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                      SECURITIES AND EXCHANGE COMMISSION

                             Washington D.C. 20549
                                ---------------

                                  FORM 10-K/A

             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                        COMMISSION FILE NUMBER 000-22751

                                ---------------
                          CONCENTRA MANAGED CARE, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                    DELAWARE                           04-3363415
           (State or other jurisdiction of          (I.R.S. Employer
           incorporation or organization)         Identification No.)

                   312 UNION WHARF,
                BOSTON, MASSACHUSETTS                    02109
     (Address of principal executive offices)         (Zip code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 367-2163

       SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
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<S>                                                                <C>
     SECURITIES  REGISTERED  PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock, par value $.01 per share
                                                                   4.5%  Convertible  Notes  due 2003
                                                                   6.0%  Convertible  Notes  Due 2001
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     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  twelve 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 |_|

     Indicate  by check mark if disclosure of delinquent filers pursuant to Item
405  of  Regulation  S-K  is not contained herein, and will not be contained, to
the   best  of  Registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in  Part  III  of this Form 10-K or any
amendment to this Form 10-K |X|

     The  aggregate  market  value of the voting stock held by non-affiliates of
the  Registrant  totaled  $679,852,314  (based  on  the  closing  price  of  the
Company's Common Stock on The Nasdaq National Market on March 15, 1999).

     As  of  March  15,  1999,  the  Registrant  had outstanding an aggregate of
47,294,074 shares of its Common Stock, $.01 par value.


                      DOCUMENTS INCORPORATED BY REFERENCE

                                     NONE.

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<PAGE>

                         CONCENTRA MANAGED CARE, INC.
                                   FORM 10-K
                      FISCAL YEAR ENDED DECEMBER 31, 1998

                                     INDEX

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                                                                                                           Page
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<S>          <C>                                                                                          <C>
PART I
Item 1.      Business .................................................................................   1
Item 2.      Properties ...............................................................................   20
Item 3.      Legal Proceedings ........................................................................   20
Item 4.      Submission of Matters to a Vote of Security Holders ......................................   20
PART II
Item 5.      Market for Registrant's Common Equity and Related Stockholder Matters ....................   21
Item 6.      Selected Financial Data ..................................................................   22
Item 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations ....   22
Item 7A.     Quantitative and Qualitative Disclosures about Market Risk ...............................   30
Item 8.      Financial Statements and Supplementary Data ..............................................   30
Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .....   30
PART III
Item 10.     Directors and Executive Officers of the Registrant .......................................   31
Item 11.     Executive Compensation ...................................................................   34
Item 12.     Security Ownership of Certain Beneficial Owners and Management ...........................   42
Item 13.     Certain Relationships and Related Transactions ...........................................   43
PART IV
Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K ..........................   44
</TABLE>



<PAGE>

                          FORWARD LOOKING INFORMATION

     This  Report  contains certain forward-looking statements that are based on
management's  current  views  and  assumptions  regarding  future events, future
business  conditions  and  the  outlook  for  the  Company  based  on  currently
available  information.  Wherever  possible,  the  Company  has identified these
"forward-looking  statements"  (as  defined in Section 27A of the Securities Act
of  1933  and  Section  21E of the Securities Exchange Act of 1934) by words and
phrases  such  as  "anticipates",  "plans",  "believes", "estimates", "expects",
"will  be  developed  and  implemented",  and  similar  expressions. Readers are
cautioned not to place undue reliance on these forward-looking     statements.
These  forward-looking  statements  are  subject  to risks and uncertainties and
future   events  could  cause  the  Company's  actual  results,  performance  or
achievements  to differ materially from those expressed in, or implied by, these
statements.   The   Company   assumes  no  obligation  to  update  publicly  any
forward-looking  statements,  whether  as  a  result  of new information, future
events or otherwise.


                                    PART I


ITEM 1. BUSINESS

A. GENERAL
     Concentra  Managed  Care,  Inc.  (the  "Company"  or  "Concentra")*  is the
leading  provider  of healthcare management and cost containment services to the
workers'  compensation,  auto  insurance  and  disability insurance markets. The
Company  is also the leading provider of out-of-network medical claims review to
the  group  health  marketplace  and performs non-injury healthcare services for
over  80,000  local  employers.  Concentra  offers  a  continuum  of services to
employers,  insurers  and  third-party administrators ("TPAs") of all sizes. The
Company's  services allow customers to increase the direction of care for injury
claims,  aggressively  manage  the  treatment plan and thereby control the total
costs  of those claims, and review medical claims retrospectively, thus reducing
overall  workers'  compensation,  auto  insurance, disability and out-of-network
group  health  costs.  The  Company  has  demonstrated  that  by  both providing
healthcare  and  offering  claims  management services, Concentra is in a unique
position  to  offer  and  provide  a  full continuum of services on a bundled or
unbundled basis to national or regional accounts and local employers.
     Concentra's   comprehensive   services  are  comprised  of  three  distinct
categories:   (i)   healthcare   services,  (ii)  specialized  cost  containment
services,  and (iii) field case management services. For the year ended December
31,  1998,  revenues  from  healthcare  services,  specialized  cost-containment
services  and  field case management services represented approximately 43%, 30%
and 27% of total revenues, respectively.
     Healthcare  services  are  provided  through  the  Company's network of 169
owned  and  managed occupational healthcare centers, located in 50 markets in 25
states  as  of  March  15,  1999.  Healthcare  services  include injury care and
physical  therapy  services  for  work-related  injuries and illnesses, physical
examinations,   substance   abuse  testing  and  certain  other  loss-prevention
services.
     Specialized  cost containment services are comprised of the Company's first
report  of  injury service provided through its First Notice Systems* subsidiary
("First  Notice"),  telephonic  case  management  services, provider bill review
services,  preferred  provider organization ("PPO") access through the Company's
Focus  Healthcare  Management*  subsidiary ("Focus"), out-of-network bill review
services  through  the Company's Concentra Preferred Systems subsidiary ("CPS"),
independent   medical   exams   ("IMEs")   and   peer   reviews.   CPS  provides
out-of-network  medical  bill  review  services  primarily  to  the group health
market,   but   Concentra   is  now  marketing  this  service  to  its  workers'
compensation and auto insurance customers.
     Field  case  management  services  are provided to a national customer base
utilizing  over  1,100  full  time  field  case  managers. Field case management
services  involve  working  on  a  one-on-one  basis  with injured employees and
facilitating   communication   among  their  various  healthcare  professionals,
employers  and  insurance  company adjusters. Field case management services are
designed   both   to   assist  in  maximizing  medical  improvement  and,  where
appropriate, to expedite return to work.

--------
* "Concentra",  "First  Notice  Systems"  and  "Focus Healthcare Management" are
  registered service marks of Concentra Managed Care, Inc.

                                       1
<PAGE>

     On  March  2,  1999, Concentra entered into an Agreement and Plan of Merger
(the  "Merger  Agreement") with Yankee Acquisition Corp., a Delaware corporation
("Yankee").  On  March  24, 1999, Concentra entered into an Amended and Restated
Agreement  and  Plan  of  Merger  (the  "Amended Merger Agreement") with Yankee,
amending  the  Merger  Agreement.  The Amended Merger Agreement contemplates the
merger  (the  "Merger")  of  Yankee  with and into Concentra. As a result of the
Merger,  each outstanding share of Concentra Common Stock will be converted into
the  right  to  receive  $16.50  in  cash. The Merger is conditioned upon, among
other  things,  approval  by the stockholders of Concentra, receipt of financing
and  certain regulatory approvals. The transaction is structured to be accounted
for as a recapitalization.

B. INDUSTRY OVERVIEW


WORKERS' COMPENSATION

     Workers'  compensation is a state-mandated, comprehensive insurance program
that  requires  employers  to  fund medical expenses, lost wages and other costs
resulting  from work-related injuries and illnesses. Since their introduction in
the  early  1900s,  these  programs  have been expanded to all fifty states, the
District  of Columbia and Canada. In addition, federal statutes provide workers'
compensation  benefits  for  federal  employees.  Each  state is responsible for
implementing   and   regulating   its   own   program.   Consequently,  workers'
compensation  benefits  and  arrangements vary on a state-by-state basis and are
often highly complex.

     Workers'  compensation  legislation  generally requires employers, directly
or  indirectly  through an insurance vehicle, to fund all of an employee's costs
of  medical  treatment  and  a significant portion of lost wages, legal fees and
other  associated  costs.  Typically, work-related injuries are broadly defined,
and  injured  or ill employees are entitled to extensive benefits. Employers are
required,  directly  or  indirectly,  to  provide  first-dollar coverage with no
co-payment  or  deductible  due  from  the  injured  or ill employee for medical
treatment  and, in many states, there is no lifetime limit on expenses. However,
in  exchange  for  providing  this  coverage  for  employees,  employers are not
subject  to  litigation  by  employees  for benefits in excess of those provided
pursuant  to  the relevant state statute. In most states, the extensive benefits
coverage  (for  both  medical  costs  and  lost  wages)  is provided through the
purchase   of   commercial   insurance   from   private   insurance   companies,
participation in state-run insurance funds or employer self-insurance.

     According  to  statistics  published in the 1998 Workers' Compensation Year
Book,  total  workers' compensation costs to employers in the United States were
estimated  to  be  approximately $92 billion in 1996. Although the industry as a
whole  is  fragmented  with  a  large  number  of  competitors  in  the  various
sub-segments  of  workers'  compensation services, Concentra believes that it is
the only integrated provider of healthcare management and cost-containment
services offering a full continuum of services on a nationwide basis.


OCCUPATIONAL HEALTHCARE

     Occupational  healthcare is largely provided by independent physicians, who
have  experienced  increasing  pressures  in  recent years from cost containment
efforts,  growing  regulatory complexity, and increased competition. The Company
anticipates  that  competition in the occupational healthcare industry may shift
from  individual  practitioners  to  specialized  provider groups, such as those
managed by the Company.

     Occupational  healthcare  services  consist  of two primary components: (i)
workers'  compensation  injury  care  and  related services; and (ii) non-injury
healthcare services related to employer needs or statutory requirements.

     INJURY CARE

     The   dollar   amount   of   workers'  compensation  claims  has  increased
significantly  in  recent years, resulting in escalating costs to employers. The
Company  anticipates  that employers' direct costs of workers' compensation will
continue  to  escalate  primarily because of broader definitions of work-related
injuries  and  illnesses  covered by workers' compensation laws, the shifting of
medical  costs  from  group health plans to the workers' compensation system, an
aging  work  force  and,  most  importantly,  the  absence of comprehensive cost
containment  programs  (such  as  those  that encourage early return-to-work and
limited duty).

     As  workers'  compensation costs increase, Concentra expects that employers
will  continue  to seek and implement strategies and programs to reduce workers'
compensation  costs  and  to improve worker productivity, health and safety. The
Company  believes  that  clients'  use of its healthcare services at the primary
care   level,   focusing   on  proactively  managing  each  injury  episode  and
encouraging  early  return  to  work (as appropriate), can result in substantial
savings in indemnity and medical costs.


                                       2
<PAGE>

     Provider  reimbursement  methods  vary  on  a  state-by-state  basis. Forty
states  have  adopted  fee  schedules pursuant to which all healthcare providers
are  uniformly reimbursed. The fee schedules are set by each state and generally
prescribe   the  maximum  amounts  that  may  be  reimbursed  for  a  designated
procedure.  In states without fee schedules, healthcare providers are reimbursed
based  on usual, customary and reasonable ("UCR") fees charged in the particular
state  in which the services are provided. Of the 25 states in which the Company
currently operates occupational healthcare centers, 21 have fee schedules.

