       Net Cash Provided by Financing Activities..................................................           7,496,000   17,700,000

NET DECREASE IN CASH AND CASH EQUIVALENTS..................................           (23,568,000)         (44,191,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                              96,841,000  103,587,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................................          $ 73,273,000         $ 59,396,000

                                                                                        Six Months Ended June 30
Supplemental Condensed Consolidated
    Statements of Cash Flows Information:                                                                    1998             1997
Cash Paid During the Period for Interest
   (Net of Amount Capitalized).............................................           $3,316,000            $2,217,000
Cash Paid During the Period for Income Taxes.....................................................            8,885,000 4,989,000

Non-cash Investing and Financing Activities:
   Tax Benefits of Stock Issued for Exercise of Options .........................................              804,000 1,142,000
   Additions to Capital Leases.............................................            3,070,000
</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, 1997 and 1996. In the opinion of  management,  the
accompanying  unaudited condensed  consolidated financial statements reflect all
adjustments,  consisting only of normal and recurring adjustments, necessary for
a fair presentation of the financial results for the interim periods presented.

     2. On June 5,  1998,  the  Company's  subsidiary,  HMO  Texas,  L.C.  ("HMO
Texas"),  entered into definitive agreements to acquire certain assets of Kaiser
Foundation  Health  Plan  of  Texas  ("Kaiser"),  a  health  plan  operating  in
Dallas-Forth  Worth with  approximately  120,000 members and Permanente  Medical
Association of Texas ("Permanente"),  a 150 physician medical group operating in
that area.  The  purchase  price was $129  million,  which is net $20 million in
operating  cost support to be paid to Sierra by Kaiser  Foundation  Hospitals in
five  quarterly  installments  following  the  closing of the  transaction.  The
purchase  price  includes  amounts for real estate and eight  medical and office
facilities  encompassing  more than 500,000  square feet. The purchase price may
increase by $30 million over three years if certain growth, member retention and
accreditation goals are met by the health plan.

         Sierra  is  assuming  no prior  liabilities  for  malpractice  or other
         litigation,  or for any  unanticipated  future  adjustments  to  claims
         expenses for periods prior to closing. The transaction will be financed
         with bank debt.  The  transaction  has been  approved  by the Boards of
         Directors of Kaiser and the Company.  Subject to applicable  regulatory
         approvals and other closing conditions,  the transaction is expected to
         close no later than October 31, 1998.

3.       On May 5, 1998, the Company announced a three-for-two stock split. Each
         stockholder  of record of the Company owning one share of common stock,
         par value of $.005,  as of the close of  business on the record date of
         May 18, 1998,  received an additional  one-half share on June 18, 1998.
         In lieu of any  fractional  share  resulting  from the stock  split,  a
         stockholder  received a cash payment  based on the closing price of the
         Company's  common stock on the record date. The par value remains $.005
         per  share.  Common  stock and  earnings  per share  amounts  have been
         retroactively adjusted to account for the split.

4. The following tables provide a  reconciliation  of basic and diluted earnings
per share ("EPS"):


                                                        Dilutive
                                           Basic     Stock Options      Diluted

         For the Three Months ended
           June 30, 1998:
           Income from Continuing
             Operations  .........      $12,551,000                  $12,551,000
           Shares.................       27,546,000    477,000        28,023,000
           Per Share Amount.......             $.46                         $.45

         For the Three Months ended
           June 30, 1997:
           Income from Continuing
             Operations...........      $10,561,000                  $10,561,000
           Shares.................       26,954,000    369,000        27,323,000
           Per Share Amount.......             $.39                         $.39



                                                     Page 6

<PAGE>






                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


                                                        Dilutive
                                           Basic     Stock Options      Diluted

         For the Six Months ended
           June 30, 1998:
           Income from Continuing
             Operations  .........      $24,738,000                  $24,738,000
           Shares.................       27,476,000    463,000        27,939,000
           Per Share Amount.......             $.90                         $.89

         For the Six Months ended
           June 30, 1997:
           Income from Continuing
             Operations...........      $11,959,000                  $11,959,000
           Shares.................       26,864,000    339,000        27,203,000
           Per Share Amount.......             $.45                         $.44


5.       The Company has adopted Statement of Financial  Accounting Standard No.
         130,  "Reporting  Comprehensive  Income"  which  requires  companies to
         classify  items of other  comprehensive  income  by their  nature  in a
         financial  statement.  Other comprehensive income is comprised entirely
         of  unrealized   holding   gains  and  losses  on  available   for-sale
         investments,  net of taxes,  arising  during the period,  adjusted  for
         gains and losses included in net income.

