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, 2000
                               -------------------

                                       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 July 31, 2000, there were 27,292,000 shares of common stock outstanding.

                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES
                                                           FORM 10-Q

                     FOR THE SIX MONTHS ENDED JUNE 30, 2000

                                      INDEX

<TABLE>

<CAPTION>
                                                                                                           Page No.

Part I - FINANCIAL INFORMATION

      Item l.     Condensed Consolidated Financial Statements

                  Condensed Consolidated Balance Sheets -
<S>                      <C> <C>               <C> <C>                                                           <C>
                    June 30, 2000 and December 31, 1999......................................................    3

                  Condensed Consolidated Statements of Operations -
                    three and six months ended June 30, 2000 and 1999........................................    4

                  Condensed Consolidated Statements of Cash Flows -
                    six months ended June 30, 2000 and 1999..................................................    5

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

      Item 2.     Management's Discussion and Analysis of
                    Financial Condition and Results of Operations............................................   12

      Item 3.     Quantitative and Qualitative Disclosures
                    about Market Risk........................................................................   20



Part II - OTHER INFORMATION

      Item l.     Legal Proceedings..........................................................................   21

      Item 2.     Changes in Securities and Use Of Proceeds..................................................   21

      Item 3.     Defaults Upon Senior Securities............................................................   21

      Item 4.     Submission of Matters to a Vote of Security Holders........................................   21

      Item 5.     Other Information..........................................................................   22

      Item 6.     Exhibits and Reports on Form 8-K...........................................................   22

Signatures...................................................................................................   23
</TABLE>


<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>

<CAPTION>
                                                                                          June 30            December 31
                                                                                           2000                1999
                                                                                           ----                ----
CURRENT ASSETS:
<S>                                                                               <C>                   <C>
     Cash and Cash Equivalents..............................................      $      62,486,000     $     55,936,000
     Investments............................................................            199,182,000          218,951,000
     Accounts Receivable (Less:  Allowance for Doubtful
         Accounts: 2000 - $22,605,000; 1999 - $15,551,000)............................             34,870,000           43,036,000
     Military Accounts Receivable (Less: Allowance for Doubtful
         Accounts: 2000 - $1,002,000; 1999 - $800,000)......................             66,631,000           60,340,000
     Reinsurance Recoverable................................................             76,374,000           54,563,000
     Prepaid Expenses and Other Current Assets..............................             93,306,000           91,767,000
     Assets Held For Sale...................................................             22,942,000         ____________
                                                                                     --------------
         Total Current Assets...............................................            555,791,000          524,593,000

PROPERTY AND EQUIPMENT, NET.................................................            186,864,000          264,549,000
LONG-TERM INVESTMENTS.......................................................             20,680,000           14,862,000
RESTRICTED CASH AND INVESTMENTS.............................................             24,595,000           21,705,000
REINSURANCE RECOVERABLE, Net of Current Portion.............................            119,895,000           82,300,000
GOODWILL ...................................................................             15,578,000          159,514,000
OTHER ASSETS................................................................            113,884,000           62,589,000
                                                                                   ----------------    -----------------
TOTAL ASSETS................................................................         $1,037,287,000       $1,130,112,000
                                                                                     ==============       ==============


                                           LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts Payable and Accrued Liabilities..................................        $   107,594,000      $   102,573,000
  Medical Claims Payable....................................................             98,367,000           91,607,000
  Current Portion of Reserve for
       Losses and Loss Adjustment Expense ..................................            112,974,000           93,768,000
  Unearned Premium Revenue..................................................             50,066,000           45,333,000
  Military Health Care Payable..............................................             53,726,000           50,831,000
  Payable Under Revolving Credit Facility...................................            185,000,000
  Premium Deficiency Reserve................................................             23,036,000           21,000,000
  Current Portion of Long-term Debt.........................................             38,470,000            4,741,000
                                                                                -------------------   ------------------
       Total Current Liabilities............................................            669,233,000          409,853,000

RESERVE FOR LOSSES AND
  LOSS ADJUSTMENT EXPENSE, Net of Current Portion...........................            197,045,000          150,626,000
LONG-TERM DEBT..............................................................             59,698,000          258,854,000
OTHER LIABILITIES ..........................................................             33,310,000           32,367,000
                                                                                  -----------------    -----------------
TOTAL LIABILITIES...........................................................            959,286,000          851,700,000
                                                                                   ----------------     ----------------

STOCKHOLDERS' EQUITY:
  Preferred Stock, $.01 Par Value, 1,000,000
       Shares Authorized; None Issued or Outstanding
  Common Stock, $.005 Par Value, 40,000,000
       Shares Authorized; Shares Issued:  2000 - 28,564,000;
     1999 - 28,400,000......................................................                143,000              142,000
  Additional Paid-in Capital................................................            176,814,000          175,915,000
  Treasury Stock, 2000 - 1,523,000; 1999 - 1,523,000
       Common Shares........................................................            (22,789,000)         (22,789,000)
  Accumulated Other Comprehensive Income:
       Unrealized Holding Loss on Available-for-Sale

            Investments.....................................................            (12,213,000)         (16,063,000)
  (Accumulated Deficit) Retained Earnings...................................            (63,954,000)         141,207,000
                                                                                  ------------------    ----------------
       Total Stockholders' Equity...........................................             78,001,000          278,412,000
                                                                                  -----------------     ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................         $1,037,287,000       $1,130,112,000
                                                                                     ==============       ==============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>

<CAPTION>
                                                                         Three Months Ended                Six Months Ended

                                                                               June 30                           June 30
                                                                               -------                           -------
                                                                       2000             1999             2000             1999
                                                                       ----             ----             ----             ----
    OPERATING REVENUES:

<S>                                                                <C>               <C>              <C>              <C>
      Medical Premiums....................................         $ 219,751,000     $204,649,000     $ 438,429,000    $411,960,000
      Military Contract Revenues..........................            72,374,000       71,093,000       137,255,000     141,181,000
      Specialty Product Revenues..........................            30,090,000       20,949,000        58,114,000      41,628,000
      Professional Fees...................................             9,695,000       13,352,000        20,716,000      27,369,000
      Investment and Other Revenues.......................             5,144,000        5,775,000         9,716,000      11,754,000
                                                                 ---------------   --------------  ----------------   -------------
        Total ............................................           337,054,000      315,818,000       664,230,000     633,892,000
                                                                   -------------     ------------    --------------    ------------

    OPERATING EXPENSES:
      Medical Expenses ...................................           246,969,000      176,265,000       439,307,000     365,307,000
      Military Contract Expenses..........................            70,150,000       68,460,000       132,983,000     136,104,000
      Specialty Product Expenses..........................            46,884,000       19,475,000        73,732,000      38,871,000
      General, Administrative and Marketing
        Expenses..........................................            34,656,000       34,646,000        68,985,000      68,543,000
      Asset Impairment, Restructuring, Reorganization
        and Other Costs (Note 2)..........................           217,540,000                        220,440,000       5,106,000
                                                                   ------------------------------------------------  --------------
        Total ............................................           616,199,000      298,846,000       935,447,000     613,931,000
                                                                   -------------    -------------    --------------    ------------

    OPERATING (LOSS) INCOME...............................          (279,145,000)      16,972,000      (271,217,000)     19,961,000

    INTEREST EXPENSE AND OTHER, NET  .....................            (5,149,000)      (4,126,000)      (10,737,000)     (8,175,000)
                                                                 ---------------    -------------   ---------------   -------------