     Limitations  on  an  employee's  right  to  choose  a  specific  healthcare
provider  are  dependent  upon  the  particular  state statute. According to the
Workers'  Compensation  Research  Institute, as of March 1999, 25 states limited
the  employee's  choice  of  provider  and  32  states  placed  restrictions  on
switching  providers,  including  provisions requiring employer approval for any
changes.  Twelve  states  place  restrictions on switching providers via managed
care  arrangements. Generally, the employer will also have the ability to direct
the  employee  when  the  employer  is  self-insured.  Concentra  believes  that
employers  greatly  influence  their  employees'  choices  of physicians even in
states  in  which  the employees may select their providers. As a result, it has
been  the Company's experience that its results of operations and prospects in a
particular  state  are  not  materially  dependent upon state statutes regarding
direction of care.

     NON-INJURY HEALTHCARE SERVICES

     Non-injury  occupational  healthcare  services  include  employment-related
physical  examinations,  drug  and  alcohol testing, functional capacity testing
and  other related programs designed to meet specific employer needs. Non-injury
healthcare  services also include programs to assist employers in complying with
a  continuously  expanding  list  of  federal  and state requirements, including
hearing   conservation   programs,  toxic  chemical  exposure  surveillance  and
monitoring  programs,  and  Department  of  Transportation  and Federal Aviation
Administration  physical  examinations.  Federal laws governing health issues in
the  workplace,  including the Americans with Disabilities Act (the "ADA"), have
increased  employers' demand for healthcare professionals who are experts in the
delivery of these regulated services.


MANAGED CARE SERVICES: SPECIALIZED COST CONTAINMENT AND FIELD CASE MANAGEMENT

     Managed  care  techniques  are  intended  to control the cost of healthcare
services  and  to  measure the performance of providers through intervention and
on-going  review  of  services  proposed  and  actually  provided.  Managed care
techniques  were  originally  developed  to  stem  the  rising  costs  of  group
healthcare.  Historically,  employers were slow to apply managed care techniques
to  workers'  compensation  costs  primarily  because  the  aggregate  costs are
relatively  small  compared  to  those associated with group health benefits and
because state-by-state  regulations  related  to  workers'  compensation are far
more  complex  than  those  related  to  group health. However, in recent years,
employers  and  insurance  carriers have been increasing their focus on applying
managed care techniques to control their workers' compensation costs.

     A  number  of  states  have  adopted  legislation  encouraging  the  use of
workers'  compensation managed care organizations ("MCOs") in an effort to allow
employers  to  control  their  workers'  compensation  costs. MCO laws generally
provide  employers  an  opportunity  to  channel injured employees into provider
networks.  In  certain  states,  MCO laws require licensed MCOs to offer certain
specified  services,  such  as  utilization  management,  case  management, peer
review  and provider bill review. Most of the MCO laws adopted to date establish
a  framework  within which a company such as Concentra can provide its customers
a full range of managed care services for greater cost control.

     Because  workers' compensation benefits are mandated by law and are subject
to  extensive  regulation, payors and employers do not have the same flexibility
to  alter benefits as they have with other health benefit programs. In addition,
workers'  compensation  programs  vary  from state to state, making it difficult
for  payors  and  multi-state employers to adopt uniform policies to administer,
manage  and  control  the  costs  of benefits. As a result, managing the cost of
workers'  compensation  requires  approaches  that  are tailored to the specific
state regulatory environment in which the employer operates.

     Workers'  compensation  managed care services include two broad categories:
specialized  cost  containment  services  and  field  case  management services.
Specialized  cost  containment  services  are  designed  to  reduce  the cost of
workers'  compensation  claims  through  a  variety  of techniques such as first
report   of   injury  services,  utilization  management  (precertification  and
concurrent review), retrospective bill review services, telephonic case


                                       3
<PAGE>

management,  PPO  network  access, out-of-network bill review services, IMEs and
peer  reviews.  Field  case  management services involve working on a one-on-one
basis  with injured employees and facilitating communication among their various
healthcare  professionals, employers and insurance company adjusters. Field case
management   services   are  designed  both  to  assist  in  maximizing  medical
improvement and, where appropriate, to expedite return to work.


GROUP HEALTH COST CONTAINMENT SERVICES

     All  healthcare  payors  have  out-of-network  exposure  due  to healthcare
claims  that  are  outside  their coverage area or network either as a matter of
choice  on  the  part  of the insured or as a result of geographic circumstances
where   the  insured  does  not  have  local  access  to  contracted  providers.
Out-of-network   healthcare   claims  expose  payors  to  greater  incidence  of
over-utilization,  cost-shifting, omission of appropriate discounts and possible
billing  errors.  Out-of-network  bill  review service providers produce savings
for  their clients by analyzing these out-of-network medical claims and reducing
the  costs  which  otherwise  would  be  payable  through  a variety of methods,
including  professional  negotiation,  line item analysis, specialized audit and
bill review processes and broad access to preferred provider networks.


AUTO MANAGED CARE SERVICES

     The   automobile   insurance   industry,  like  the  workers'  compensation
industry,  is  regulated on a state-by-state basis. Although regulatory approval
is  not  required  for Concentra to offer most of its services to the automobile
insurance   market   (including  voluntary  network  access),  state  regulatory
approval  is  required  in  order  to  offer  automobile insurers' products that
permit them to direct claimants into a network of medical providers.

     It  is  relatively  recent  that  the  auto  insurance  market has provided
legislative  support  of  healthcare  management  and  cost management services.
However,  in  states  that have adopted auto managed care legislation, direction
of  care to designated providers of treatment have lowered the costs of Personal
Injury  Protection  coverage. The lowering of this threshold has an impact as to
whether  further  damages  claims  can be made with regard to injury costs. As a
result  of  performance  in the states of Colorado and Hawaii, new opportunities
have  arisen  in  other  states with existing no-fault legislation. Concentra is
pursuing  auto-related business using cost management strategies in those states
that permit such programs.


C. CONCENTRA'S BUSINESS STRATEGY
     Concentra's  objective  is  to  capitalize  on  its  national  presence  by
providing  an  integrated  platform  of  comprehensive healthcare management and
cost  containment  services.  The  Company's  strategy is to (i) increase market
penetration  of  early  intervention services such as healthcare services, first
report   of   injury  and  telephonic  case  management,  (ii)  increase  market
penetration  of  out-of-network  bill  review  services  to  the  group  health,
workers'  compensation  and  auto  insurance  markets,  (iii) streamline patient
care,  outcomes  reporting  and  claims  resolution through enhanced information
technology,  (iv)  continue  to  acquire  and  develop  occupational  healthcare
centers   and   expand   healthcare   network   services  by  developing  direct
affiliations  with  primary  care  physicians,  specialists, hospitals and other
ancillary  providers  and  (v) capitalize on the Company's national organization
and  local market presence to win new customers and to increase cross-selling of
services to existing accounts.
     Concentra will seek to implement this strategy as follows:

INCREASE MARKET PENETRATION OF EARLY INTERVENTION SERVICES

     Concentra  intends  to  increase  its  development  and  marketing of early
intervention  services, such as access to its network of occupational healthcare
centers  and  other  providers  in  its  PPO  network,  first  report of injury,
precertification,  and  telephonic  case  management. Early intervention enables
Concentra  to  identify  promptly  cases  that  have  the potential to result in
significant  expenses and to take appropriate measures to control these expenses
before  they  are incurred. In addition, Concentra believes that providing early
intervention  services generally results in the Company obtaining earlier access
to  claims  files.  Such  earlier  access  improves the Company's opportunity to
provide  the  full  range  of  its  healthcare  management  and cost containment
services, which should result in lowering the total costs of the claim.


INCREASE MARKET PENETRATION OF OUT-OF-NETWORK BILL REVIEW SERVICES

     Concentra  will  further expand its reach into the group health marketplace
by  offering  new  and existing customers CPS's comprehensive retrospective bill
review services which will help customers contain costs


                                       4
<PAGE>

related  to  out-of-network  group  health  medical  charges.  CPS is the market
leader  in this line of business and is expanding its services into the workers'
compensation   market  and  auto  insurance  market  in  states  that  have  not
established  fee  schedules.  Concentra  believes  that expansion in these areas
represents a significant opportunity for the Company in the future.

Streamline  Patient  Care,  Outcomes  Reporting  and  Claims  Resolution Through
Enhanced Information Technology

     Concentra's  ongoing  development  of  enhanced information technology will
strengthen  the  Company's  ability  to  provide  a full continuum of integrated
services  to  its  customers. Concentra will continue to develop its information
systems  to  make  more  effective  use  of  the Company's extensive proprietary
knowledge  base  relating  to  workplace injuries, treatment protocols, outcomes
data  and  the  workers' compensation system's complex web of regulations. These
enhanced  information  systems  will enable Concentra to streamline patient care
and  outcomes  reporting,  thus  augmenting  the  Company's  ability  to furnish
high-quality,  efficient  healthcare services in compliance with the regulations
governing   healthcare   services.  Further,  Concentra  believes  it  can  more
efficiently  process  bill  review  and field case management claims through the
use  of enhanced information technology and will continue to devote resources to
improving such systems.

CONTINUE  TO  ACQUIRE  AND  DEVELOP  OCCUPATIONAL  HEALTHCARE CENTERS AND EXPAND
HEALTHCARE NETWORK SERVICES

     Concentra  estimates  that  there are more than 2,000 healthcare centers in
the  United  States  in which physicians who specialize in occupational medicine
are  providing  occupational  healthcare  services. The Company will continue to
acquire  and develop occupational healthcare centers in new and existing markets
and  will  continue  to  organize  its  occupational  healthcare centers in each
market  into  clusters  to serve employers, payors and workers more effectively,
to  leverage management and other resources and to facilitate the development of
integrated  networks of affiliated physicians and other healthcare providers. In
addition,  Concentra will develop occupational healthcare centers in new markets
and  within  existing  markets through joint ventures and management agreements.
Finally,    through    Focus,    Concentra   will   continue   to   expand   its
vertically-integrated  networks  of  specialists, hospitals and other healthcare
providers.  These  networks,  and the Company's occupational healthcare centers,
are  designed to provide quality care to patients, while reducing total costs to
employers and insurers.

CAPITALIZE  ON  NATIONAL  ORGANIZATION  AND  LOCAL  MARKET  PRESENCE  TO WIN NEW
CUSTOMERS AND TO INCREASE CROSS-SELLING OF SERVICES TO EXISTING ACCOUNTS

     Concentra  believes  that  national  and  regional  insurance  carriers and
self-insured  employers  will  benefit  greatly  from  the  Company's ability to
provide  a full continuum of healthcare management and cost containment services
on  a  nationwide  basis.  Concentra  offers  these large payors a comprehensive
solution  to  their  healthcare  management  and  cost  containment needs from a
service  provider that is adept at understanding and working with many different
and  complex  state  legislative environments. Concentra's national organization
of  local  service  locations  enables  the  Company  to meet the needs of these
large,  national payors while maintaining the local market presence necessary to
monitor  changes in state-specific regulations and to facilitate case resolution
through  locally  provided managed care services. Concentra's national marketing
personnel  will  continue  to  target these large payors to expand the Company's
customer  base.  In  addition, Concentra is well-positioned to capitalize on the
relationships  developed  through  the  Company's broad-based national and local
marketing  efforts  by cross-selling its full continuum of healthcare management
and cost containment services to its existing customer base.

D. SERVICES AND OPERATIONS
     Concentra's  business  and operations span the workers' compensation, group
health,  auto and disability insurance markets. Each of these markets represents
a  significant  opportunity  for the full continuum of healthcare management and
cost  containment  services  provided  by  Concentra.  In each of these markets,
insurance  companies,  self-insured employers and TPAs have a need for Concentra
service offerings.

Healthcare Services

     Occupational Healthcare Centers

     The  Company's  169  occupational  healthcare  centers  at  March  15, 1999
provide  treatment  for  work-related  injuries and illnesses, physical therapy,
preplacement physical examinations and evaluations, certain diagnostic


                                       5
<PAGE>

testing,  drug  and  alcohol  testing  and  various  other employer-requested or
government-mandated   occupational   health  services.  During  the  year  ended
December  31,  1998,  approximately  52%  of all patient visits to the Company's
centers  were  for  the  treatment  of  injuries  or  illnesses and 48% were for
substance   abuse   testing,   physical   examinations   and   other  non-injury
occupational healthcare services.