         The following table presents  comprehensive  income for the three month
         and six month periods ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
                                                             Three Months Ended                  Six Months Ended
                                                                         June 30                        June 30
                                                             1998              1997               1998             1997

<S>                                                        <C>              <C>                <C>             <C>
           NET INCOME:...........................          $12,551,000      $10,561,000        $24,738,000     $11,959,000
           Change in net unrealized Holding
             Gains (loses) on Investments,
             net of income taxes.................              708,000          450,000            191,000      (1,217,000)

          COMPREHENSIVE INCOME...................          $13,259,000      $11,011,000        $24,929,000     $10,742,000
</TABLE>

6.       During  1997  the   Financial   Accounting   Standards   Board   issued
         "Disclosures  about Segments of an Enterprise and Related  Information"
         ("FAS 131").  FAS 131 is effective  for fiscal  years  beginning  after
         December  31,  1997;  however,  the  statement  need not be  applied to
         interim  statements  in  the  initial  year  of  application.  FAS  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.

         In March 1998,  the  Accounting  Standards  Executive  Committee of the
         American  Institute of Certified Public Accountants issued Statement of
         Position  98-1  ("SOP  98-1"),  "Accounting  for the Costs of  Computer
         Software  Developed For or Obtained For Internal  Use." Under SOP 98-1,
         effective for years beginning after December 15, 1998, certain computer
         software  costs are required to be  capitalized  and amortized over the
         software's  estimated  useful life. The Company will adopt SOP 98-1 for
         the fiscal year  ending  December  31,  1999 and does not believe  this
         statement will have a material impact on its financial statements.

         In  June  1998,  the  Financial   Accounting   Standards  Board  issued
         "Accounting for Derivative  Instruments and Hedging  Activities"  ("FAS
         133").  FAS 133 is effective for fiscal years  beginning after June 15,
         1999.  FAS 133 addresses the  accounting  for  derivative  instruments,
         including certain derivative  instruments  embedded in other contracts,
         and hedging  activities.  The Company does not believe  this  statement
         will have a material

                                                     Page 7

<PAGE>



                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


         impact on its financial statements.

7.       Certain amounts in the Condensed  Consolidated Financial Statements for
         the three and six months ended June 30, 1997 have been  reclassified to
         conform with the current year presentation.

                                                     Page 8

<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 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 19, 1998  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 June 30,  1998,  compared to three
months ended June 30, 1997.

The Company's total operating  revenues for the three months ended June 30, 1998
increased approximately 38.7% to $244.5 from $176.3 million for the three months
ended June 30, 1997. The increase was primarily due to military contract revenue
of $41.9 million and an increase in premium revenue of $18.0 million. During the
fourth  quarter of 1997  Sierra  Military  Health  Services,  Inc.  ("SMHS"),  a
wholly-owned  subsidiary of the Company,  began the implementation  phase of its
TRICARE  contract.  The military  contract  revenue is a result of the continued
implementation  of that contract as well as health care delivery  which began on
June 1, 1998.  The operating  margin for SMHS was 4.3% for the current  quarter.
With health care delivery starting in June 1998,  operating margins for SMHS are
expected to decrease in future quarters.

Medical premium revenue from the Company's HMO and managed  indemnity  insurance
subsidiaries  increased $18.0 million, or 14.3%. The increase in premium revenue
reflects a 5.9%  increase in member  months (the number of months of each period
that an individual  is enrolled in a plan).  Medicare  member  months  increased
19.6% 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. The Company's premium rates increased
an  average of 3% to 5% for its HMO  commercial  groups and in excess of 10% for
its managed  indemnity  commercial  groups.  The Company also  realized a slight
increase  in its  capitation  rate  established  by the  Health  Care  Financing
Administration  ("HCFA").  Approximately  75% of the Company's  Nevada  Medicare
members are enrolled in the 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.