    (LOSS) INCOME BEFORE INCOME TAXES ....................          (284,294,000)      12,846,000      (281,954,000)     11,786,000

    BENEFIT (PROVISION) FOR INCOME TAXES..................            77,577,000       (4,290,000)       76,793,000      (3,936,000)
                                                                  --------------     ------------   ---------------   --------------

    NET (LOSS) INCOME ....................................         $(206,717,000)    $  8,556,000     $(205,161,000)   $  7,850,000
                                                                    ============     ============     =============    ============

    NET (LOSS) INCOME PER COMMON SHARE....................               $(7.64)          $.32              $(7.59)         $.29
                                                                         ======           ====              ======          ====

    NET (LOSS) INCOME PER COMMON SHARE
     ASSUMING DILUTION  ..................................    $(7.64)   $.32               $(7.59)         $.29
                                                              ======    ====               ======          ====

    WEIGHTED AVERAGE COMMON SHARES
     OUTSTANDING        ..................................            27,041,000       26,795,000        27,013,000      26,989,000
                                                                 ===============      ===========    ==============    ============

    WEIGHTED AVERAGE COMMON SHARES
      OUTSTANDING ASSUMING DILUTION.......................            27,041,000       26,825,000        27,013,000      27,029,000
                                                                 ===============     ============    ==============    ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>

<CAPTION>
                                                                                         Six Months Ended June 30

                                                                                        2000                 1999
                                                                                        ----                 ----

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                 <C>                 <C>
   Net (Loss) Income ...........................................................    $(205,161,000)      $   7,850,000
   Adjustments to Reconcile Net (Loss) Income to Net Cash
       Used for Operating Activities:
          Provision for Asset Impairment and Other Charges......................      202,951,000           3,509,000
          Depreciation and Amortization.........................................       17,673,000          13,767,000
          Provision for Doubtful Accounts.......................................        2,173,000           2,277,000
   Changes in Assets and Liabilities ...........................................      (37,679,000)        (55,213,000)
                                                                                  ----------------       ------------
       Net Cash Used for Operating Activities ..................................      (20,043,000)        (27,810,000)
                                                                                  ---------------        ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital Expenditures, Net of Equipment Dispositions..........................      (10,894,000)        (26,984,000)
   Changes in Investments.......................................................       17,014,000           6,926,000
   Corporate Acquisition........................................................                           (3,000,000)
                                                                                ----------------------  --------------
   Net Cash Provided by (Used for) Investing Activities.........................        6,120,000         (23,058,000)
                                                                                  ---------------        -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from Borrowings.....................................................       48,000,000          43,000,000
   Payments on Debt and Capital Leases..........................................      (28,427,000)        (40,121,000)
   Purchase of Treasury Stock...................................................                           (7,968,000)
   Exercise of Stock in Connection with Stock Plans.............................          900,000           1,248,000
                                                                                 ----------------      --------------
          Net Cash Provided by (Used for) Financing Activities..................       20,473,000          (3,841,000)
                                                                                   --------------      ---------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................        6,550,000         (54,709,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................................       55,936,000          83,910,000
                                                                                   --------------       -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD......................................    $  62,486,000        $ 29,201,000
                                                                                    =============        ============


                                                                                        Six Months Ended June 30

Supplemental Condensed Consolidated

  Statements of Cash Flows Information:                                                   2000               1999
------------------------------------------------------------------------                  ----               ----
Cash Paid During the Period for Interest

   (Net of Amount Capitalized)..................................................      $11,613,000          $8,976,000
Net Cash Received (Paid) During the Period for Income Taxes.....................       10,773,000          (3,029,000)

Non-cash Investing and Financing Activities:
   Note Received for Sale of Investment.........................................        3,700,000
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                  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 accounting principles generally
accepted in the United  States of America and 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,  1999 and 1998.  In the  opinion of
management,   the  accompanying   unaudited  condensed   consolidated  financial
statements  reflect  all  adjustments,   consisting  only  of  normal  recurring
adjustments,  necessary for a fair presentation of the financial results for the
interim periods presented.

     2. Premium Deficiency, Adverse Development, Reorganization,  Impairment and
Other Charges:

     Medical  Expenses:  Included in reported  medical  expenses for the quarter
ended June 30, 2000 is $29.5 million of reserve  strengthening  primarily due to
adverse  development on prior periods' medical claims,  as well as $15.5 million
in  premium  deficiency  expense  related  to  under-performing  markets  in the
Dallas/Ft.  Worth and Houston areas.  The recorded premium  deficiency  reflects
anticipated cost savings from restructuring and reorganization actions discussed
below. In addition,  the Company  recorded $10.2 million of other  non-recurring
medical costs primarily relating to the write-down of medical subsidiary assets.

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

     Asset Impairment,  Restructuring,  Reorganization and Other Charges:  Asset
impairment,  restructuring,  reorganization  and other  charges  recorded in the
quarter ended June 30, 2000 consist of the following:

  Goodwill Impairment.........................................     $141,506,000
  Fixed Asset Impairment......................................       48,984,000
  Restructuring...............................................       10,592,000
  Premium Deficiency Maintenance Costs........................       10,358,000
  Other Costs.................................................        6,100,000
                                                                 --------------
           Total    ..........................................     $217,540,000
                                                                   ============

     Goodwill and Fixed Asset  Impairments:  In  connection  with  restructuring
plans  adopted and  announced by the Company in the quarter ended June 30, 2000,
the  Company  re-evaluated  the  recoverability  of certain  long-lived  assets,
primarily associated with the Texas operations,  in accordance with Statement of
Financial  Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of
Long-Lived  Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121")
and Accounting  Principles Board Opinion No. 17,  "Intangible  Assets" ("APB No.
17") and  determined  that the  carrying  values of certain  goodwill  and other
long-lived assets were impaired.

     Based on  financial  projections  for 2000,  the  Company  recorded a $21.0
million premium  deficiency at the end of 1999,  relative to the Company's Texas
operations.  In the first quarter of 2000,  the Company  engaged a consultant to
help it assess the Texas operations. In late February, the consultant issued its
report and the Company  implemented  strategic  action  plans to turn around the
Texas  operations.  These actions  included the  replacement of the Texas senior
management,  a  reduction  in  staffing  along with a  consolidation  of certain
services to Las Vegas and a revision of product strategy.

     The new management was charged with further assessing the Dallas/Ft.  Worth
health care  delivery  system.  In May,  the Company  decided  that the delivery
system,  which emphasized the Company's  affiliated medical group as the primary
provider  network,  would be  replaced  by an  expanded  network  of  contracted
physician groups and individuals.  In addition,  the contracted hospital network
would be significantly expanded. As a result, during the second quarter of 2000,
the Company  adopted and  announced a further  restructuring  of the  Dallas/Ft.
Worth operations, which entailed a significant reduction of physicians and staff
and the closing of several clinic sites.  In addition,  management  decided that
the real estate assets would be sold.

                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



     Management also adopted a plan in the second quarter of 2000 to discontinue
medical  delivery  operations  in Mohave  County,  Arizona  and to sell the real
estate assets located there, as well as an underperforming medical clinic in Las
Vegas.

     In assessing the asset  impairment of the  long-lived  assets,  the Company
first allocated a portion of related goodwill to the fixed assets to be disposed
of, in accordance  with SFAS No. 121. The fixed assets were then written down to
estimated fair value less costs to sell,  which was determined from  independent
appraisals.  The  remainder  of the  related  goodwill  was  then  assessed  for
recoverability in accordance with APB No. 17 based on projected  discounted cash
flows.