     Preplacement  physical  examinations  and drug and alcohol testing are most
frequently  conducted on a walk-in  basis but may be scheduled in advance.  More
specialized  services,  such as audiogram testing or pulmonary function testing,
are  sometimes  scheduled  in advance.  Employees  suffering  from  work-related
injuries or illnesses are treated on an urgent basis.

     Each  of  Concentra's  centers  is  staffed  with  at  least  one  licensed
physician  who  is  an  employee  of  a professional association or professional
corporation  affiliated  with  the Company (the "Physician Groups") and at least
one  licensed  physical therapist. The licensed physicians are generally trained
and  experienced  in  occupational  medicine or have emergency, family practice,
internal  medicine or general medicine backgrounds. Most centers utilize a staff
of  between  10  and  15  full-time  persons  (or  their part-time equivalents),
including   licensed   physicians,  nurses,  licensed  physical  therapists  and
administrative support personnel.

     Physician  and  physical  therapy  services  are  provided  at  Concentra's
occupational  healthcare  centers  under  agreements  with the Physician Groups,
which  are  independently organized professional corporations that hire licensed
physicians  and  physical  therapists  to  provide  healthcare  services  to the
centers'   patients.   The  management  agreements  between  Concentra  and  the
Physician  Groups  with  respect to the 300 affiliated physicians as of February
28,  1999 have 40-year terms. Pursuant to each management agreement, the Company
provides  a  wide  array  of  business services to the Physician Groups, such as
providing  nurses  and  other medical support personnel, practice and facilities
management,  billing  and  collection, accounting, tax and financial management,
human  resource  management,  risk  management,  marketing and information-based
services  such  as  process management and outcomes analysis. As another service
to  the  Physician  Groups,  the  Company  recruits physicians, nurses, physical
therapists  and  other  healthcare  providers. Concentra collects receivables on
behalf  of the Physician Groups and advances funds for payment of each Physician
Group's  expenses,  including  salaries,  shortly after services are rendered to
patients.  The Company receives a management fee based on all services performed
at  the  centers.  The  management  fee  is  subject to renegotiation and may be
adjusted  from  time  to  time to reflect industry practice, business conditions
and  actual  expenses  for  contractual  allowances  and  bad  debts.  Concentra
provides  services  to  the Physician Groups as an independent contractor and is
responsible   only   for  the  non-medical  aspects  of  the  Physician  Groups'
practices.  The  Physician  Groups  retain  sole  responsibility for all medical
decisions.

     Individual  physicians  who  perform  services pursuant to contracts with a
Physician  Group  are employees of the Physician Group. The physicians providing
services  for  the  Physician Groups do not maintain other practices. The owners
of  the  Physician Groups are physicians. It is the responsibility of the owners
of  the  Physician  Group  to hire and manage all physicians associated with the
Physician   Group   and   to  develop  operating  policies  and  procedures  and
professional  standards and controls. Pursuant to each management agreement, the
Physician  Group  indemnifies  the Company from any loss or expense arising from
acts  or  omissions  of  the  Physician  Group  or  its  professionals  or other
personnel, including claims for malpractice.

     Joint Ventures and Management Agreements

     Concentra's  strategy  is  to  continue to develop clusters of occupational
healthcare  centers in new and existing geographic markets through the formation
of  strategic  joint  ventures in addition to the acquisition and development of
physician  practices.  In  selected  markets  in  which  a  hospital  management
company,  hospital  system  or  other  healthcare  provider  has  a  significant
presence,  the  Company  may focus its expansion efforts on the establishment of
joint  ventures  or  management  contracts.  In its joint venture relationships,
Concentra  typically  acquires  a majority ownership interest in the venture and
agrees  to  manage  the  venture  for  a  management  fee based on net revenues.
Concentra  currently  is  the  managing  member  of eight joint ventures through
which  it  operates  22  centers  and has entered into two management agreements
through which it operates five centers.

     Other Ancillary Programs

     Concentra  offers  other ancillary programs as described below. It has been
the  Company's  experience  that,  by  offering  a  full  range  of  programs to
complement its core healthcare management operations, it strengthens its


                                       6
<PAGE>

relationships  with  existing clients and increases the likelihood of attracting
new  clients.  Concentra  anticipates expanding its ancillary programs as needed
to address occupational legislation and regulations enacted in the future.

     Compliance  With ADA. The ADA is a federal statute that generally prohibits
employers  from  discriminating  against  qualified  disabled individuals in the
areas  of  the  job application process, hiring, discharge, compensation and job
training.  The  ADA  now  applies  to  all  employers with 15 or more employees.
Through  its  "ADApt  Program,"  Concentra assists employers with ADA compliance
issues  by proactively addressing ADA requirements relating to job descriptions,
pre-placement    physical    examinations,    analysis    and   compliance   and
confidentiality  of  applicant/employee information. ADApt helps employers adapt
their  hiring  and  termination  procedures, job descriptions and injury/illness
management programs in order to comply with ADA guidelines.

     Risk  Assessment  and Injury Prevention Programs. Concentra assists clients
in   reducing   workplace  injuries  and  illnesses  through  its  on-site  risk
assessment  and  injury  prevention programs. These programs include identifying
workplace  hazards, designing plant-specific safety programs and helping clients
comply  with federal and state occupational health regulations. The Company also
provides ongoing educational programs for its clients.

     Healthcare  services  collectively  represented  approximately 46%, 43% and
43%  of  Concentra's  total  revenues  for  the fiscal years ending December 31,
1996, 1997 and 1998, respectively.


SPECIALIZED COST CONTAINMENT SERVICES

     Concentra  provides  a  number  of specialized services focused directly on
helping  to  reduce  the  medical  and  indemnity costs associated with workers'
compensation  and  the  medical costs associated with group health claims. These
specialized  cost  containment  services  include first report of injury service
through  First  Notice,  utilization management (precertification and concurrent
review),  retrospective  bill  review  services, telephonic case management, PPO
network  access  through Focus, out-of-network bill review services through CPS,
IMEs and peer reviews.

     Concentra  is  able  to  offer  its  services on an unbundled basis or on a
bundled  basis  as a full-service managed care program, beginning with the first
report  of injury and including all specialized cost containment services needed
to  manage  aggressively  the  costs  associated  with  a  work-related  injury.
Concentra's  comprehensive  approach  to  managing  workers'  compensation costs
serves  the  needs of a broad range of clients, from local adjusters to national
accounts.  In  addition  to  providing specialized cost containment services for
work-related  injuries  and  illnesses, the Company also provides out-of-network
bill  review  services  to the group health market, cost containment services to
payors  of  automobile  accident  medical  claims and social security disability
advocacy services to payors of long term disability claims.

     Concentra  believes  that  the  demand  for  specialized  cost  containment
services  will  continue  to increase due to a number of factors, including: (i)
the  increasing payor awareness of the availability of these techniques for cost
containment  and  case  management;  (ii)  the  effectiveness  of  managed  care
techniques  at  reducing  costs  for  group  health  insurance  plans; (iii) the
verifiable  nature  of  the  savings  that  can  be  obtained  by application of
specialized  cost  containment  techniques  applicable to workers' compensation;
and  (iv)  the broad applicability of these techniques to all injured employees,
not just severely injured employees likely to be absent from work.

     First Report of Injury

     Through  First  Notice,  Concentra  provides a computerized first report of
injury/loss  reporting  service  utilizing two centralized national call centers
to  which  an employer or insurance company claims adjuster communicates reports
of  injuries or losses as soon as they occur. First Notice provides its services
primarily  to  the  auto  industry  for  first  notice  of loss reporting and to
workers'  compensation  carriers for first report of injuries reporting, as well
as  to  property  and  casualty  carriers  that  write  both  auto  and workers'
compensation  insurance. For injuries, each report is electronically transferred
or  mailed  to  the  state  agency, the employer and the insurance company. This
service  assists  in  the  timely preparation and distribution of state-mandated
injury  reports  and  also  provides  Concentra  and its customers with an early
intervention  tool  to  maximize  control  over  workers'  compensation and auto
claims.

     Utilization Management: Precertification and Concurrent Review

     Concentra's  precertification  and  concurrent  review services are used by
clients  to  ensure  that  certain  medical  procedures  are  precertified  by a
Concentra registered nurse and/or physician for medical necessity and


                                       7
<PAGE>

appropriateness   of  treatment  before  the  medical  procedure  is  performed.
Concentra's  determinations  represent only recommendations to the customer; the
ultimate  decision  to  approve  or disapprove the request is made by the claims
adjuster.  Precertification  calls  are  made  by  either  the  claimant  or the
provider  to one of Concentra's national utilization management reporting units.
After  a  treatment  plan has been precertified, a Concentra employee performs a
follow-up  call  (concurrent  review)  at  the end of an approved time period to
evaluate compliance and/or discuss alternative plans.

     Retrospective Bill Review

     Through  a  sophisticated  software  program, Concentra reviews and reduces
its  customers'  medical  bills (including hospital bills) to either the various
state-mandated  fee  schedules  for workers' compensation claims or a percentage
of  the  UCR  rates  that  exist  in non-fee schedule states. Additionally, this
automated  retrospective  bill  review service enables clients to access certain
PPO  pricing schedules that represent additional savings below the fee schedules
or  UCR  rates.  The  savings to Concentra's clients as a result of this service
can  be  significant.  Retrospective  bill  review  also  creates  an  important
historical  database  for  provider  practice patterns and managed care provider
compliance requirements.

     Telephonic Case Management

     This  service  provides  for  short-duration  (30  to  90  days) telephonic
management  of  workers'  compensation  claims.  The  telephonic case management
units  accept  first  reports  of injury, negotiate discounts with hospitals and
other  providers,  identify care alternatives and work with injured employees to
minimize  lost  time on the job. Each of the telephonic case management units is
overseen  by  nurses  who  are  experienced  in  medical  case  management.  The
telephonic  case  management  units  represent  an  important component of early
intervention  and  act  as a referral source of appropriate cases to Concentra's
field case management offices.

     Access to Preferred Provider Networks

     Through  Focus,  Concentra  provides  its clients with access to a national
PPO  network.  This  network  provides  injured  workers  with access to quality
medical  care  and pre-negotiated volume discounts, thereby offering Concentra's
clients  the  ability  to  influence,  or  in  certain  states  to direct, their
employees  into  the  PPO  network  as  a  means  of managing their work-related
claims.  In  addition  to  providing  a  vehicle  for  managing  the delivery of
appropriate  care  by  qualified  providers, the discounts associated with these
PPO  arrangements  generate  additional  savings  through the retrospective bill
review  program described above. Focus's national network includes approximately
219,000  individual  providers  and  2,900  hospitals covering 41 states and the
District of Columbia.

     Out-of-Network Bill Review

     Through   CPS,  Concentra  continues  to  expand  its  market  presence  in
retrospective  bill  review  services.  CPS is the market leader in this line of
business  in  the  group  health  arena  and  is expanding its services into the
workers'  compensation  market in states that have not established fee schedules
and  into  the auto insurance market when appropriate. CPS utilizes a variety of
techniques  to  reduce  expenses  by  repricing  hospital  and other facilities'
bills.  Utilizing  its  comprehensive  portfolio  of products, CPS reduces costs
ordinarily  payable  on  medical bills submitted by healthcare providers and the
administrative  expense  associated  with reviewing and analyzing medical bills.
These  services  include  professional  fee negotiation, line-item analysis, and
other  specialized  audit  and  bill  review  processes,  as well as access to a
nationwide PPO network.