Specialty product revenue increased $3.6 million,  or 9.8%, for the three months
ended June 30, 1998 compared to the same  three-month  period in the prior year.
The increase was due to revenue  growth in the workers'  compensation  insurance
operation  offset in part by a decrease in  administrative  services  revenue of
$900,000 due primarily to the termination of the Company's workers' compensation
administrative  services  contract  with the State of Nevada.  Professional  fee
revenue increased approximately $3.6 million primarily due to the acquisition of
the  operations  of  two  medical  clinics  in  southern  Nevada.   In  addition
approximately  $1.1 million of the increase in  professional  fees is due to the
operations  of Total Home Care,  Inc.  ("THC").  THC was  acquired  in the third
quarter of 1997 and provides home infusion, oxygen and durable medical equipment
services  in  Nevada  and  Arizona.   Investment  and  other  revenue  increased
approximately  $1.1  million  over  the  comparable  period  in the  prior  year
primarily due to an increase in invested  balances and capital gains realized on
the sale of investments.

                                                     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,  three  months  ended June 30,  1998,  compared to three
months ended June 30, 1997 (continued).

Medical  expenses as a  percentage  of medical  premiums and  professional  fees
("Medical  Loss  Ratio")  increased  from 76.7% to 77.4%.  The  increase  in the
medical loss ratio was due to an increase in Medicare members as a percentage of
fully-insured  members,  continued  expansion in Texas which has higher  medical
expenses and the  acquisitions of THC and two medical clinics for which costs of
operations are included in medical expenses.  The cost of providing medical care
to Medicare  members  generally  requires a greater  percentage  of the premiums
received.  Specialty  product  expenses  increased  $3.2 million,  or 8.7%,  due
primarily  to  the  9.8%  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 99.6%
compared to 101.7% for the comparable  prior year period.  The reduction was due
to a 225 basis point decrease in the expense ratio which was offset  slightly by
a 12 basis point increase in the loss ratio.  The reduction in the expense ratio
was  primarily  due to a larger net earned  premium.  The dollar amount of those
expenses that are not a direct function of premium  revenues were  substantially
the same between the periods. 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,  which was the
same as the  comparable  prior  year  period.  There  can be no  assurance  that
favorable  development,  or the magnitude thereof,  will continue in the future.
The losses and loss adjustment expense ratio for the three months ended June 30,
1998 reflect 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.
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 $3.9 million,  or
16.9%, compared to the second quarter of 1997. As a percentage of revenues,  G&A
costs for the second  quarter of 1998  decreased  to 11.0% from 13.1% during the
comparable period in 1997. The decrease in the G&A ratio is primarily due to the
addition of military  contract  revenues  offset in part by costs for additional
infrastructure  needed to support overall  Company  growth.  Of the $3.9 million
increase in G&A,  $1.1  million  consisted  of  increased  compensation  expense
resulting primarily from additional  employees  supporting expanded services and
new benefit  programs for management.  Broker,  third-party  administration  and
premium  tax  expenses  increased   approximately   $600,000  due  to  increased
membership.  The remaining G&A increase is due to additional expenses in several
areas including an increase in depreciation of $400,000. 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,  1998,  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 approximately $400,000 compared to the same
period in the prior year primarily due to the addition of a new mortgage as well
as capital leases for equipment at SMHS.



                                                     Page 10

<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,  1998,  compared to three
months ended June 30, 1997 (continued).

For the period,  the Company recorded  approximately $4.4 million of tax expense
for an  effective  tax rate of 25.9%  compared to 24.0% in 1997.  The  Company's
current low operating tax rate is primarily a result of taxpreferred 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.  The effective
tax  rate  will  increase  in  future  periods  after  the  remaining  valuation
allowances for net operating loss carryforwards are utilized.

Net income for the three  months ended June 30, 1998  increased  $2.0 million or
18.8%, compared to the three months ended June 30, 1997.