     Restructuring:  In the second quarter of 2000,  the Company  adopted a plan
and announced  additional  restructuring  of its managed health care operations,
primarily in Texas and Arizona. As a result of this  restructuring,  the Company
recorded  charges in accordance  with Emerging Issues Task Force Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity  (Including  Certain Costs Incurred in a Restructuring)"  of
approximately  $10.6  million.  Of the  costs  recorded,  $5.9  million  was for
severance,  $2.9 million was related to clinic closures and lease  terminations,
and $1.8 million was for other costs.

     Of these amounts,  the Company  anticipates paying $8.7 million during 2000
and the remainder in 2001. No amounts were expended as of June 30, 2000.

     As compared to the quarter ended June 30, 2000, management  anticipates the
restructuring  and  reorganization  activities to result in cash flow savings of
approximately  $2.0 to $3.0 million per quarter  beginning in the fourth quarter
of 2000. The severance charge resulted from the termination of 315 employees at
the Company's subsidiaries and affiliated medical groups.

     In the first quarter of 2000, the Company  announced a restructuring of its
managed health care operations in Texas. As a result of this restructuring,  the
Company incurred  approximately  $1.4 million of severance pay for employees who
were terminated. Of this amount,  approximately $1.3 million has been paid as of
June 30, 2000. The remainder is expected to be paid by the end of the year 2000.
The restructuring  involved changes in senior management at the Texas facilities
and centralization of key services to Las Vegas.

     Premium Deficiency  Maintenance  Costs: The premium deficiency  maintenance
costs  recorded  in the second  quarter of 2000 are an  estimate  of general and
administrative  costs, in excess of those covered by premiums,  the Company will
incur to service  the Texas  contracts.  The amount  reflects  anticipated  cost
reductions  from the  restructuring  actions  noted above.  Of this amount,  the
company expects to utilize $7.3 million in 2000 and $3.1 million in 2001.

     Other Costs:  The  remaining  $6.1 million of costs  recorded in the second
quarter of 2000 relate  primarily to the  write-down of certain  receivables  as
well as an accrual for litigation expense.

     In the first quarter of 2000,  the Company  incurred $1.5 million of costs,
consisting  primarily  of  consulting  fees,  in  conjunction  with a review and
reorganization of its managed care operations in Texas.

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

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

                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



     3.  During the first  quarter of 2000,  the  Company  sold its  interest in
TriWest Healthcare Alliance. The Company received a note for $3.7 million, which
approximated the carrying value of this investment.

     4. The assets  designated as held for sale on the balance sheet at June 30,
2000  consist of real estate for which the  Company is actively  seeking a buyer
and expects to sell within twelve months.  All assets are owned by  subsidiaries
in  the  managed  care  and  corporate  operations  segment.  See  Note  2 for a
description  of the primary facts and  circumstances  leading to the decision to
sell this real estate. A related mortgage note in the amount of $34.5 million is
included in the current portion of long-term debt on the balance sheet.  Because
these assets have been written down to fair market  value,  in  accordance  with
SFAS No. 121, the Company will cease depreciating them. In addition, the Company
has announced  that it is evaluating  the possible sale and leaseback of certain
other  properties  that are included in the property and  equipment  line on the
balance sheet.

     5. As of June 30,  2000,  the Company was not in  compliance  with  certain
financial covenants relating to its line of credit.  Under the terms of its line
of credit,  noncompliance  with the covenants  constitutes  an event of default,
which  permits the Company's  lenders to  accelerate  repayment of the Company's
outstanding  obligations under its line of credit. The Company's compliance with
these  covenants  under its line of credit has been waived by its  lenders.  The
waiver  is  effective  as of June  30,  2000  and will  remain  effective  until
mid-September  by which  time  the  Company  expects  to have  negotiated  a new
amendment  with revised  covenants.  In accordance  with  Statement of Financial
Accounting Standards No. 78, "Classification of Obligations that are Callable by
the Creditor",  the Company has classified the entire outstanding  balance under
its line of  credit as a  current  liability  as of June 30,  2000.  The  waiver
includes an amendment to the line of credit, which, among other things, requires
that the  Company  grant its  lenders a security  interest  in certain  personal
property of the Company,  reduces the  availability  under the line of credit to
$185 million,  increases the Company's  borrowing  rate by 87.5 basis points and
provides  for the payment of  additional  fees by the  Company.  There can be no
assurances that a new amendment with revised covenants will be obtained.

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

<CAPTION>
                                                                                           Dilutive

                                                                            Basic        Stock Options       Diluted

     For the Three Months ended June 30, 2000:

<S>                                                                  <C>                        <C>     <C>
       Loss from Continuing Operations                               $(206,717,000)             0       $(206,717,000)
       Shares                                                           27,041,000                         27,041,000
       Per Share Amount                                                  $(7.64)                            $(7.64)

     For the Three Months ended June 30, 1999:

       Income from Continuing Operations                           $     8,556,000                   $     8,556,000
       Shares                                                           26,795,000          30,000        26,825,000
       Per Share Amount                                                 $.32                               $.32

     For the Six Months ended June 30, 2000:

       Loss from Continuing Operations                               $(205,161,000)                     $(205,161,000)
       Shares                                                           27,013,000                         27,013,000
       Per Share Amount                                                  $(7.59)                            $(7.59)

     For the Six Months ended June 30, 1999:

       Income from Continuing Operations                           $     7,850,000                   $     7,850,000
       Shares                                                           26,989,000          40,000        27,029,000
       Per Share Amount                                                 $.29                               $.29
</TABLE>

     CII  Financial,   Inc.,  a  wholly-owned  subsidiary  of  the  Company  has
outstanding convertible subordinated debentures (the "Debentures") due September
15,  2001.  Each $1,000 in principal is  convertible  into 25.382  shares of the
Company's common stock at a conversion price of $39.40 per share. The Debentures
were not  included in the  computation  of EPS  because  their  effect  would be
anti-dilutive. Outstanding stock options were not included in the computation of
diluted EPS in 2000 because their effect would be anti-dilutive in both periods.


                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



     7. The following  table presents  comprehensive  income for the three-month
and six-month periods ended June 30, 2000 and 1999:

<TABLE>

<CAPTION>
                                                                Three Months Ended                   Six Months Ended
                                                                      June 30                             June 30
                                                              2000              1999               2000            1999

<S>                                                       <C>                <C>             <C>               <C>
      NET (LOSS) INCOME:...............................   $(206,717,000)     $8,556,000      $(205,161,000)    $ 7,850,000
      Change in net Unrealized Holding
        Losses on Investments,
                    net of income taxes................        (224,000)     (4,092,000)         3,850,000      (9,563,000)
                                                       ----------------     ------------  ----------------      ----------

      COMPREHENSIVE (LOSS) INCOME......................  $(206,941,000)      $4,464,000      $(201,311,000)    $(1,713,000)

                                                         =============       ==========      =============     ============
</TABLE>

8.   Segment Reporting

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

     Sierra  evaluates each  segment's  performance  based on segment  operating
profit  before  interest  expense and income  taxes and  excludes  charges  that
obscure current period operating results, and unusual and non-recurring charges,
such  as:  prior-period development  in  medical  and  loss  reserves,   premium
deficiencies, asset impairment, restructuring and other non-recurring  gains and
losses.  Other than  excluding  such  charges,  the  accounting  policies of the
operating segments are the same as those of the consolidated company.