     CPS  provides  out-of-network  bill review services to healthcare payors in
most  risk  categories:  indemnity,  PPO, health maintenance organization, ERISA
self-insured  plans, Taft-Hartley Plans, reinsurance carriers and intermediaries
such  as  administrative  services  organizations  and  TPAs. CPS is the largest
provider   of   these  specific  services  in  the  managed  care  industry  and
specializes  in out-of area and non-network cost management services that reduce
exposure  to over-utilization, upcoding, cost shifting, various forms of revenue
enhancement tactics and inflated retail charge practices.

     The  current  service  delivery model employed at CPS is designed to review
most  provider  bill  types,  employ  four  distinct  transmission modalities to
facilitate  the  exchange of bill data, utilize various database technologies as
part  of  the  bill  screening  process,  score  each bill referred based on the
individual  service  requirements  of  each client group, and route each bill to
the  most  appropriate  bill review service included in a consolidated portfolio
of  cost  containment  services. CPS has packaged this process and markets it as
the Healthcare Bill Management


                                       8
<PAGE>
System  ("HBMS").  The  system  affords  large payor clients scale and capacity,
consolidated  and uniform cost management capability, rigorous due diligence and
superior performance.

     INDEPENDENT MEDICAL EXAMS

     IMEs  are  provided to assess the extent and nature of an employee's injury
or   illness.   Concentra  provides  its  clients  with  access  to  independent
physicians  who perform the IMEs from 14 of the Company's service locations and,
upon completion, prepare reports describing their findings.

     Peer Reviews


     Peer  review  services are provided by a physician, therapist, chiropractor
or  other  provider  who  reviews  medical  files to confirm that the care being
provided  appears  to  be  necessary and appropriate. The reviewer does not meet
with the patient, but merely reviews the file as presented.


     AUTOMOBILE INSURANCE MANAGED CARE


     Concentra  offers  an integrated service to the automobile insurance market
that,  where  permitted  by  law,  includes the direction of automobile accident
victims  into  networks  of  medical  providers.  The Company currently offers a
fully-integrated  service  in  only 2 states and offers voluntary network access
in  several other states. The Company's program has produced significant savings
for  its insurance company clients. Services offered to the automobile insurance
market  include  precertification,  telephonic  case  management,  direction  of
injured  persons  into  specialized  PPO networks, medical bill review and field
case management.


     Specialized    cost    containment    services   collectively   represented
approximately  22%,  29%  and  30%  of Concentra's total revenues for the fiscal
years ending December 31, 1996, 1997 and 1998, respectively.


FIELD CASE MANAGEMENT SERVICES

     Concentra   provides   field  case  management  services  to  the  workers'
compensation  insurance  industry  through  nurse  case  managers working at the
local  level  on  a  one-on-one  basis  with injured employees and their various
healthcare   professionals,  employers  and  insurance  company  adjusters.  The
Company's  services  are  designed  to  assist in maximizing medical improvement
and,  where  appropriate,  to expedite employees' return to work through medical
management and vocational rehabilitation services.

     Concentra's   field   case   management   services  consist  of  one-on-one
management  of  a  work-related  injury  by over 1,100 field case managers in 89
offices  in  49  states,  the  District  of  Columbia  and  Canada. This service
typically  involves a case with a significant potential or actual amount of lost
work  time  or  a  catastrophic  injury  that  requires  detailed management and
therefore  is  referred  out  by  the  local adjuster to the Concentra marketer.
Concentra  field  case  managers specialize in expediting the injured employee's
return  to  work  through both medical management and vocational rehabilitation.
Medical  management services provided by Concentra's field case managers include
coordinating  the  efforts  of  all  the  healthcare  professionals involved and
increasing   the  effectiveness  of  the  care  being  provided  by  encouraging
compliance  and  active  participation  on  the  part  of  the  injured  worker.
Vocational   rehabilitation   services   include  job  analysis,  work  capacity
assessments,  labor  market  assessments, job placement assistance and return to
work coordination.

     The  Company  believes  that  the  following  factors  will  contribute  to
continued   growth   of  its  field  case  management  services:  (i)  increased
acceptance  of  field  case management techniques due to greater exposure to the
workers'  compensation  managed  care  market;  (ii)  earlier  identification of
individuals  in  need  of  field  case  management  services  due  to  increased
utilization   of   the   Company's   specialized   cost   containment  services,
particularly  early  intervention  services; (iii) increased market share at the
expense  of  smaller,  undercapitalized  competitors;  and  (iv)  the ability to
access national accounts for use of case management services.


     Field  case  management services represented approximately 32%, 28% and 27%
of  Concentra's  total  revenues for the years ended December 31, 1996, 1997 and
1998, respectively.


     Financial  information  regarding  the  Company's  segments is set forth in
Note 13 of Notes to Consolidated Financial Statements, beginning on Page F-21.

E. CUSTOMERS

     Concentra's  occupational  healthcare  centers  currently  serve  more than
80,000  employers, ranging from large corporations to businesses with only a few
employees. The Company serves more than 2,000 specialized

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<PAGE>

cost  containment  and  field case management customers across the United States
and  Canada,  including  most of the major underwriters of workers' compensation
insurance, TPAs and self-insured employers.

     Concentra  is  compensated  primarily on a fee-for-service or percentage of
savings  basis.  The  Company's  largest  customer  represented  less than 6% of
Concentra's  total  revenue  in  1998.  The Company has not entered into written
agreements  with  most  of  its  healthcare  services  customers.  Many  of  the
Company's  specialized  cost containment and field case management relationships
are  based  on  written  agreements. However, either the customer or the Company
can terminate most of these agreements on short notice.



F. SALES AND MARKETING
     Concentra  actively markets its services primarily to workers' compensation
insurance  companies,  TPAs,  employers  and  employer  groups. The Company also
markets  to  the  group  health,  automobile  insurance and disability insurance
markets.  The Company's marketing organization includes over 350 full-time sales
and marketing personnel.
     Concentra  markets  its  services  at  both  the  local  insurance  company
adjuster  and  employer  level. In addition, the Company markets its services at
the  national  and  regional  level  for  large  managed  care  accounts and for
self-insured  corporations  where  a  more  sophisticated  sales presentation is
required.  Concentra  has  a  dedicated  staff  of national accounts salespeople
responsible  for marketing and coordinating the Company's full range of services
to corporate offices.
     Concentra's  local  marketing  has been a critically important component of
the  Company's  strategy,  because of the decision-making authority that resides
at  the  local  level  and the relationship-driven nature of that portion of the
business.  However,  the  expansion  of  comprehensive managed care legislation,
continuing   receptiveness   to   workers'   compensation   change  and  a  more
comprehensive  product  offering  by Concentra, demand that the Company continue
to  focus  on  marketing to national headquarters offices of insurance companies
and  self-insured  companies.  As  part  of  its  coordinated  marketing effort,
Concentra   periodically   distributes  follow-up  questionnaires  to  patients,
insurers and employers to monitor satisfaction with the Company's services.


G. QUALITY ASSURANCE
     Concentra  routinely  uses  internal  audits  to  test  the  quality of its
delivery  of  services.  The  Company conducts audits of compliance with special
instructions,   completion  of  activities  in  a  timely  fashion,  quality  of
reporting,  identification  of  savings, accuracy of billing and professionalism
in  contacts  with  healthcare  providers.  The  Company  conducts  audits  on a
nationwide  basis  for  particular  customers  or  on  a  local  office basis by
selecting  random files for review. A detailed report is generated outlining the
audit  findings  and  providing  specific  recommendations  for service delivery
improvements.  When appropriate, the Company conducts follow-up audits to ensure
that recommendations from the initial audit have been implemented.


H. COMPETITION


HEALTHCARE SERVICES

     The  market to provide healthcare services within the workers' compensation
system  is  highly fragmented and competitive. Concentra's competitors typically
have  been  independent  physicians,  hospital  emergency  departments and other
urgent  care  providers.  The  Company  believes  that,  as  integrated networks
continue   to  be  developed,  its  competitors  will  increasingly  consist  of
specialized provider groups.

     Concentra  competes  effectively  because  of  its  specialization  in  the
occupational  healthcare  industry,  its  broad  knowledge  and  expertise,  the
effectiveness  of its services as measured by favorable outcomes, its ability to
offer  services  in  multiple  markets  and its information systems. The Company
believes  that  it  enjoys a unique competitive advantage by specializing in and
focusing  on  occupational  healthcare at the primary care provider level, which
is the entry point to the occupational healthcare delivery system.

     The  recruiting  of  physicians,  physical  therapists,  nurses  and  other
healthcare  providers  can  be  competitive.  However,  Concentra  continues  to
experience  greater  ease  in  recruiting  as the Company grows and becomes more
widely  known  by  healthcare  providers.  The  loss  of  services  provided  by
physicians,  physical  therapists,  nurses  and  other providers for an extended
period  of  time,  or  the  inability to attract such individuals, could have an
adverse effect on the Company's business.


                                       10
<PAGE>

SPECIALIZED COST CONTAINMENT AND FIELD CASE MANAGEMENT SERVICES

     The  managed  care  services  market  is fragmented, with a large number of
competitors.  Concentra  competes  with  numerous  companies, including national
managed  care providers, smaller independent providers, and insurance companies.
The  Company's primary competitors are companies that offer one or more workers'
compensation  managed  care  services  on  a  national  basis.  The Company also
competes  with  numerous  smaller  companies  that  generally  provide unbundled
services  on a local level where such companies often have a relationship with a
local  adjuster.  Several  large  workers' compensation insurance carriers offer
managed   care  services  for  their  insurance  customers  either  through  the
insurance  carrier's  own  personnel  or  by  outsourcing  various  services  to
providers   such   as   Concentra.  Concentra  believes  that  this  competitive
environment will continue into the foreseeable future.

     Concentra  competes  effectively  because  of its specialized knowledge and
expertise  in  the  workers'  compensation  managed  care services industry, the
effectiveness  of  its  services,  its  ability  to  offer  a  full continuum of
services  in  multiple  markets, its information systems and the prices at which
its offers its services.


I. INFORMATION SYSTEMS AND TECHNOLOGY

     Concentra  maintains  a  fundamental  commitment  to  the  development  and
implementation  of advanced information technology, with a considerable focus on
web-based  applications.  These  applications  further the Company's systems and
product  integration,  enhancing  the  delivery  of quality customer service and
increasing   customer   communication   by  augmenting  Concentra's  ability  to
demonstrate cost savings across the entire episode of care.

     Concentra  has  substantially  completed  the implementation of a wide area
network  ("WAN")  in  each market in which it provides healthcare services. When
the  implementation is complete, all occupational healthcare centers in a market
will  utilize a patient administration system (named "OccuSource") which runs on
a  client/server  architecture allowing each center to access and share a common
database  for  its  market.  The  database  contains employer protocols, patient
records  and  other  information regarding Concentra's operations in the market.
Creating  a  WAN  in  each  market  allows  the  centers  in the market to share
information  and  thereby  improve center and physician efficiencies and enhance
customer  service. Concentra is linking each market WAN into a nationwide WAN in
order  to  create  a  centralized  repository  of Company data to be used, among
other  things,  for  clinical  outcomes  analysis.  Concentra  believes that its
commitment  to  continued  development  of  its  healthcare  information  system
provides  a unique and sustainable competitive advantage within the occupational
healthcare industry.

     Concentra   has  developed  a  new  internet-based  first  notice  of  loss
reporting  system  for  all lines of insurance (named "FNSNet"). The application
extends  the  Company's  call  center  technology through the internet, enabling
users  to  report  first  notices  of  loss,  as well as providing the user with
immediate   access  to  customized  networks  and  routing  to  appropriate  and
qualified  healthcare  providers.  FNSNet  can be accessed through hyperlinks on
customers'  web  pages.  This application enhances both internal integration and
customer  communication  and creates an effective platform for Concentra's First
Notice Systems division to handle calls with greater speed and efficiency.