Results of  Operations,  six months ended June 30, 1998,  compared to six months
ended June 30, 1997.

The Company's  total  operating  revenues for the six months ended June 30, 1998
increased  approximately  31.1% to $455.0 from $346.9 million for the six months
ended June 30, 1997. The increase was primarily due to military contract revenue
of $60.4  million  and an  increase  in premium  revenue of $33.5  million.  The
military  contract  revenue is a result of the continued  implementation  of the
TRICARE contract as well as one month of health care delivery.

Medical premium revenue from the Company's HMO and managed  indemnity  insurance
subsidiaries  increased $33.5 million, or 13.5%. The increase in premium revenue
reflects a 6.5% increase in member  months.  Medicare  member  months  increased
19.3% 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. The Company's premium rates increased
an  average of 3% to 5% for its HMO  commercial  groups and in excess of 10% for
managed indemnity commercial groups. The Company also realized a slight increase
in its capitation rate established by HCFA.  Approximately  75% of the Company's
Nevada Medicare members are enrolled in the 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.

Specialty  product revenue  increased $5.1 million,  or 7.1%, for the six months
ended June 30, 1998 compared to the same six-month period in the prior year. The
increase  was due to  revenue  growth  in the  workers'  compensation  insurance
operation  offset in part by a decrease in  administrative  services  revenue of
$2.3  million  due  primarily  to  the  termination  of the  Company's  workers'
compensation   administrative  services  contract  with  the  State  of  Nevada.
Professional fee revenue increased  approximately  $7.0 million primarily due to
the acquisition of the operations of two medical clinics in southern Nevada.  In
addition  approximately $1.9 million of the increase in professional fees is due
to the operations of THC.  Investment and other revenue increased  approximately
$2.1 million over the  comparable  period in the prior year  primarily due to an
increase  in  invested  balances  and  capital  gains  realized  on the  sale of
investments.

The medical  loss ratio  increased  from 76.7% to 77.1% for the six months ended
June 30, 1998  compared to the prior  period.  The  increase in the medical loss
ratio  was  due  to  an  increase  in  Medicare   members  as  a  percentage  of
fully-insured  members,  continued  expansion in Texas which has higher  medical
expenses and the  acquisitions of THC and two medical clinics for which costs of
operations are included in medical expenses.  The cost of providing medical care
to Medicare  members  generally  requires a greater  percentage  of the premiums
received.  Specialty  product  expenses  increased  $4.8 million,  or 6.7%,  due
primarily  to  the  7.1%  increase  in  specialty   product  revenue   discussed
previously. Specialty product revenue and expense is

                                                     Page 11

<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, 1998,  compared to six months
ended June 30, 1997 (continued).

primarily related to the workers' compensation insurance business.

The combined ratio for the workers'  compensation  insurance business was 101.0%
compared to 103.1% for the comparable  prior year period.  The reduction was due
to a 159 basis point decrease in the expense ratio and a 45 basis point decrease
in the loss ratio.  The  reduction in the expense  ratio was  primarily due to a
larger net earned  premium.  The dollar amount of those  expenses that are not a
direct  function of premium  revenues  were  substantially  the same between the
periods.  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 $4.5 million  compared to net favorable loss development
of $4.4 million for the comparable prior year period.  There can be no assurance
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, 1998 reflect 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.  Workers'  compensation  claims are paid over several  years.
Until payment is made,  the Company  invests the monies,  earning a yield on the
invested balance.

G&A costs increased $7.1 million, or 15.8%,  compared to the first six months of
1997.  As a  percentage  of  revenues,  G&A  costs  for the six  months  of 1998
decreased to 11.5% from 13.0% during the comparable period in 1997. The decrease
in the G&A ratio is primarily due to the addition of military  contract revenues
offset in part by costs for additional  infrastructure needed to support overall
Company growth.  Of the $7.1 million increase in G&A, $2.4 million  consisted of
increased  compensation  expense resulting  primarily from additional  employees
supporting  expanded  services and new benefit programs for management.  Broker,
third-party  administration  and premium tax  expenses  increased  approximately
$900,000  due to  increased  membership.  The  remaining  G&A increase is due to
additional  expenses in several areas  including an increase in  depreciation of
$600,000.  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 six months  ended June 30,  1998,  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 slightly compared to the same period in the
prior year primarily due to the acquisition of new debt.