                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



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

<CAPTION>
                                                     Managed Care              Military             Workers'
                                                     and Corporate          Health Services        Compensation
                                                      Operations             Operations             Operations             Total

Three Months Ended June 30, 2000

<S>                                                    <C>                           <C>                 <C>            <C>
Medical Premiums.............................          $ 219,751                     0                   0              $219,751
Military Contract Revenues...................                                 $ 72,374                                    72,374
Specialty Product Revenues...................              2,370                                     $27,720              30,090
Professional Fees............................              9,695                                                           9,695
Investment and Other Revenues................              1,301                   252                 3,591               5,144
                                                     -----------            ----------             ---------         -----------
   Total Revenue.............................           $233,117               $72,626               $31,311            $337,054
                                                        ========               =======               ===========================

Segment Operating Profit.....................         $    5,154              $  2,477              $  1,061          $    8,692
Interest Expense and Other, Net..............             (4,874)                 (123)                 (152)             (5,149)
Impairment, Restructuring, Premium Deficiency
   and Other Charges.........................           (269,837)               ______               (18,000)           (287,837)
                                                       ---------                                    --------           ---------
Net (Loss) Income Before Income Taxes........          $(269,557)              $ 2,354              $(17,091)          $(284,294)
                                                       =========               =======              ========

Three Months Ended June 30, 1999

Medical Premiums.............................           $204,649                                                        $204,649
Military Contract Revenues...................                                 $ 71,093                                    71,093
Specialty Product Revenues...................              2,110                                     $18,839              20,949
Professional Fees............................             13,352                                                          13,352
Investment and Other Revenues................              1,732                    96                 3,947               5,775
                                                    ------------           -----------             ---------        ------------
   Total Revenue.............................            221,843               $71,189               $22,786            $315,818
                                                          ======               =======

Segment Operating Profit.....................           $  9,327    $            2,642              $  5,003             $16,972
Interest Expense and Other, Net..............             (2,863)                 (382)                 (881)             (4,126)
                                                        --------            ----------            ----------        ------------
Net Income Before Income Taxes...............           $  6,464             $   2,260              $  4,122          $   12,846
                                                        ========             =========              ========          ==========

Six Months Ended June 30, 2000

Medical Premiums.............................           $438,429                                                        $438,429
Military Contract Revenues...................                                 $137,255                                   137,255
Specialty Product Revenues...................              4,692                                     $53,422              58,114
Professional Fees............................             20,716                                                          20,716
Investment and Other Revenues................              2,296                   454                 6,966               9,716
                                                     -----------          ------------             ---------         -----------
   Total Revenue.............................           $466,133              $137,709             $60,388              $664,230
                                                        ========              ========             =============================

Segment Operating Profit.....................         $   10,799            $    4,727             $   6,494            $ 22,020
Interest Expense and Other, Net..............             (9,402)                 (365)                 (970)            (10,737)
Impairment, Restructuring, Premium Deficiency
   and Other Charges.........................           (273,737)              _______               (19,500)           (293,237)
                                                       ---------                                     -------          ----------
Net (Loss) Income Before Income Taxes........          $(272,340)           $    4,362             $ (13,976)          $(281,954)
                                                       =========            ==========             =========           =========

Six Months Ended June 30, 1999

Medical Premiums.............................          $ 411,960                                                        $411,960
Military Contract Revenues...................                                 $141,181                                   141,181
Specialty Product Revenues...................              4,556                                  $   37,072              41,628
Professional Fees............................             27,369                                                          27,369
Investment and Other Revenues................              3,381                   249                 8,124              11,754
                                                      ----------          ------------           -----------          ----------
   Total Revenue.............................           $447,266              $141,430             $  45,196            $633,892
                                                        ========              ========             =============================

Segment Operating Profit.....................          $  17,882            $    5,320            $    9,965            $ 33,167
Interest Expense and Other, Net..............             (5,816)                 (550)               (1,809)             (8,175)
Impairment, Restructuring, Premium Deficiency
   and Other Charges.........................            (13,206)                                                        (13,206)
                                                       ---------        --------------        --------------           ---------
Net (Loss) Income Before Income Taxes........          $  (1,140)            $   4,770             $   8,156            $ 11,786
                                                       ==========            =========             =========            ========
</TABLE>

                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)




     9. 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").  In April 2000,  the  Company's  Board of Directors
authorized  a $2.5  million  loan from the Company to the CEO which,  along with
accrued  interest,  is due on June 30, 2002. As of June 30, 2000,  the aggregate
principal  outstanding  and  accrued  interest  for  both  instruments  was $5.3
million. All borrowed amounts bear interest at a rate equal to the rate at which
the Company could have borrowed  funds under its line of credit  facility at the
time of the borrowing plus 10 basis points.

     10. In December 1999, the Securities and Exchange  Commission  issued Staff
Accounting Bulletin No. 101,"Revenue  Recognition in Financial Statements" ("SAB
101").  SAB 101  clarifies  existing  accounting  principles  related to revenue
recognition in financial statements.  The Company is required to comply with the
provisions  of SAB 101 by the  fourth  quarter of 2000.  Management  has not yet
completed  an  analysis  of the impact  that SAB 101 will have on the  Company's
current revenue recognition practices.

     11. Certain amounts in the Condensed  Consolidated Financial Statements for
the three and six months ended June 30, 1999 have been  reclassified  to conform
with the current year presentation.

                  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 15, 2000,  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, 2000, compared to three

months ended June 30, 1999.

     The Company's total operating  revenues for the three months ended June 30,
2000, increased approximately 6.7% to $337.1 million from $315.8 million for the
three months ended June 30, 1999. The increase was primarily due to increases in
medical premium revenues of $15.1 million and specialty product revenues of $9.1
million, offset by a decrease in professional fees of $3.7 million.

     Total member months (the number of months of each period that an individual
is  enrolled  in a  plan)  for  the HMO  and  insurance  subsidiaries  decreased
approximately  2%.  Commercial and Medicaid HMO member months in total decreased
approximately 2% and managed  indemnity  member months  decreased  approximately
10%. These  decreases were  partially  offset by an increase in Medicare  member
months of approximately 8%. In Nevada, commercial and Medicaid HMO member months
increased  approximately 3% and Medicare member months  increased  approximately
2%. In  Texas,  commercial  member  months  decreased  approximately  9%,  while
Medicare  member months  increased  30%.  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  HMO and insurance  subsidiaries'  average  premium rate per
member  increased  approximately  10% for the three  months  ended June 30, 2000
compared to the same three-month period in the prior year. The Nevada commercial
and Medicaid HMO average premium rate per member increased  approximately 3% and
the Nevada Medicare HMO average rate per member increased  approximately 8%. The
increase in Nevada  Medicare HMO rates is primarily due to a shift in members to
the Las Vegas  area from  other  parts of  Nevada as well as from  Arizona.  The
amount  of  premium  received  from the  Health  Care  Financing  Administration
("HCFA") per Medicare member is higher in Las Vegas. HCFA's established rate per
member  increased 4% for the Las Vegas area. Over 95% of the Company's Las Vegas
Medicare  members are enrolled in the HCFA Social HMO Medicare  Program ("Social
HMO").  The  Company's  premium  received  from HCFA is higher  for  Social  HMO
members.  HCFA might adjust 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.  Managed  indemnity premium rates per
member increased approximately 14%.

     The  Texas  commercial  HMO  average  premium  rate  per  member  increased
approximately  11% in the  quarter  ended  June 30,  2000  compared  to the same
quarter of the prior year.  Commercial  rate  increases on renewals were greater
than 10% for Dallas. The Texas Medicare average rate decreased  approximately 3%
primarily due to an increase in Medicare membership in Dallas, which has a lower
rate than most of the Company's Medicare members in the Houston area.