     Concentra's  newly-developed  Integrated  Case  Management  Software System
("ICMS")  facilitates  and  expedites the daily tasks of the Company's field and
telephonic  case  managers,  allowing  them  to  devote  more time to consistent
delivery  of  quality  service.  This  software  allows  immediate  exchange  of
information  among  Concentra's  offices, as well as among employees in the same
office. ICMS is integrated with the FNSNet web-based    product.    The    ICMS
application  enables  a  clear,  precise and immediate transmission of data from
First  Notice  into  the  ICMS  system.  This  pre-population of data eliminates
redundant  and duplicative data entry for nurse case managers, thus resulting in
greater  time efficiency and cost savings. The development and implementation of
ICMS  allow  for  shared  data in situations in which multiple case managers are
working  on  a  case.  The  new  ICMS  also  creates  better  customer access to
information and allows Concentra to produce specific, user-friendly  reports  to
demonstrate the value of the Company's services.

     Finally,    Concentra's    CPS   subsidiary   utilizes   its   proprietary,
technology-based HBMS system for its out-of-network   medical   claims   review
services.  Client bills are accessed and entered into HBMS in a variety of ways,
including  electronic bill identification within the client's claim adjudication
system  with  subsequent  EDI transfer to CPS, entry of appropriate bills into a
customized, CPS-supplied Data Access Point ("DAP") system,


                                       11
<PAGE>

on-site  bill entry by a CPS employee into the DAP system, and overnight mail or
facsimile  of  client bills to a CPS service center. These access strategies are
designed  to  increase  the number of appropriate bills that CPS receives, while
minimizing  the administrative cost to the client. Once a bill is electronically
or  manually entered into HBMS, the bill is evaluated against CPS's licensed and
proprietary  databases that are designed to identify instances of cost shifting,
improper  coding  and  utilization and pricing issues. Following analysis of the
bill,  the  bill  passes through CPS's client preference profile that is created
at  the  time  of  CPS's initial engagement with the client. HBMS then evaluates
the  compatibility  of  the  service with the greatest expected savings with the
service  requirements  of  the  client  and  electronically  sends  the bill for
processing to the appropriate CPS service department.


J. GOVERNMENT REGULATION


GENERAL

     As  a  provider  of  healthcare  management  and cost containment services,
Concentra  is  subject  to  extensive  and  increasing regulation by a number of
governmental  entities  at  the  federal, state and local levels. The Company is
also  subject  to  laws  and  regulations  relating  to business corporations in
general. Applicable laws and regulations are subject to frequent changes.

     Laws  and  regulations  affecting  Concentra's  operations  fall  into four
general  categories:  (i) workers' compensation and other laws that regulate the
provision  of  healthcare services or the provision of cost containment services
or  require licensing, certification or other approval of such services provided
by  the  Company;  (ii)  laws  regarding  the  provision  of healthcare services
generally;  (iii)  laws  regulating  the  operation  of  managed  care  provider
networks; and (iv) other laws and regulations of general applicability.


WORKERS' COMPENSATION LAWS AND REGULATIONS

     In   performing   workers'   compensation   healthcare  services  and  cost
containment  services,  Concentra  must  comply with state workers' compensation
laws.   Workers'   compensation  laws  require  employers  to  assume  financial
responsibility  for  medical  costs,  a  portion of lost wages and related legal
costs  of  work-related  illnesses and injuries. These laws establish the rights
of  workers  to  receive  benefits  and  to  appeal  benefit  denials.  Workers'
compensation   laws   generally   prohibit   charging   medical  co-payments  or
deductibles  to  employees.  In  addition,  certain  states  restrict employers'
rights  to  select  healthcare  providers  and  establish maximum fee levels for
treatment of injured workers.

     Many  states  are  considering  or have enacted legislation reforming their
workers'  compensation  laws.  These  reforms  generally  give employers greater
control  over  who will provide healthcare services to their employees and where
those  services will be provided and attempt to contain medical costs associated
with  workers'  compensation  claims.  At  present,  40  of  the states in which
Concentra does business have implemented treatment-specific  fee  schedules that
set  maximum  reimbursement  levels  for  healthcare  services.  The District of
Columbia  and  10  states provide for a "reasonableness" review of medical costs
paid  or  reimbursed  by  workers'  compensation.  When  not  governed  by a fee
schedule,  Concentra  adjusts its charges to the usual, customary and reasonable
levels accepted by the payor.

     Many  states,  including  a  number  of  those in which Concentra transacts
business,  have  licensing  and  other regulatory requirements that apply to the
Company's  specialized  cost  containment  and  field  case management business.
Approximately  half  of  the  states have enacted laws that require licensing of
businesses  that  provide  medical review services, such as Concentra's. Some of
these  laws  apply  to  medical review of care covered by workers' compensation.
These   laws   typically  establish  minimum  standards  for  qualifications  of
personnel,  confidentiality,  internal  quality  control  and dispute resolution
procedures.  In  addition,  new  laws  regulating  the operation of managed care
provider  networks have been adopted by a number of states. These laws may apply
to  managed  care  provider  networks  having  contracts  with the Company or to
provider  networks  that  the  Company  has  organized  and  may organize in the
future.  To  the  extent that Concentra is governed by these regulations, it may
be  subject  to  additional  licensing  requirements,  financial  oversight  and
procedural standards for beneficiaries and providers.


CORPORATE PRACTICE OF MEDICINE AND OTHER LAWS

     Most  states  limit  the  practice  of  medicine to licensed individuals or
professional  organizations  comprised of licensed individuals. Many states also
limit the scope of business relationships between business entities such as


                                       12
<PAGE>

the   Company   and   licensed   professionals  and  professional  corporations,
particularly   with   respect   to   fee-splitting   between   physicians   and
non-physicians.  Laws  and  regulations  relating  to  the practice of medicine,
fee-splitting  and  similar  issues  vary  widely from state to state, are often
vague,  and  are seldom interpreted by courts or regulatory agencies in a manner
that  provides guidance with respect to business operations such as Concentra's.
The  Company  attempts to structure all of its healthcare services operations to
comply  with applicable state statutes regarding medical practice, fee-splitting
and  similar  issues.  However,  there  can  be  no assurance (i) that courts or
 .governmental  officials  with  the power to interpret or enforce these laws and
regulations  will  not  assert  that  Concentra is in violation of such laws and
regulations  or  (ii)  that  future interpretations of such laws and regulations
will  not  require  Concentra  to  modify  the structure and organization of its
business.


FRAUD AND ABUSE LAWS

     A  federal  law (the "Anti-Kickback Statute") prohibits the offer, payment,
solicitation  or  receipt of any form of remuneration to induce or in return for
the  referral  of  Medicare  or  other  governmental  health program patients or
patient  care  opportunities,  or  in return for the purchase, lease or order of
items  or  services  that  are  covered by Medicare or other governmental health
programs.  Violations of the statute can result in the imposition of substantial
civil  and  criminal  penalties.  In  addition,  as  of January 1, 1995, certain
anti-referral  provisions  (the  "Stark Amendments") prohibit a physician with a
"financial  interest"  in  an entity from referring a patient to that entity for
the  provision  of  any  of  11 "designated medical services" (some of which are
provided by Physician Groups affiliated with the Company).

     At  least  six  of  the states in which the Company conducts its healthcare
services   business   (Florida,  California,  Texas,  Arizona,  New  Jersey  and
Maryland) have enacted statutes similar in scope and purpose to the        Anti-
Kickback  Statute,  with  applicability  to services other than those covered by
Medicare  or  other  governmental health programs. In addition, most states have
statutes,  regulations  or  professional  codes  that  restrict a physician from
accepting  various  kinds  of  remuneration  in  exchange  for making referrals.
Several  states  are  considering legislation that would prohibit referrals by a
physician  to  an  entity  in  which  the  physician  has  a specified financial
interest.  Even  in  states  which  have  not enacted such statutes, the Company
believes  that  regulatory  authorities  and  state  courts  interpreting  these
statutes  may  regard  federal law under the Anti-Kickback Statute and the Stark
Amendments as persuasive.

     Concentra  believes  that its arrangements with the Physician Groups comply
with  the Anti-Kickback Statute, the Stark Amendments and applicable state laws.
However,   all   of   the   foregoing  laws  are  subject  to  modification  and
interpretation,  have not often been interpreted by appropriate authorities in a
manner  applicable  to  the  Company's  business and are enforced by authorities
vested  with  broad  discretion. Concentra has attempted to structure all of its
operations   so   that   they  comply  with  all  applicable  anti-kickback  and
anti-referral  prohibitions. Concentra also continually monitors developments in
this  area.  If  these  laws are interpreted in a manner contrary to Concentra's
interpretation  or  are  reinterpreted  or  amended,  or  if  new legislation is
enacted  with  respect  to  healthcare  fraud and abuse, illegal remuneration or
similar  issues, the Company will seek to restructure any affected operations to
maintain  compliance  with  applicable  law. No assurance can be given that such
restructuring  will  be  possible,  or,  if  possible, will not adversely affect
Concentra's business or results of operations.


SPECIALIZED COST CONTAINMENT SERVICES

     Many  of  the  Company's  specialized  cost  containment  services  include
prospective  or  concurrent  review  of  requests  for  medical care or therapy.
Approximately  half  of  the  states  have  enacted laws that require licensure,
certification  or  other  approval  of  businesses,  such  as  Concentra's, that
provide  medical  review services. Some of these laws apply to medical review of
care  covered  by  workers' compensation. These laws typically establish minimum
standards  for  qualifications  of  personnel, confidentiality, internal quality
control  and dispute resolution procedures. These regulatory programs may result
in  increased costs of operation for Concentra, which may have an adverse impact
upon  the  Company's  ability  to  compete with other available alternatives for
healthcare cost control.


USE OF PROVIDER NETWORKS

     Concentra's  ability  to  provide  comprehensive  healthcare management and
cost  containment  services  depends  in part on its ability to contract with or
create  networks  of  healthcare providers which share the Company's objectives.
For  some of its clients, Concentra offers injured workers access to networks of
providers who


                                       13
<PAGE>

are  selected  by  the  Company for quality of care and pricing. Laws regulating
the  operation  of  managed care provider networks have been adopted by a number
of  states.  These  laws  may  apply  to  managed  care provider networks having
contracts  with  Concentra or to provider networks that the Company may organize
or  acquire. To the extent Concentra is governed by these regulations, it may be
subject   to   additional   licensing   requirements,  financial  oversight  and
procedural standards for beneficiaries and providers.


ERISA

     The  provision  of  goods  and services to certain types of employee health
benefit  plans is subject to the Employee Retirement Income Security Act of 1974
("ERISA").  ERISA  is  a complex set of laws and regulations subject to periodic
interpretation  by  the  Internal  Revenue  Service  and the Department of Labor
("DOL").   ERISA   regulates   certain   aspects  of  the  relationship  between
Concentra's  managed care contracts and employers that maintain employee benefit
plans  subject  to ERISA. DOL is engaged in ongoing ERISA enforcement activities
that  may  result  in additional constraints on how ERISA-governed benefit plans
conduct  their  activities.  There  can be no assurance that future revisions to
ERISA  or  judicial  or  regulatory  interpretations  of  ERISA  will not have a
material adverse effect on Concentra's business or results of operations.


AUTOMOBILE INSURANCE REGULATION

     The   automobile   insurance   industry,  like  the  workers'  compensation
industry,  is  regulated on a state-by-state basis. Although regulatory approval
is  not required for the Company to offer most of its services to the automobile
insurance   market   (including  voluntary  network  access),  state  regulatory
approval  is required in order to offer automobile insurers products that permit
them  to  direct  claimants  into  a network of medical providers. To date, only
Colorado  and  Hawaii  have  permitted  such  direction of care, and the Company
offers  this  managed  care  service  to automobile insurers in those states. No
assurance  can be given that other states will permit such direction of care for
automobile  accident  victims  or,  if  such  a  program  is permitted, that the
Company  will  be  able  to  obtain  regulatory approval, if any is required, to
provide such services.