                                                     Page 12

<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, 1998,  compared to six months
ended June 30, 1997 (continued).

For the period,  the Company recorded  approximately $8.6 million of tax expense
for an  effective  tax rate of 25.7%  compared to 24.0% in 1997.  The  Company's
current low operating tax rate is primarily a result of taxpreferred 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.  The effective
tax  rate  will  increase  in  future  periods  after  the  remaining  valuation
allowances for net operating loss carryforwards are utilized.

Net income  for the six months  ended June 30,  1998  increased  $12.8  million,
compared  to the six months  ended June 30,  1997.  Excluding  the effect of the
merger related expenses, net income increased $4.4 million, or 21.7% compared to
the same period in the prior year.

Liquidity and Capital Resources

The Company's  cash flow from operating  activities  during the six months ended
June 30, 1998 resulted primarily from $24.7 million of net income,  $8.5 million
in  depreciation  and  amortization  and $3.2 million in provision  for doubtful
accounts  offset by a $32.5  million net change in assets and  liabilities.  The
decrease in cash flow  resulting from the change in assets and  liabilities  was
primarily due to an increase in accounts  receivable  and a decrease in unearned
premium revenue.  The increase in accounts  receivable  resulted  primarily from
work performed in conjunction  with the Region 1 TRICARE  contract for which the
Company  had  not  been  paid  as  of  June  30,  1998.  The  Company   received
approximately  $28.8 million of this  receivable  in July 1998.  The decrease in
unearned  premium  revenue  resulted  primarily  from the early  receipt  of the
subsequent month's HCFA Medicare capitation payment as of December 31, 1997.

The $27.4 million used for investing and financing activities since December 31,
1997 consisted of a $19.1 million net increase in investments, and $17.2 million
in  capital   expenditures  for   construction   costs  associated  with  office
facilities,   furniture  and  equipment  for  the  newly  constructed  six-story
headquarters building,  continued  implementation of three new computer systems,
computer and medical equipment, and other capital needs to support the Company's
growth.  The Company  received $15.5 million from new debt primarily  related to
financing  for the newly  constructed  headquarters  building  offset in part by
$12.7 million used for the reduction of debt,  including an $8.0 million payment
on the Company's line of credit.  In July 1998, the Company repaid an additional
$9.0  million on its line of  credit.  The  remaining  $92.0  million  available
balance of the line of credit as of July 31,  1998,  may be used for  additional
working capital, if necessary.  In addition the Company received $4.7 million in
connection  with the sale of stock  through the  Company's  stock plans and $1.4
million in connection with the sale of THC's Arizona operations.

On June 5, 1998, HMO Texas entered into signed definitive  agreements to acquire
certain assets of Kaiser and Permanente in Dallas, Texas. The purchase price was
$129 million,  which is net $20 million in operating  cost support to be paid to
Sierra by Kaiser Foundation Hospitals in five quarterly  installments  following
the closing of the  transaction.  The purchase price may increase by $30 million
over three years if certain growth, member retention and accreditation goals are
met by the health plan.  Sierra is assuming no prior liabilities for malpractice
or other  litigation,  or for any  unanticipated  future  adjustments  to claims
expenses for periods  prior to closing.  The  transaction  will be financed with
bank debt. Subject to applicable  regulatory and other closing  conditions,  the
transaction is expected to close by the end of October 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

                                                     Page 13

<PAGE>


                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES


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

reserve requirements.  The HMO and insurance  subsidiaries had restricted assets
on deposit in various states totaling $17.2 million as of June 30, 1998. The HMO
and  insurance  subsidiaries  must also meet  requirements  to maintain  minimum
stockholder's  equity,  on a  statutory  basis,  ranging  from  $500,000 to $5.2
million.  Of the cash and cash  equivalents held at June 30, 1998, $62.3 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.