                  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, 2000, compared to three
months ended June 30, 1999 (continued).

     As part of the Company's reorganization,  it will no longer actively market
its HMO Medicare  product in Texas for the remainder of calendar year 2000.  The
Company will continue to enroll Medicare  eligible  members who proactively seek
coverage in Texas and will continue customer service to its existing  membership
through 2000.  The Company has notified HCFA, that  effective  January 1, 2001,
it will cease its Medicare  products in 14 counties in the Houston area, which
will affect approximately 1,500 members.

     The  Company  markets  its HMO and  managed  indemnity  insurance  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,  2000,  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.

     Military  contract  revenue  increased to $72.4 million from $71.1 million.
The 1.8% increase is primarily  attributable to increased  change order activity
and  associated  revenue  offset  slightly  by a smaller  population  of at-risk
beneficiaries.

     Specialty product revenue  increased $9.1 million,  or 43.6%, for the three
months  ended June 30, 2000,  compared to the same prior year period.  Specialty
product revenue and expense are primarily  related to the workers'  compensation
insurance  business.  The increase in specialty  product revenues related to the
workers'  compensation  insurance  segment was primarily due to premium  growth,
which has occurred  since July 1999,  and premium rate  increases for California
policies issued in 2000,  which have averaged over 30% on renewal  policies,  as
well as new business in Nevada and Colorado.  Beginning in July 1999,  the State
of Nevada allowed  private  insurance  companies to offer workers'  compensation
products.

     Professional  fees decreased  approximately  $3.7 million primarily
due to the sale of the  pharmacy  operations  in Texas in the fourth  quarter of
1999.

     Investment  and other  revenues  decreased  approximately $600,000 over the
comparable prior year period  primarily due to a decrease in invested  balances.
Approximately  $400,000 of the difference was due to realized losses  recognized
in the current year compared to slight gains in the prior year.

     Total medical  expenses  increased $70.7 million over the same  three-month
period last year.  Included in medical expenses for the three-month period ended
June 30, 2000, is $29.5 million of reserve  strengthening  primarily for adverse
development  related to prior periods' medical claims,  $15.5 million of premium
deficiency and $10.2 million of other  non-recurring  medical  costs.  Excluding
these items,  medical  expenses  increased  $15.5 million,  or 8.8%, and medical
expenses as a percentage of medical  premiums and  professional  fees  ("Medical
Care Ratio")  increased  from 80.9% to 83.6% for the quarter ended June 30, 2000
compared to the same prior year  period.  The increase in the Medical Care Ratio
is primarily  due to the increase in Medicare  members as a percentage  of fully
insured  members.  The  cost  of  providing  medical  care to  Medicare  members
generally requires a greater  percentage of the premiums received.  In addition,
hospital  costs in southern  Nevada were higher  primarily due to an increase in
bed days and in Houston,  hospital  costs were higher due to  increased  cost of
care.

                  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, 2000, compared to three
months ended June 30, 1999 (continued).

     Included in medical  expenses is the  utilization  of $8.5 million and $7.6
million of premium deficiency reserve to offset losses on contracts in Texas for
the periods ended June 30, 2000 and 1999, respectively. Also included in medical
expenses  for the three months  ended June 30, 1999 is the  utilization  of $2.7
million of premium  deficiency  reserve to offset  losses  primarily on Medicare
risk members in Arizona and rural Nevada.

     Total  military  contract  expenses  increased to $70.2  million from $68.5
million.  The $1.7 million,  or 2.5% increase is consistent with the two factors
contributing to the revenue increase previously discussed.

     Specialty product expenses increased $27.4 million.  The combined ratio for
the workers' compensation insurance business for the three months ended June 30,
2000 was 164.8%  compared to 95.3% for the  comparable  prior year  period.  The
increase was due to an increase in the loss and loss adjustment  expense ("LAE")
ratio to  135.6%  from  59.0% in 1999,  partially  offset by a  decrease  in the
expense  ratio to 27.0% from 36.3% in 1999.  The  remaining  variance  is due to
policyholders' dividends incurred for participating policies issued in the state
of Nevada. The policyholders' dividend ratio in 2000 was 2.2% while no dividends
were incurred in 1999.

     The higher  loss and LAE ratio for 2000 is due to $19.2  million in adverse
development  related to accident years 1999 and prior.  In the second quarter of
1999, no prior accident year development was incurred. Estimated ultimate losses
and LAE incurred in accident years 1996 to 1998 have developed  significantly in
response  to the  continuation  of  increasing  claim  severity  patterns on the
Company's  California  book of business.  Many workers'  compensation  insurance
carriers in  California  are  experiencing  higher  claim  severity.  For claims
occurring on and after July 1, 1998,  the Company has  reinsured a percentage of
the  higher  claim  severity  to its  reinsurer  under the  Company's  low-level
reinsurance  treaty. The low-level  reinsurance treaty expired on June 30, 2000;
however,  the Company  opted to continue  ceding  premiums  and losses under the
treaty on a run-off basis for all policies in force at June 30, 2000. On July 1,
2000, the Company entered into a reinsurance treaty that covers losses on claims
in excess of $250,000 for policies issued after June 30, 2000.

     The  reduction  in the expense  ratio is due to the higher  premium  volume
earned in 2000  compared  to 1999.  For the  quarter  ended June 30,  2000,  net
premiums earned were 48.0% higher than the comparable quarter in 1999. Moreover,
policy acquisition costs, comprised of commissions, premium taxes and boards and
bureaus expense,  decreased to 6.9% of net premiums earned from 9.6% in 1999 and
non-policy acquisition expenses decreased to 18.7% from 25.0% in 1999. Total
non-policy acquisition expenses were $5.1 million compared to $4.6 million in
1999, an increase of 10.9%.  Gross premiums  earned for the quarter  increased
from $32.8 million in 1999 to $48.6 million in 2000, an increase of 48.2%.

     General,  administrative  and marketing  ("G&A") costs  increased  slightly
compared to the second  quarter of 1999. As a percentage of revenues,  G&A costs
for the second  quarter of 2000  decreased  to 10.3% from 11.0% in 1999.  A $1.5
million   increase   in   depreciation   expense,   primarily   related  to  the
implementation of new computer  systems,  was partially offset by a $1.2 million
decrease  in  legal  expense.  G&A  expense  is net of  utilization  of  premium
deficiency reserves for maintenance costs of approximately $3.4 million and $4.7
million for the three-month periods ended June 30, 2000 and 1999, respectively.

     In  the  second  quarter  of  2000,  the  Company  incurred  certain  asset
impairment,  restructuring,  reorganization  and other costs.  See Note 2 to the
Condensed Consolidated Financial Statements for a discussion of these charges.

                  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, 2000, compared to three
months ended June 30, 1999 (continued).

     Interest  expense and other  increased  $1.0  million for the three  months
ended June 30, 2000,  compared to the same prior year period primarily due to an
increase in debt as well as an increase in the Company's cost of borrowing.

     For the current  year period,  the Company  recorded  $77.6  million of tax
benefit for an effective tax rate of 27.3%  compared to 33.4% for the same prior
year period.  The  Company's  effective  tax rate is less than the 35% statutory
rate primarily due to the  non-deductibility of certain portions of the goodwill
impairment expense recorded in the second quarter of 2000.  Excluding the effect
of  the  expenses  discussed  in  Notes  2 and 8 to the  Condensed  Consolidated
Financial  Statements,  the  effective  tax rate for the period  was 33.5%.  The
Company's  ongoing  effective  tax  rate is less  than  the 35%  statutory  rate
primarily due to tax preferred investments.