ENVIRONMENTAL

     Concentra  is  subject  to  various  federal,  state and local statutes and
ordinances  regulating  the  disposal of infectious waste, including medical and
other  waste  generated  at the Company's occupational healthcare centers. If an
environmental  regulatory  agency  finds  any  of the Company's centers to be in
violation  of  waste  laws,  penalties  and fines may be imposed for each day of
violation,  and  the  affected  facility  could  be  forced to cease operations.
Concentra  believes  that  its  waste  handling  and  discharge practices are in
material compliance with applicable law.


K. SEASONALITY
     Concentra's  healthcare  services  business is seasonal in nature. Although
Concentra's  expansion  of services and continuing growth may obscure the effect
of  seasonality  in  the  Company's  financial  results, the Company's first and
fourth  quarters  generally  reflect lower net healthcare services revenues on a
same market basis when compared to the second and third quarters.
     Plant  closings,  vacations  and  holidays  during  the  first  and  fourth
quarters   result   in  fewer  patient  visits  at  the  Company's  occupational
healthcare  centers,  primarily  because  of  fewer  occupational  injuries  and
illnesses  during  those  periods.  In  addition, employers generally hire fewer
employees   during   the   fourth   quarter,  thereby  reducing  the  number  of
pre-employment  physical  examinations  and  drug and alcohol tests conducted at
the Company's centers during that quarter.


L. INSURANCE

     The   Company   and  the  Physician  Groups  maintain  medical  malpractice
insurance  in  the amount of $1,000,000 per incident/$3,000,000 annual aggregate
per   provider,   subject  to  an  annual  aggregate  limit  in  the  amount  of
$20,000,000.  Pursuant  to the management agreements between the Company and the
Physician  Groups, each Physician Group has agreed to indemnify the Company from
certain  losses,  including medical malpractice. The Company maintains an errors
and  omissions  liability insurance policy covering all aspects of the Company's
managed   care   services.   This   policy   has   limits   of   $1,000,000  per
claim/$3,000,000 annual aggregate.



                                       14
<PAGE>

     In  addition, Concentra maintains $3,000,000 of general liability insurance
and  an  umbrella  policy  that  provides  excess insurance coverage for medical
malpractice  and  for  errors  and  omissions  in  the amount of $20,000,000 per
occurrence and $20,000,000 in the aggregate.

M. Employees
     Concentra  had  approximately 7,800 employees at December 31, 1998. None of
Concentra's  employees  is  subject  to  a  collective bargaining agreement. The
Company  has  experienced  no  work  stoppages  and  believes  that its employee
relations   are   good.   All  physicians,  physician  assistants  and  physical
therapists   providing  professional  services  in  the  Company's  occupational
healthcare  centers  are  either  employed  by  or  contract  with the Physician
Groups.

N. RISK FACTORS

DEPENDENCE ON FUTURE ACQUISITIONS AND JOINT VENTURES; ACQUISITION RISKS

     The  growth  of  Concentra's healthcare services in new and current markets
is  dependent  upon  an  aggressive  acquisition and joint venture strategy. The
success  of  this  acquisition  strategy will be determined by numerous factors,
including  the  Company's  ability  to identify suitable acquisition candidates,
competition  for such acquisitions, purchase price, the financial performance of
the  acquired  businesses  after  acquisition  and the ability of the Company to
integrate  effectively the operations of acquired businesses. Although Concentra
is  currently  in  various  stages of negotiations to complete acquisitions from
several  prospective  selling  groups, there can be no assurance that additional
suitable  acquisition candidates can be found, that acquisitions can be financed
or  consummated  on  favorable terms or that acquisitions, if completed, will be
successful.  In  addition, there can be no assurance that Concentra will be able
to  integrate  successfully  the  operations of acquired businesses or institute
Company-wide  systems  and  procedures  to  operate  successfully  the  combined
enterprises.  A  strategy  of  growth  by  acquisition also involves the risk of
assuming   unknown  or  contingent  liabilities  of  acquired  businesses.  Such
liabilities could be material, individually or in the aggregate.

     Any  failure  by Concentra to identify suitable candidates for acquisition,
to  integrate  or  operate acquired businesses effectively or to insulate itself
from  unwanted  liabilities of acquired businesses could have a material adverse
effect   on   the   Company's  business,  financial  condition  and  results  of
operations.  In  addition,  the  Emerging  Issues  Task  Force  of the Financial
Accounting  Standards  Board is currently evaluating certain matters relating to
the  accounting  for  business  combinations. Concentra is unable to predict the
impact,  if  any,  that  this  review  may  have  on  the  Company's acquisition
strategy.

     Concentra  has  also entered into, and is in various stages of negotiations
to  form,  joint  ventures to own and operate occupational healthcare centers in
selected  markets  and  to enter into management agreements in selected markets.
The  Company's  strategy  is  to  form  these joint ventures or enter into these
management   agreements   with   competitively-positioned   hospital  management
companies,  hospital  systems  and  other  healthcare providers. There can be no
assurances  that Concentra will continue to utilize joint ventures or management
agreements  as part of its growth strategy, that further suitable joint ventures
or  management  agreements  can  be entered into or that such existing or future
joint ventures or management relationships will be successful.

EFFECT OF AMORTIZATION ON RESULTS OF OPERATIONS


     Concentra  has  had,  and  will  continue  to have, significant charges for
depreciation  and  amortization expense related to the fixed assets and goodwill
and  other  intangibles  acquired,  or  to  be  acquired,  in  its acquisitions.
Consequently,  the  Company expects that such depreciation and amortization will
continue   to  have  an  impact  on  its  results  of  operations.  The  Company
periodically  reviews  whether  changes  have  occurred,  either specific to the
business  or  generally  in  the  industry,  which might require revision of the
remaining  estimated  useful  life  of  the assigned goodwill or render all or a
portion   of   the   goodwill  non-recoverable.  In  accordance  with  Financial
Accounting  Standards  No.  121,  "Accounting  for  the Impairment of Long-Lived
Assets  and  Long-Lived Assets to be Disposed of," impairments are determined by
comparing  undiscounted  estimated  future  cash  flows to the carrying value of
long-lived  assets.  At  December 31, 1998, intangible assets were approximately
$278.0  million  compared  to  total  assets of $656.8 million and stockholders'
equity of $239.9 million.


MANAGEMENT OF GROWTH

     Concentra  has  experienced  rapid  growth.  Continued growth could place a
significant  strain on the Company's management and other resources. The Company
anticipates that continued growth, if any, will require it to


                                       15
<PAGE>

continue  to  recruit,  hire,  train  and retain a substantial number of new and
highly-skilled   administrative,  information  technology,  finance,  sales  and
marketing  and support personnel. Concentra's ability to compete effectively and
to  manage  future  growth,  if  any,  will depend on its ability to continue to
implement  and improve operational, financial and management information systems
on  a  timely  basis  and  to expand, train, motivate and manage its work force.
Should  Concentra continue to experience rapid growth, there can be no assurance
that  the Company's personnel, systems, procedures and controls will be adequate
to   support  the  Company's  operations  or  that  management  will  anticipate
adequately  all  demands  that  growth will place on the Company. If Concentra's
management  is unable to manage growth effectively, the quality of the Company's
products  and  its  business, operating results and financial condition could be
materially and adversely affected.


COMPETITION

     The  market to provide healthcare services within the workers' compensation
system  is  highly  fragmented  and competitive. Concentra's primary competitors
have  typically  been independent physicians, hospital emergency departments and
other  urgent  care providers. The Company believes that, as integrated networks
continue  to be developed, its healthcare services competitors will increasingly
consist of specialized provider groups.

     Concentra  faces  managed  care  services competition from national managed
care  providers,  smaller  independent  providers,  and insurance companies. The
Company  believes  that,  as managed care techniques continue to gain acceptance
in  the  workers'  compensation  marketplace,  the  Company's  competitors  will
increasingly  consist  of  nationally focused workers' compensation managed care
service  companies,  insurance  companies,  and  other  significant providers of
managed  care  products.  Legislative reforms in some states permit employers to
designate  health  plans  such as PPOs to cover workers' compensation claimants.
Because  many health plans have the ability to manage medical costs for workers'
compensation  claimants,  such  legislation  may  intensify  competition  in the
markets served by the Company.

     In  the  face of such competition, there can be no assurance that Concentra
will  continue  to  maintain  its existing performance or be successful with any
new products or in any new geographic markets it may enter.


UNCERTAINTIES REGARDING HEALTHCARE REFORM

     There  have  been  numerous initiatives at the federal and state levels for
comprehensive  reforms  affecting the payment for and availability of healthcare
services.  Concentra  believes  that  such  initiatives  will  continue  in  the
foreseeable  future. Aspects of certain of these reforms as proposed in the past
could, if adopted, adversely affect the Company.


RISKS  INHERENT  IN PROVISION OF MEDICAL SERVICES; POSSIBLE LITIGATION AND LEGAL
   LIABILITY

     The  Physician  Groups and certain employees of the Company are involved in
the  delivery  of  healthcare services to the public and, therefore, are exposed
to   the  risk  of  medical  malpractice  claims.  Claims  of  this  nature,  if
successful,  could  result  in substantial damage awards against the Company and
the  Physician  Groups  that could exceed the limits of any applicable insurance
coverage.  Concentra  is  indemnified  under  its management agreements with the
Physician   Groups  from  certain  losses,  including  medical  malpractice  and
maintains  medical malpractice insurance. However, successful malpractice claims
asserted  against  the  Physician  Groups  or  the Company could have a material
adverse effect on the Company's financial condition and profitability.

     Through   its  specialized  cost  containment  and  field  case  management
services,  Concentra  makes  recommendations  concerning  the appropriateness of
providers'  proposed  medical  treatment of patients throughout the country, and
as  a  result  the  Company  could be subject to claims arising from any adverse
medical  consequences.  The Company does not grant or deny claims for payment of
benefits,  and  the  Company does not believe that it engages in the practice of
medicine   or  the  delivery  of  medical  services  in  the  provision  of  its
specialized  cost containment and field case management services. However, there
can  be  no assurance that Concentra will not be subject to claims or litigation
related  to the grant or denial of claims for payment of benefits or allegations
that  the Company engages in the practice of medicine or the delivery of medical
services  in  this  context.  In  addition,  there  can be no assurance that the
Company  will  not  be subject to other litigation that may adversely affect the
Company's  business  or  results  of  operations. Concentra maintains errors and
omissions  insurance  and  such  other lines of coverage as the Company believes
are reasonable in light of the Company's experience to date. There


                                       16
<PAGE>

can  be  no  assurance,  however,  that  such  insurance  will  be sufficient or
available  at  reasonable  cost  to protect Concentra from liability which might
adversely affect the Company's business or results of operations.


CORPORATE PRACTICE OF MEDICINE AND OTHER LAWS AND REGULATIONS


     Most  states  limit  the  practice  of  medicine to licensed individuals or
professional  organizations  comprised of licensed individuals. Many states also
limit  the scope of business relationships between business entities such as the
Company  and  licensed professionals and professional corporations, particularly
with  respect  to  fee-splitting between physicians and non-physicians. Laws and
regulations  relating  to  the  practice  of medicine, fee-splitting and similar
issues  vary  widely  from  state  to  state,  are  often  vague, and are seldom
interpreted  by courts or regulatory agencies in a manner that provides guidance
with  respect  to  business operations such as Concentra's. The Company attempts
to   structure  all  of  its  healthcare  services  operations  to  comply  with
applicable  state statutes regarding medical practice, fee-splitting and similar
issues.  However,  there  can  be  no  assurance (i) that courts or governmental
officials  with  the  power  to  interpret or enforce these laws and regulations
will  not  assert that Concentra is in violation of such laws and regulations or
(ii)  that  future interpretations of such laws and regulations will not require
Concentra to modify the structure and organization of its business.