The National Association of Insurance  Commissioners (the "NAIC") has undertaken
an  initiative  that would impose new minimum  capitalization  requirements  for
HMOs,  health  care  insurance  entities  and other  risk  bearing  health  care
entities.  If those  capitalization  requirements  are  adopted,  certain of the
Company's  subsidiaries  may have increased  minimum capital  requirements.  The
Company does not believe that any such required  increase in the amount of funds
to be contributed to the subsidiaries will be material.

On  September  30, 1997,  the Company was awarded a TRICARE  contract to provide
managed health care coverage to 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, Virginia, West Virginia and Washington, D.C. In 1998, the
award  will  result in a total of  approximately  $150.0 to  $200.0  million  of
revenue for the five-month  implementation phase and seven months of health care
delivery.  SMHS was notified on February 13, 1998 that the United States General
Accounting Office ("GAO") sustained a competitor's protest of the contract award
for TRICARE Managed Care Support Region 1 and  recommended  that the contract be
re-bid.  The TRICARE  Management  Activity  ("TMA") along with the Company,  has
filed a motion requesting the GAO reconsider its recommendation. If the GAO does
not change its recommendation and the TMA follows the recommendation,  there are
several possible  outcomes,  including  litigation.  While it is not possible to
predict the outcome,  the Company  anticipates  that it will continue to provide
health care under the  contract for a currently  undetermined  amount of time if
the TMA and the Company are unsuccessful in their reconsideration request.

The Company is in the process of modifying or replacing its computer systems and
applications to accommodate the "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 currently expects to complete
all  material   replacements  or  modifications  of  its  computer  systems  and
applications  sufficiently  in  advance  of the Year 2000 to allow for  adequate
testing so as not to have any material  negative impact on its  operations.  The
Company is in the process of  implementing  three major  systems at an estimated
cost of  $25.0  million  to  $30.0  million.  These  systems  will be Year  2000
compliant.  The Company is expensing the costs to make modifications to existing
computer  systems as incurred.  Management  currently  estimates  the  remaining
modification  costs to be  approximately  $3.0  million to $5.0 million over the
next two years. 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 inability of the Company to
timely complete its Year 2000  modifications and replacements,  or the inability
of companies with which the Company does business to timely  complete their Year
2000  modifications,  could have a material effect on the Company's  operations.
During  the first six  months of 1998,  the  Company  spent  approximately  $7.0
million on both system implementations and Year 2000 items.

     The Company  has a 1998  capital  budget of  approximately  $50.0  million,
primarily for computer hardware and

                                                     Page 14

<PAGE>


                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES


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

software, furniture and equipment for the newly constructed 180,000 square foot,
six-story  corporate  headquarters  building,  and other requirements due to the
Company's projected growth and expansion. Excluding the acquisition from Kaiser,
which will be financed with bank debt,  the Company's  liquidity  needs over the
next 12  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.  Excluding the acquisition from
Kaiser, 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.



                                                     Page 15

<PAGE>


                  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 June 30, 1998  and 1997 was as follows:
<TABLE>
<CAPTION>

                                                                            Number of Members at Period Ended
                                                                             June 30                  June 30
                                                                              1998                     1997

HMO
<S>                                                                           <C>                     <C>
  Commercial...................................................               161,000                 155,900
  Medicare.....................................................                38,600                  32,500
Managed Indemnity..............................................                50,400                  47,300
Medicare Supplement............................................                25,100                  24,800
Administrative Services  (1)...................................               312,600                 334,600
Total Members..................................................               587,700                 595,100
</TABLE>

(1)      For comparability purposes, enrollment information has been restated to
         reflect the September 30, 1997  termination  of the company's  workers'
         compensation administrative services contract with the State of Nevada.
         Enrollment in the terminated plan was approximately  175,000 members at
         June 30, 1997.


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 16

<PAGE>



                                              PART II - OTHER INFORMATION

ITEM 1.        LEGAL PROCEEDINGS


On March 18, 1997, the Company  announced it had terminated its merger agreement
with Physician  Corporation of America ("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  in excess of $20  million.  The  lawsuit  has been  dismissed
(without prejudice to PCA's claims) for failure to join an indispensable  party.
On March 27, 1997, the Company  commenced a lawsuit  against PCA in the Court of
Chancery of the State of Delaware.  On July 31, 1998, the Company filed a Second
Amended Complaint alleging,  among other things, breach of the merger agreement,
negligent  misrepresentation,  common law fraud and equitable fraud, and seeking
monetary  damages and 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.