     Results of  Operations,  six months  ended June 30,  2000,  compared to six

months ended June 30, 1999.

     The Company's  total  operating  revenues for the six months ended June 30,
2000, increased approximately 4.8% to $664.2 million from $633.9 million for the
six months ended June 30, 1999.  The increase was  primarily due to increases in
medical  premium  revenues of $26.5  million,  or 6.4%,  and  specialty  product
revenues of $16.5  million,  offset by a decrease in  professional  fees of $6.7
million and military contract revenue of $3.9 million.

     Total  member  months  for  the HMO and  insurance  subsidiaries  decreased
approximately  3%.  Commercial and Medicaid HMO member months in total decreased
approximately 4% and managed indemnity member months decreased approximately 9%.
These  decreases were partially  offset by an increase in Medicare member months
of  approximately  7%. In Nevada,  commercial  and  Medicaid  HMO member  months
remained relatively constant and Medicare member months increased  approximately
1%. In  Texas,  commercial  member  months  decreased  approximately  9%,  while
Medicare  member months  increased  31%.  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  HMO and insurance  subsidiaries'  average  premium rate per
member  increased  approximately  10% for the six  months  ended  June 30,  2000
compared to the same six-month  period in the prior year. The Nevada  commercial
and Medicaid HMO average premium rate per member increased  approximately 4% and
the Nevada Medicare HMO average rate per member increased approximately 10%. The
increase in Nevada  Medicare HMO rates is primarily due to a shift in members to
the Las Vegas  area from  other  parts of  Nevada as well as from  Arizona.  The
amount of premium received from HCFA per Medicare member is higher in Las Vegas.
HCFA's established rate per member increased 4% for the Las Vegas area. Over 95%
of the Company's Las Vegas Medicare members are enrolled in the HCFA Social HMO.
The Company's premium received from HCFA is higher for Social HMO members.  HCFA
might adjust 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.  Managed  indemnity  premium rates per member increased
approximately 9%.

     The  Texas  commercial  HMO  average  premium  rate  per  member  increased
approximately  9% in the six months  ended June 30,  2000  compared  to the same
period in the prior year.  Commercial  rate  increases on renewals  were greater
than 10% for Dallas. The Texas Medicare average rate decreased  approximately 3%
primarily due to an increase in Medicare membership in Dallas, which has a lower
rate than most of the Company's Medicare members in the Houston area.

                  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,  2000,  compared to six
months ended June 30, 1999 (continued).

     As part of the Company's reorganization,  it will no longer actively market
its HMO Medicare  product in Texas for the remainder of calendar year 2000.  The
Company will continue to enroll Medicare  eligible  members who proactively seek
coverage in Texas and will continue customer service to its existing  membership
through 2000.  The Company has notified HCFA, that  effective  January 1, 2001,
it will cease its Medicare  products in 14 counties in the Houston area, which
will affect approximately 1,500 members.

     The  Company  markets  its HMO and  managed  indemnity  insurance  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,  2000,  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.

     Military contract revenues decreased to $137.3 million from $141.2 million,
or 2.8%. The reduction in revenue is primarily  attributable  to a first quarter
2000  decrease  in the  at-risk  health  care  population  of  beneficiaries  as
additional  beneficiaries enrolled with military treatment facility primary care
managers.  The Company is not at-risk for those  TRICARE  eligibles and receives
less revenue related to them from the government.

     Specialty product revenues  increased $16.5 million,  or 39.6%, for the six
months  ended June 30, 2000,  compared to the same prior year period.  Specialty
product revenues and expenses are primarily related to the workers' compensation
insurance  business.  The increase in specialty  product revenues related to the
workers'  compensation  insurance  segment was primarily due to premium  growth,
which has occurred  since July 1999 and premium rate  increases  for  California
policies issued in 2000,  which have averaged over 30% on renewal  policies,  as
well as new business in Nevada and Colorado.  Beginning in July 1999,  the State
of Nevada allowed  private  insurance  companies to offer workers'  compensation
products.

     Professional fees decreased approximately $6.7 million primarily due to the
sale of the pharmacy  operations in Texas in the fourth  quarter of 1999 and the
closure of inpatient  operations at Mohave Valley  Hospital in the first quarter
of 1999.

     Investment and other revenues decreased approximately $2.0 million over the
comparable prior year period  primarily due to a decrease in invested  balances.
Approximately  $800,000 of the difference was due to realized losses  recognized
in the current year compared to slight gains in the prior year.

     Total medical  expenses  increased  $74.0  million over the same  six-month
period last year.  Included in medical  expenses for the six-month  period ended
June 30, 2000, are $30.5 million of reserve strengthening  primarily for adverse
development  related to prior periods' medical claims,  $15.5 million of premium
deficiency and $10.2 million of other non-recurring  medical costs.  Included in
medical expenses for the six-month period ended June 30, 1999 is $8.1 million of
premium deficiency  expense.  Excluding these items,  medical expenses increased
$25.9 million, or 7.2%, and the Medical Care Ratio increased from 81.3% to 83.4%
for the six months  ended June 30, 2000  compared to the same prior year period.
The  increase  in the Medical  Care Ratio is  primarily  due to the  increase in
Medicare members as a percentage of fully insured members. The cost of providing
medical care to Medicare members generally  requires a greater percentage of the
premiums  received.  In addition,  hospital costs in southern Nevada were higher
primarily  due to an  increase  in bed days and in Houston  hospital  costs were
higher due to increased cost of care.

                  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,  2000,  compared to six
months ended June 30, 1999 (continued).

     Included in medical  expenses is the utilization of $14.8 million and $12.2
million of premium deficiency reserve to offset losses on contracts in Texas for
the six-month periods ended June 30, 2000 and 1999, respectively.  Also included
in medical expenses for the six months ended June 30, 1999 is the utilization of
$5.3  million  of  premium  deficiency  reserve to offset  losses  primarily  on
Medicare risk members in Arizona and rural Nevada.

     Total military contract expenses decreased  approximately $3.1 million,  or
2.3%.  This  decrease is  consistent  with the  decrease  in revenues  discussed
previously.

     Specialty product expenses increased $34.9 million.  The combined ratio for
the workers'  compensation  insurance business for the six months ended June 30,
2000 was 132.9%  compared to 95.9% for the  comparable  prior year  period.  The
increase  was due to an  increase in the loss and LAE ratio to 102.0% from 59.0%
in 1999, partially offset by a decrease in the expense ratio to 29.2% from 36.9%
in 1999. The remaining variance is due to policyholders'  dividends incurred for
participating  policies  issued  in the  state  of  Nevada.  The  policyholders'
dividend ratio in 2000 was 1.7%, while no dividends were incurred in 1999.

     The higher  loss and LAE ratio for 2000 is due to $20.7  million in adverse
development related to accident years 1999 and prior. In the first six months of
1999, no prior accident year development was incurred. Estimated ultimate losses
and LAE incurred in accident years 1996 to 1998 have developed  significantly in
response  to the  continuation  of  increasing  claim  severity  patterns on the
Company's  California  book of  business.  Many workers  compensation  insurance
carriers in  California  are  experiencing  higher  claim  severity.  For claims
occurring on and after July 1, 1998,  the Company has  reinsured a percentage of
the  higher  claim  severity  to its  reinsurer  under the  Company's  low-level
reinsurance  treaty. The low-level  reinsurance treaty expired on June 30, 2000;
however,  the Company  opted to continue  ceding  premiums  and losses under the
treaty on a run-off basis for all policies in force at June 30, 2000. On July 1,
2000, the Company entered into a reinsurance treaty that covers losses on claims
in excess of $250,000 for policies issued after June 30, 2000.