     Many  states,  including  a  number of those in which the Company transacts
business,  have  licensing  and  other regulatory requirements that apply to the
Company's  specialized  cost  containment  and  field  case management business.
Approximately  half  of  the  states have enacted laws that require licensing of
businesses  that  provide  medical review services, such as Concentra's. Some of
these  laws  apply  to  medical review of care covered by workers' compensation.
These   laws   typically  establish  minimum  standards  for  qualifications  of
personnel,  confidentiality,  internal  quality  control  and dispute resolution
procedures.   These  regulatory  programs  may  result  in  increased  costs  of
operation  for  the Company, which may have an adverse impact upon the Company's
ability  to  compete  with  other  available  alternatives  for  healthcare cost
control.  In  addition,  new  laws  regulating  the  operation  of  managed care
provider  networks have been adopted by a number of states. These laws may apply
to  managed  care  provider  networks  having  contracts  with the Company or to
provider  networks  that  the  Company  has  organized  and  may organize in the
future.  To  the  extent that Concentra is governed by these regulations, it may
be  subject  to  additional  licensing  requirements,  financial  oversight  and
procedural standards for beneficiaries and providers.


     Regulation   in   the   healthcare  and  workers'  compensation  fields  is
constantly  evolving.  Concentra is unable to predict what additional government
regulations,  if  any,  affecting its business may be promulgated in the future.
The  Company's  business  may  be  adversely  affected by failure to comply with
existing  laws  and  regulations,  failure  to  obtain  necessary  licenses  and
government  approvals  or  failure  to  adapt  to  new  or  modified  regulatory
requirements.


FRAUD AND ABUSE AND ILLEGAL REMUNERATION LAWS


     The  Anti-Kickback  Statute  prohibits  the offer, payment, solicitation or
receipt  of  any form of remuneration to induce or in return for the referral of
Medicare   or  other  governmental  health  program  patients  or  patient  care
opportunities,  or  in  return  for  the  purchase,  lease  or order of items or
services  that  are  covered  by Medicare or other governmental health programs.
Violations  of the statute can result in the imposition of substantial civil and
criminal  penalties. In addition, the Stark Amendments prohibit a physician with
a  "financial interest" in an entity from referring a patient to that entity for
the  provision  of any of eleven "designated health services" (some of which are
provided by Physician Groups affiliated with Concentra).


     At  least  six  of  the states in which the Company conducts its healthcare
services   business   (Florida,  California,  Texas,  Arizona,  New  Jersey  and
Maryland) have enacted statutes similar in scope and purpose to the        Anti-
Kickback  Statute,  with  applicability  to services other than those covered by
Medicare  or  other  governmental health programs. In addition, most states have
statutes,  regulations  or  professional  codes  that  restrict a physician from
accepting  various  kinds  of  remuneration  in  exchange  for making referrals.
Several  states  are  considering legislation that would prohibit referrals by a
physician  to  an  entity  in  which  the  physician  has  a specified financial
interest.  Even  in  states  which  have  not enacted such statutes, the Company
believes  that  regulatory  authorities  and  state  courts  interpreting  these
statutes  may  regard  federal law under the Anti-Kickback Statute and the Stark
Amendments as persuasive.


                                       17
<PAGE>

     Concentra  believes  that its arrangements with the Physician Groups comply
with  the Anti-Kickback Statute, the Stark Amendments and applicable state laws.
However,   all   of   the   foregoing  laws  are  subject  to  modification  and
interpretation,  have not often been interpreted by appropriate authorities in a
manner  applicable  to  the  Company's  business and are enforced by authorities
vested  with  broad  discretion. Concentra has attempted to structure all of its
operations   so   that   they  comply  with  all  applicable  anti-kickback  and
anti-referral  prohibitions. Concentra also continually monitors developments in
this  area.  If  these  laws are interpreted in a manner contrary to Concentra's
interpretation  or  are  reinterpreted  or  amended,  or  if  new legislation is
enacted  with  respect  to  healthcare  fraud and abuse, illegal remuneration or
similar  issues, the Company will seek to restructure any affected operations to
maintain  compliance  with  applicable  law. No assurance can be given that such
restructuring  will  be  possible,  or,  if  possible, will not adversely affect
Concentra's business or results of operations.


RELIANCE ON DATA PROCESSING AND LICENSED SOFTWARE


     Certain  aspects  of Concentra's business are dependent upon its ability to
store,  retrieve,  process  and manage data and to maintain and upgrade its data
processing  capabilities.  Interruption  of data processing capabilities for any
extended  length  of  time,  loss  of  stored  data, programming errors or other
computer  problems  could  have  a  material  adverse  effect  on  the Company's
business and results of operations.


     Certain  of  the  software  Concentra  uses  within its medical bill review
operation  is licensed from an independent third-party software company pursuant
to  a  non-exclusive  license  that  may  be terminated by either party upon six
months   notice.  Although  the  Company  has  historically  maintained  a  good
relationship  with  the  licensor,  there can be no assurance that this software
license  will  not  be  terminated or that the licensor will be able to continue
the  license  on  its  existing  terms.  The Company is currently negotiating an
extension   of   this   software  license.  Although  management  believes  that
alternative   software   would   be  available  if  the  existing  license  were
terminated,  such  termination  could  be  disruptive  and could have a material
adverse effect on Concentra's business and results of operations.


INFORMATION SYSTEM UPGRADES AND YEAR 2000 COMPLIANCE


     The  Year  2000  concern,  which  is common to most companies, involves the
inability   of  information  and  non-information  systems,  primarily  computer
software programs, to properly recognize and process date-sensitive  information
as   the   year   2000   approaches.   System   database   modifications  and/or
implementation  modifications  will  be  required to enable such information and
non-information  systems  to  distinguish  between  20th and 21st century dates.
Concentra  has  completed  a  number  of  acquisitions  in recent years, and the
information  systems  of  some  of  the  acquired businesses have not been fully
integrated with the Company's information systems.


     Concentra  has  formed  a Year 2000 Program Office to provide a centralized
management  function  for  the  entire  Company that will assist in identifying,
addressing  and  monitoring  the  Company's  Year  2000 readiness and compliance
programs.  The  Year  2000  Program  Office has organized teams in each business
unit  of  the  Company  to  research  Year  2000 compliance status and implement
appropriate  solutions.  Concentra's  Year  2000  Program includes five phases -
awareness,  assessment,  remediation,  testing and implementation. The awareness
and  assessment  phases  are  substantially  complete  with the exception of the
assessment  phase  of  the  Company's  information systems infrastructure (i.e.,
desktops and other hardware) Year 2000 compliance.


     The  Company's  Year  2000  Program Office engaged an outside consultant to
assist  in  an  inventory  and  assessment  of  Year 2000 affected areas, with a
primary  focus  on  information technology systems, third party software and key
suppliers  and  selected  customers. This inventory and assessment was completed
in  the  fourth  quarter of 1998. The Company's Year 2000 Program Office engaged
an  outside  consultant  in the first quarter of 1999 to assist in an inventory,
and  assessment  and  remediation  efforts  of the Company's information systems
infrastructure  Year  2000  compliance.  The  Company  completed  in  the fourth
quarter  of  1998  an  internal  inventory  and  assessment  of  non-information
technology  systems  (e.g.,  embedded  systems  contained in medical equipment).
Remediation  or replacement of noncompliant Year 2000 medical equipment began in
the  first  quarter of 1999 and Concentra expects this effort to be completed by
the third quarter of 1999.


                                       18
<PAGE>

     The  Year  2000  Program  Office  has established a protocol for soliciting
Year  2000  compliance  information  from third parties. Concentra sent requests
for  compliance information from all key suppliers and selected customers in the
fourth  quarter  of  1998  and  first  quarter of 1999. The Company continues to
gather  Year  2000  compliance  information  from  third parties and anticipates
receiving  the  majority  of responses by the end of the second quarter of 1999.
To  the  extent  responses  have not been received, the Year 2000 Program Office
has  ranked the third parties by level of importance to the Company's operations
and  is  following  up  with  phone surveys, additional mailings and research of
public  information  issued  by the third party (i.e., internet research). These
responses  should  indicate the extent to which Concentra is vulnerable to those
third parties' failure to remediate their own Year 2000 issues.


     The  Company's  identified  Year  2000  projects  overlap  with its ongoing
investments  in  information  technology. As such, there are presently Year 2000
projects  at  the  assessment,  remediation,  testing and implementation phases.
Concentra  believes  that  it  has identified most "mission critical" issues and
has  developed  or is in the process of modifying appropriate action plans which
may  include  software  upgrades,  replacement  of  noncompliant  components  or
referral  of  problems  related to third party-provided software to the original
supplier.  The  Company  has  prepared  its plans to have all "mission critical"
projects  Year  2000  compliant  by the end of the fourth quarter of 1999. While
some  non-critical  systems  may not be addressed until after December 1999, the
Company  believes  such  systems  will not disrupt the Company's operations in a
material  manner.  Any  additional  issues  that may arise will be classified as
either  "mission critical" or non-critical, and appropriate action plans will be
developed  and  implemented.  Concentra expects to have formulated any necessary
contingency plans by the third quarter of 1999.


     Concentra  currently estimates that the total cost of implementing its Year
2000  Program  will  be  between  $5,000,000  and  $10,000,000. This preliminary
estimate  is  based  upon presently available information and will be updated as
the  Company  finalizes its assessments and continues through implementation. In
particular,  the  estimate may also need to be increased as the Company receives
feedback  from  key  suppliers and selected customers and formulates contingency
plans,  if  required.  It  is  expected  these  costs  will not be significantly
different   from   Concentra's   current   planned  investment  for  information
technology,  and  therefore,  should  not  have a material adverse effect on the
Company's  long-term  results of operations, liquidity or consolidated financial
position.  However,  until  the  information  systems  infrastructure assessment
phase  is  completed  in the second quarter of 1999, the Company is uncertain if
its  present  plans  and  resources  will  be  sufficient  to  ensure  Year 2000
compliance of all "mission critical" projects by January 1, 2000.


     Although  Concentra does not anticipate any disruption in its operations or
financial  reporting  as  a  result  of  system upgrades or system integrations,
there  can be no assurance that such disruption will not occur or that Year 2000
compliance  of  the  Company's  information  and non-information systems will be
realized.  If the Company does not identify and remediate Year 2000 issues prior
to  January  1,  2000,  its  operations  could  be  disrupted which could have a
material  adverse  effect  on  the  Company's  business  or operating results or
financial  condition.  In addition, the Company places a high degree of reliance
on  computer  systems  of  third parties, such as customers, trade suppliers and
computer  hardware  and  commercial  software suppliers. Although the Company is
assessing  the  readiness of these third parties, there can be no guarantee that
the  failure  of  these  third  parties  to  modify  their systems in advance of
December  31,  1999  would not have a material adverse effect on the Company. In
addition,  Concentra's operations could be disrupted if the companies with which
Concentra  does  business  do  not identify and correct any Year 2000 issues and
their  failure adversely affects their ability to do business with Concentra. If
all  Year  2000 issues are not identified and all action plans are not completed
and  contingency  plans  become  necessary,  Concentra  may  not  be  Year  2000
compliant  which could have a material adverse effect on the Company's long-term
results  of  operations,  liquidity,  or  consolidated  financial  position. The
amount of potential liability and lost revenue has not been estimated.


VOLATILITY OF STOCK PRICE


     The  market  price of Concentra's Common Stock has been volatile and may be
volatile  in  the  future.  Future  developments  concerning  the Company or its
competitors,   including   developments  related  to  governmental  regulations,
acquisitions,  operating  results, the healthcare industry generally and general
market  and  economic  conditions,  may  have a significant impact on the market
price of Concentra's Common Stock.


                                       19
<PAGE>

DIVIDEND POLICY AND RESTRICTIONS

     Concentra  does not intend to pay cash dividends on the Common Stock in the
foreseeable  future  and  anticipates  that  future earnings will be retained to
finance  future operations and expansion. Concentra's revolving credit agreement
with  its  senior lenders prohibits the Company from paying dividends and making
other distributions on its Common Stock.