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,
claims by providers  for payment for medical  services  rendered to HMO members.
Also included in such  litigation are claims for dividends and claims denials in
the  workers'  compensation  division  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

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

               Sierra held its annual meeting of stockholders on May 12, 1998 in
Las Vegas, Nevada.

               The following  persons were elected directors for a two-year term
               ending in 2000 based on the voting results below:
<TABLE>
<CAPTION>

               Name                                        For            Withheld        Abstain      Non-votes

<S>                                                      <C>               <C>               <C>           <C>
               Erin MacDonald                            16,325,014        130,665           0             0
               William J. Raggio                         16,325,014        130,665           0             0
               Charles L. Ruthe                          16,325,014        130,665           0             0
</TABLE>

               The following  persons'  terms as directors  continued  after the
meeting and end in 1999.

               Anthony M. Marlon, M.D.
               Thomas Y. Hartley


                                                     Page 17

<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 1998. The voting results were as follows:

<TABLE>
<CAPTION>
                                                                                          Broker
                                 For                Against           Abstain             Non-votes

<S>                             <C>                  <C>               <C>                 <C>
                                16,406,902           33,012            15,765              0
</TABLE>

               The stockholders also approved an amendment to the 1995 Long-Term
               Incentive  Plan for the  purpose of  increasing  by  900,000  the
               number  of shares of common  stock  (1,350,000  shares  after the
               stock  split)  reserved  for  issuance  to  participants  and  to
               authorize cash annual  incentive  awards  thereunder.  The voting
               results were as follows:
<TABLE>
<CAPTION>
                                                                                          Broker
                                 For              Against             Abstain             Non-votes

<S>                             <C>                <C>                 <C>                 <C>
                                11,171,202         5,268,665           15,812              0
</TABLE>

ITEM 5.        OTHER INFORMATION

               None

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

               (a)      Exhibits

     (10.1) Master Purchase and Sale Agreement  between Kaiser Foundation Health
Plan of Texas (as Seller) and HMO Texas, L.C. (as Buyer), dated June 5, 1998

     (10.2) Asset Sale and Purchase  Agreement Kaiser  Foundation Health Plan of
Texas,  A Texas  Non-Profit  Corporation  and HMO Texas,  L.C., a Texas  Limited
Liability Company, dated June 5, 1998

     (10.3)  Asset  Sale  and  Purchase  Agreement  between  Permanente  Medical
Association of Texas, a Texas  Professional  Association and HMO Texas,  L.C., a
Texas Limited Liability Company, dated June 5, 1998

     (10.4)  Sierra Health  Services,  Inc. 1995  Long-Term  Incentive  Plan, as
amended and restated through May 18, 1998

     (10.5) Sierra Health  Services,  Inc. 1995  Non-Employee  Directors'  Stock
Plan, as amended and restated through May 18, 1998

     (27) Financial Data Schedule

     (99)  Registrant's  current  report  on Form  8-K  dated  March  19,  1998,
incorporated herein by reference.

     (b) Reports on Form 8-K

     The Company filed a Current  Report on Form 8-K,  dated May 15, 1998,  with
the Securities and Exchange Commission to announce a 3 for 2 split of its common
stock.


                                                     Page 18

<PAGE>




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

                        The Company  filed a Current  Report on Form 8-K,  dated
                        June  5,  1998,   with  the   Securities   and  Exchange
                        Commission  to  announce  an  agreement  to acquire  the
                        business and assets of Kaiser  Foundation Health Plan of
                        Texas and Permanente Medical Association of Texas.

                                                     Page 19

<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, 1998                                   /S/ PAUL H. PALMER
                                                     Paul H. Palmer
                                                  Acting Chief Financial Officer
                                                     (Principal Financial and
                                                     Accounting Officer)

                                                     Page 20

<PAGE>