     The  reduction  in the expense  ratio is due to the higher  premium  volume
earned in 2000  compared to 1999.  For the six months ended June 30,  2000,  net
premiums earned are 44.8% higher than the comparable  period in 1999.  Moreover,
policy acquisition costs, comprised of commissions, premium taxes and boards and
bureaus expense, decreased to 8.5% of net premiums earned from 9.7% in 1999, and
non-policy expenses decreased to 19.3% from 25.5% in 1999. Total
non-policy acquisition expenses were $10.2 million  compared to $9.3 million
in 1999, an increase of 9.7%. Gross premiums  earned for 2000  increased from
$64.9 million in 1999 to $93.0 million in 2000, an increase of 43.2%.

     General,  administrative  and marketing ("G&A") costs increased $400,000 or
less than 1%  compared  to the first six  months  of 1999.  As a  percentage  of
revenues,  G&A costs for the first six  months of 2000  decreased  to 10.4% from
10.8% in 1999.  A $3.1  million  increase  in  depreciation  expense,  primarily
related to the  implementation of new computer systems,  was offset by decreases
in  other  G&A  expenses,  including  legal  expense.  G&A  expense  is  net  of
utilization   of  premium   deficiency   reserves  for   maintenance   costs  of
approximately $9.0 million and $7.0 million for the six-month periods ended June
30, 2000 and 1999, respectively.

     In the first six  months of 2000 and 1999,  the  Company  incurred  certain
asset  impairment,  restructuring  and other costs.  See Note 2 to the condensed
consolidated financial statements for a discussion of these charges.

                  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,  2000,  compared to six
months ended June 30, 1999 (continued).

     Interest  expense and other increased $2.6 million for the six months ended
June 30,  2000,  compared  to the same prior  year  period  primarily  due to an
increase in debt as well as an increase in the Company's cost of borrowing.

     For the current  year period,  the Company  recorded  $76.8  million of tax
benefit for an effective tax rate of 27.2%  compared to 33.4% for the same prior
year period.  The  Company's  effective  tax rate is less than the 35% statutory
rate  primarily  due to the  non-deductibility  of certain  portions of goodwill
impairment  expense in the second  quarter of 2000.  Excluding the effect of the
expenses  discussed  in Notes 2 and 8 to the  Condensed  Consolidated  Financial
Statements,  the  effective  tax rate for the period was  33.5%.  The  Company's
ongoing  effective tax rate is less than the 35% statutory rate primarily due to
tax preferred investments.

Liquidity and Capital Resources

     The Company had negative cash flows from operations of approximately  $20.0
million for the six months ended June 30, 2000,  resulting primarily from a loss
of $205.2  million and a net change in assets and  liabilities  of $37.7 million
offset by a non-cash  impairment  provision of $203.0 million,  $17.7 million in
depreciation  and  amortization  and $2.2  million  in  provision  for  doubtful
accounts.  The  decrease  in cash flow  resulting  from the change in assets and
liabilities  was  primarily  due to  increases  in deferred  tax assets of $64.7
million primarily  related to the charges  discussed in Note 2 to the Condensed
Consolidated Financial Statements. In addition, reinsurance recoverable
increased approximately  $59.4  million,  primarily  due to increased  business
as well as development  on prior year loss  estimates.  These cash outflows were
partially offset by an  increase  in losses  and LAE of $65.6  million  and
increases  in current liabilities, including medical claims payable.

     Sierra  Military  Health  Services,  Inc.  ("SMHS")  receives  monthly cash
payments  equivalent to  one-twelfth  of its annual  contractual  price with the
Department of Defense ("DoD").  SMHS also accrues revenue on a monthly basis for
the  contractually  specified  Bid  Price  Adjustment  ("BPA")  process  and for
contract change orders.

     The BPA serves to adjust the DoD's monthly  payments to SMHS  because such
payments  are  based  in  part  on DoD  estimates  for  beneficiary  population,
beneficiary  population baseline health care cost, inflation and military direct
care system  utilization.  As actual information has been made available for the
above items, quarterly adjustments are made to SMHS' monthly health care payment
in addition to lump sum  adjustments  for past months.  During  April 2000,  the
Company  completed BPA's 2 and 3 with the DoD resulting in a cash payment to the
Company of $13.0 million in the second quarter.

     As SMHS implements  DoD-directed contract changes,  revenue is accrued on a
percentage of completion basis until price negotiation is settled. In the second
quarter,  the Company received  payments from the DoD of $6.0 million related to
three specific change orders.

     As of June  30,  2000,  the  Company  was not in  compliance  with  certain
financial covenants relating to its line of credit.  Under the terms of its line
of credit,  noncompliance  with the covenants  constitutes  an event of default,
which  permits the Company's  lenders to  accelerate  repayment of the Company's
outstanding  obligations under its line of credit. The Company's compliance with
these  covenants  under its line of credit has been waived by its  lenders.  The
waiver  is  effective  as of June  30,  2000  and will  remain  effective  until
mid-September  by which  time  the  Company  expects  to have  negotiated  a new
amendment  with revised  covenants.  In accordance  with  Statement of Financial
Accounting Standards No. 78, "Classification of Obligations that are Callable by
the Creditor",  the Company has classified the entire outstanding  balance under
its line of  credit as a  current  liability  as of June 30,  2000.  The  waiver
includes an amendment to the line of credit, which, among other things, requires
that the  Company  grant its  lenders a security  interest  in certain  personal
property of the Company,  reduces the  availability  under the line of credit to
$185 million,  increases the Company's  borrowing  rate by 87.5 basis points and
provides for the payment of additional fees by the Company.

                  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 is  negotiating a further  amendment to its line of credit with
its lenders which the Company  expects will,  among other things,  amend some of
the covenants in its line of credit such that the Company will be in compliance.
While the Company  believes that its best  interests,  and those of its lenders,
would be served  through an  amendment  to the line of  credit,  there can be no
assurance  that  the  Company's  lenders  will  ultimately  agree  that  such an
amendment will ultimately be consummated,  or that in the event the Company does
obtain such an  amendment  to its line of credit,  the  Company  will be able to
maintain  compliance with its covenants.  In the meantime,  the Company has been
aggressively  exploring various strategic options,  and has been taking steps to
conserve and manage its cash flow;  however,  there is no  assurance  that these
actions will be successful.

     During the six months ended June 30, 2000,  the Company had net  borrowings
of $25.0 million under its line of credit, which was offset by $5.4 million used
for the reduction of other debt. In addition to the borrowings,  cash inflows in
the six  months  ended June 30,  2000  included  a $17.0  million  net change in
investments  and $900,000  received in connection with the sale of stock through
the Company's  stock plans.  Offsetting the above cash inflows was $10.9 million
in net  capital  expenditures  including  costs  associated  with the  Company's
technology  initiatives  to  improve  new  systems  and to  establish  web-based
applications. In March 2000, the Company sold its interest in TRIWEST Healthcare
Alliance in exchange for a note receivable in the amount of $3.7 million.

     The  Company has a revised  2000  capital  budget of under  $20.0  million,
primarily for computer hardware and software,  furniture and equipment and other
requirements  due to the Company's  computer  system  initiatives  and projected
growth. The Company's liquidity needs over the next six months will primarily be
to fund anticipated temporary negative cash flow at SMHS as well as continuing
operating losses in Texas, and for the debt service and capital items noted
above. To facilitate a reduction of the  balance  on its line of  credit,  the
Company  anticipates  the  following actions:

o        Sale of the Company's Houston operations
o        Sale of the Company's Texas and Arizona real estate
o        Sale of the Company's jet
o        Sale-leaseback of substantially all of the Company's Nevada real estate

     In addition, the Company has restructured its Dallas operations.  (See Note
2 to the Company's Condensed Consolidated  Financial  Statements.)  Furthermore,
the Company is initiating a plan through which an overhead  reduction of over $7
million is expected.  The Company  believes the actions  delineated  above along
with  operating  cash flow should enable it to fund its debt service and capital
expenditures, as well as meet its liquidity needs.

     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").  In April 2000, the Company's Board of Directors  authorized a
$2.5  million  loan  from the  Company  to the CEO  which,  along  with  accrued
interest,  is due on June 30, 2002. As of June 30, 2000, the aggregate principal
outstanding  and accrued  interest for both  instruments  was $5.3 million.  All
borrowed  amounts bear interest at a rate equal to the rate at which the Company
could have borrowed  funds under its line of credit  facility at the time of the
borrowing plus 10 basis points.

     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 $24.6 million as of June
30, 2000.  The HMO and insurance  subsidiaries  must also meet  requirements  to
maintain minimum  stockholder's  equity, on a statutory basis, ranging from $1.5
million to $5.2 million.  Additionally,  in  conjunction  with the  Kaiser-Texas
acquisition,  Texas Health Choice, L.C. ("TXHC") entered into a letter agreement
with the Texas  Department  of  Insurance  whereby TXHC agreed to maintain a net
worth of $20.0 million.  Of the cash and cash equivalents held at June 30, 2000,
$55.5 million is designated for use only by the regulated subsidiaries.

                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

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

     Such amounts are available for transfer to the holding company from the HMO
and  insurance  subsidiaries  only to the extent  that they can be  remitted  in
accordance  with the terms of existing  management  agreements and by dividends.
Remaining  amounts are available on an unrestricted  basis.  The holding company
will not receive  dividends  from its  regulated  subsidiaries  if such dividend
payment would cause violation of statutory net worth and reserve requirements.

     CII Financial, Inc., a wholly-owned subsidiary that the Company acquired in
1995,   has  $47.5  million  of   convertible   subordinated   debentures   (the
"Debentures") due September 15, 2001 and bearing interest at 7 1/2%, which is
due semi-annually  on March  15 and  September  15.  Each  $1,000  in  principal
is convertible  into 25.382  shares of the  Company's  common stock at a
conversion price of $39.40 per share. The Debentures are general  unsecured
obligations of CII and are not guaranteed by Sierra. During the six months ended
June 30, 2000, the Company purchased $3.0 million of the Debentures on the open
market.

Membership

         The Company's membership at June 30, 2000 and 1999 was as follows:

<TABLE>

<CAPTION>
                                                                          Number of Members at Period Ended
                                                                            June 30                 June 30

                                                                             2000                    1999
                                                                             ----                    ----

HMO

<S>                                                                         <C>                      <C>
  Commercial..................................................              250,700                  263,100
  Medicare....................................................               53,100                   48,900
  Medicaid (1)................................................               12,200                    9,400
Managed Indemnity.............................................               32,900                   42,800
Medicare Supplement...........................................               28,700                   27,400
Administrative Services.......................................              278,100                  301,500
TRICARE Eligibles.............................................              613,500                  599,000
                                                                         ----------               ----------
Total Members.................................................            1,269,200                1,292,110
                                                                          =========                =========
</TABLE>

(1)      In prior years Medicaid was included in commercial membership.


ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company's available for sale investments are substantially owned by
the HMO and insurance subsidiaries.  As of June 30,  2000,  unrealized  holding
losses  on  available  for sale investments  have  decreased  by $3.9  million
since the 1999 year end primarily due to a decrease in interest rates,  and
thus, an  increase in the market value of bonds.  The  Company  believes  that
changes in market  interest  rates,  resulting  in unrealized holding gains or
losses, should not have a material impact on future
earnings or cash flows as it is unlikely  that the Company  would need or choose
to substantially liquidate its investment portfolio.

                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

                           PART II - OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

     The  Company  is subject to  various  claims  and other  litigation  in the
ordinary  course  of  business.  Such  litigation  includes  claims  of  medical
malpractice, coverage related claims 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 pending legal proceedings should not have a material adverse
effect on the Company's financial condition.

ITEM 2.       CHANGES IN SECURITIES AND USE OF PROCEEDS

              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 18,  2000 in Las
Vegas, Nevada.

     The following  persons were elected directors for a two-year term ending in
2002 based on the voting results below:

<TABLE>

<CAPTION>
                                                                                                       Broker

                       Name                           For              Withheld        Abstain        Non-votes

<S>                                                    <C>               <C>                <C>          <C>
               Erin MacDonald                          24,291,845        682,492            0            0
              William J. Raggio                        24,256,799        717,538            0            0
               Charles L. Ruthe                        24,272,082        702,255            0            0
</TABLE>

     The following person was elected to a one-year term ending in 2001 based on
the voting results below:
<TABLE>

<CAPTION>
                                                                                                     Broker
                        Name                              For          Withheld         Abstain     Non-votes

<S>                                                    <C>               <C>                <C>          <C>
               Anthony L. Watson                       24,321,963        652,374            0            0
</TABLE>

     The following  persons' terms as directors  continued after the meeting and
end in 2001.

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

     The stockholders  also ratified the appointment of Deloitte & Touche LLP as
the Company's  independent  auditors for the year ending  December 31, 2000. The
voting results were as follows:

<TABLE>

<CAPTION>
                                                                                             Broker

                               For                Against            Abstain                Non-votes

<S>                           <C>                  <C>               <C>                        <C>
                              24,488,847           464,627           20,863                     0

</TABLE>

                  SIERRA HEALTH SERVICES, INC. AND SUBSIDIARIES

                           PART II - OTHER INFORMATION

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

     The stockholders also voted to amend the Company's  Employee Stock Purchase
Plan to increase by 1,250,000  the number of shares of common stock for issuance
to  participants  and to extend  the plan to 2010.  The voting  results  were as
follows:

<TABLE>

<CAPTION>
                                                                                             Broker

                               For                Against            Abstain                Non-votes

<S>                           <C>                <C>                <C>                         <C>
                              21,702,597         3,171,125          100,615                     0
</TABLE>

ITEM 5.       OTHER INFORMATION

              None

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

              (a)     Exhibits

                      (10.1)          Loan Agreement

                      (10.2)          Collateral Assignment of Rights

                          (27) Financial Data Schedule

                      (99)          Registrant's  current  report  on  Form  8-K
                                    dated March 15, 2000, incorporated herein by
                                    reference.

              (b)     Reports on Form 8-K

     The Company  has not filed any  Reports on Form 8-K during  this  reporting
period.

                                   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
duly authorized undersigned.

                                   SIERRA HEALTH SERVICES, INC.
                                   ----------------------------
                                           (Registrant)



Date:  August 14, 2000                /S/ PAUL H. PALMER
                                   ---------------------
                                   Paul H. Palmer
                                   Vice President of Finance,
                                   Chief Financial Officer and Treasurer
                                   (Principal Financial and Accounting Officer)