ANTI-TAKEOVER PROVISIONS

     Certain  provisions of Concentra's Certificate of Incorporation and certain
provisions  of  the  Delaware  General  Corporation Law may make it difficult to
change  control  of  the  Company and replace incumbent management. For example,
Concentra's  Certificate  of  Incorporation  provides  for  a staggered Board of
Directors.   The   Certificate  of  Incorporation  also  permits  the  Board  of
Directors,  without  stockholder  approval, to issue additional shares of Common
Stock  or  establish one or more series of Preferred Stock having such number of
shares,  designations,  relative  voting rights, dividend rates, liquidation and
other  rights,  preferences  and  limitations  as  the  Board  of  Directors may
determine.  Concentra  has also adopted a Rights Agreement, which is intended to
deter certain takeover practices or takeover bids.

     In  connection  with the Merger, effective March 2, 1999, Concentra amended
its  Rights  Agreement.  The amendment provides, among other things, that Yankee
and  its  affiliates  will  not  be  deemed an Acquiring Person (as such term is
defined   in  the  Rights  Agreement)  and  the  Rights  Agreement  will  expire
immediately prior to the effective time of the Merger.


ITEM 2. PROPERTIES
     The   Company's   principal   corporate   office   is  located  in  Boston,
Massachusetts.  The  Company leases the 11,000 square feet of space in this site
pursuant  to  a  lease  agreement  expiring  in 2003. Except for 13 occupational
medical  centers  owned  by  the  Company, the Company leases all of its offices
located  in  49  states,  the  District  of  Columbia  and Canada. Twelve of the
Company's  offices  are  leased  from  Colonial  Realty  Trust, of which Lois E.
Silverman,  a director of the Company, is a trustee and beneficiary. The Company
believes  that  its  facilities  are  adequate  for  its  current needs and that
suitable additional space will be available as required.


ITEM 3. LEGAL PROCEEDINGS
     As  of the date hereof, Concentra is aware of three lawsuits that have been
filed  by  alleged  stockholders  of Concentra relating to the Merger. All three
lawsuits  were filed in the Chancery Court for New Castle County, Delaware. Each
of  the  lawsuits  names  Concentra, its directors and Yankee as defendants. The
plaintiff  in  each  lawsuit  seeks  to represent a putative class of all public
holders  of  Concentra  common  stock.  The lawsuits allege, among other things,
that  the  directors of Concentra breached their fiduciary duties to Concentra's
stockholders  by  approving  the  Merger. The lawsuits seek, among other things,
preliminary  and  permanent  injunctive  relief  prohibiting consummation of the
Merger,  unspecified  damages,  attorneys'  fees  and  other  relief.  Concentra
expects  that  these  lawsuits  will  be  consolidated into a single action. The
Company intends to contest these lawsuits vigorously.
     The  Company  is  party  to  certain  other  claims  and  litigation in the
ordinary   course  of  business.  Other  than  as  described  in  the  preceding
paragraph,  the Company is not involved in any legal proceeding that it believes
will  result,  individually  or  in  the aggregate, in a material adverse effect
upon its financial condition or results of operations.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     During  the  fourth  quarter  of 1998, no matter was submitted to a vote of
security holders.

                                       20
<PAGE>

                                    PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The  Company's  common stock is listed in the NASDAQ National Market System
under  the  trading symbol "CCMC." The high and low prices of Concentra's common
stock for the past eight quarters are shown in the table below:



<TABLE>
<CAPTION>
                            High          Low
                        -----------   -----------
<S>  <C>                <C>           <C>
     1997
     First Quarter      $ 28.00       $ 22.00
     Second Quarter     $ 29.50       $ 17.25
     Third Quarter      $ 35.88       $ 27.50
     Fourth Quarter     $ 38.50       $ 31.38
     1998
     First Quarter      $ 35.50       $ 27.25
     Second Quarter     $ 34.25       $ 22.00
     Third Quarter      $ 26.00       $  5.63
     Fourth Quarter     $ 12.50       $  5.44

</TABLE>

     The  Company  has  neither  declared  nor paid cash dividends on its Common
Stock during 1997 and 1998.


RECENT SALES OF UNREGISTERED SECURITIES

     On  January  6,  1998,  Concentra  issued  10,500 shares of Common Stock to
Robert  D. Kirkpatrick, M.D., P.C. ("Kirkpatrick"), as a portion of the purchase
price  for  the  Company's  purchase  of  substantially  all  of  the  assets of
Kirkpatrick's  business. These shares were issued in reliance on Section 4(2) of
the Securities Act of 1933 and Rule 506 promulgated thereunder.

     On  January  22,  1998,  Concentra  issued  3,500 shares of Common Stock to
Meadowlands  Medical  Associates,  P.A.  ("Meadowlands"),  as  a  portion of the
purchase  price for the Company's purchase of substantially all of the assets of
Meadowlands'  business.  These shares were issued in reliance on Section 4(2) of
the Securities Act of 1933 and Rule 506 promulgated thereunder.

     On  February 24, 1998, Concentra issued 7,100,690 shares of Common Stock to
certain  of  the  shareholders  of  Preferred  Payment Systems, Inc. ("PPS"), in
connection  with  the  merger  of  PPS  into  a subsidiary of the Company. These
shares  were  issued  in  reliance on Section 4(2) of the Securities Act of 1933
and Rule 506 promulgated thereunder.

     On  March  1,  1998, Concentra issued 279,250 shares of Common Stock to the
shareholders  of  Rehabilitation  Consultants for Industry, Inc. ("RCI"), as the
purchase  price  for  the  Company's  purchase  of the outstanding stock of RCI.
These  shares  were  issued in reliance on Section 4(2) of the Securities Act of
1933 and Rule 506 promulgated thereunder.

     On  May  1,  1998,  Concentra  issued 70,000 shares of Common Stock to AMAX
Occupational  Medicine  ("AMAX"),  as  a  portion  of the purchase price for the
Company's  purchase of substantially all of the assets of AMAX's business. These
shares  were  issued  in  reliance on Section 4(2) of the Securities Act of 1933
and Rule 506 promulgated thereunder.

     On  July  24,  1998,  Concentra issued 45,000 shares of Common Stock to the
shareholders  of  New  England  Medical  Claims  Analysts  Corp.  ("NMCA"), as a
portion  of  the  purchase  price  for the Company's purchase of the outstanding
stock  of  NMCA.  These  shares  were  issued in reliance on Section 4(2) of the
Securities Act of 1933 and Rule 506 promulgated thereunder.

     On  July  29, 1998, Concentra issued 4,500 shares of Common Stock to Howard
E.  Boulter as a portion of the purchase price for the Company's purchase of the
outstanding  stock of The Exam Center, Inc. These shares were issued in reliance
on  Section  4(2)  of  the  Securities  Act  of  1933  and  Rule 506 promulgated
thereunder.


                                       21
<PAGE>


ITEM 6. SELECTED FINANCIAL DATA
     Selected  Financial  Data  is  included in this Form 10-K in note 15 to the
Company's Consolidated Financial Statements on page F-23.


ITEM  7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
     This  section contains certain forward-looking statements that are based on
management's  current  views  and  assumptions  regarding  future events, future
business  conditions  and  the  outlook  for  the  Company  based  on  currently
available  information.  Wherever  possible,  the  Company  has identified these
"forward-looking  statements"  (as  defined in Section 27A of the Securities Act
and   Section   21E   of  the  Exchange  Act)  by  words  and  phrases  such  as
"anticipates",  "plans",  "believes", "estimates", "expects", "will be developed
and  implemented",  and  similar expressions. Readers are cautioned not to place
undue reliance on these forward-looking   statements.   These   forward-looking
statements  are subject to risks and uncertainties and future events could cause
the  Company's  actual results, performance or achievements to differ materially
from  those  expressed  in, or implied by, these statements. The Company assumes
no  obligation  to  update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.


OVERVIEW
     On  August  29,  1997,  Concentra  Managed  Care,  Inc. ("Concentra" or the
"Company"),  a  Delaware  corporation,  was  formed  by  the  merger  (the "1997
Merger")   of   CRA   Managed   Care,   Inc.   ("CRA")   and  OccuSystems,  Inc.
("OccuSystems").  The  1997  Merger  was  a  tax-free  stock  for stock exchange
accounted for as a pooling of interests.
     Concentra   Health   Services,   Inc.  ("Health  Services"),  an  operating
subsidiary   of   Concentra,  which  was  formerly  OccuSystems,  Inc.,  manages
occupational   healthcare  centers  at  which  it  provides  support  personnel,
marketing,  information  systems  and  management  services  to  its  affiliated
physicians.   Health   Services   owns  all  of  the  operating  assets  of  the
occupational  healthcare  centers,  including  leasehold  interests  and medical
equipment.  Health Services generates its net patient service revenues primarily
from  the  diagnosis,  treatment  and  management  of  work-related injuries and
illnesses and from other occupational healthcare services, such as   employment-
related  physical  examinations,  drug  and alcohol testing, functional capacity
testing  and other related programs. For the years ended December 31, 1996, 1997
and  1998,  Health  Services  derived 63.8%, 63.5% and 63.1% of its net revenues
from  the  treatment  of  work-related  injuries and illnesses, respectively and
36.2%,  36.5%  and  36.9%  of  its  net revenues from non-injury related medical
services, respectively.
     Physician  and  physical  therapy  services  are  provided  at  the  Health
Services   centers   under   management  agreements  with  affiliated  physician
associations   (the   "Physician  Groups"),  which  are  organized  professional
corporations  that  hire  licensed physicians and physical therapists to provide
medical  services  to  the  centers'  patients.  Health  Services  has a nominee
shareholder  relationship  with  the  Physician  Groups as defined in EITF 97-2,
Application  of  APB  Opinion  No.  16  and  FASB  Statement No. 94 to Physician
Practice  Entities,  and  as a result, the financial statements of the Physician
Groups are consolidated. Specifically:
     o Health  Services  can  at  all  times  establish  or effect change in the
nominee shareholder;
     o Health  Services  can  cause  a  change  in  the  nominee  shareholder an
       unlimited number of times;
     o Health  Services has sole discretion without cause to establish or change
       the nominee shareholders;
     o Health  Services  has  sole  discretion  as  to the choice of new nominee
       shareholder;
     o Health  Services  and  the  Physician  Groups  would  incur  no more than
       a nominal cost to cause a change in the nominee shareholder; and,
     o Neither   Health   Services  nor  the  Physician  Groups  are  subject to
       any significant adverse impact upon a change in the nominee shareholder.
     The  Company's  management fees from the Physician Groups are calculated as
collected  revenue  net of compensation, benefits and other expenses incurred by
the Physician Groups.
     Concentra  Managed  Care  Services,  Inc.  ("Managed  Care  Services"),  an
operating  subsidiary  of  Concentra  which was formerly CRA Managed Care, Inc.,
provides  specialized  cost  containment  and  field  case  management services.
Specialized  cost  containment  includes  first  report  of  injury, utilization
management  (precertification and concurrent review), retrospective medical bill
review,  telephonic  case  management,  preferred  provider organization ("PPO")
network  access,  independent  medical  examinations  ("IMEs"), peer reviews and
out-of-network bill



                                       22
<PAGE>


review  services  that  are designed to reduce the cost of workers' compensation
claims,  automobile  accident injury claims and group health claims. On February
24,  1998,  the Company merged with Preferred Payment Systems, Inc. ("PPS") in a
pooling-of-interests  transaction and significantly expanded its presence in the
out-of-network  group health bill review market. PPS, now operating as Concentra
Preferred  Systems  ("CPS"),  is  a  nationwide  provider  of  specialized  cost
containment  and  outsourcing  services  for  healthcare  payors.  In  the first
quarter  of  1998,  the  Company  recorded a non-recurring charge of $12,600,000
primarily  associated  with  the  merger  of  PPS.  Managed  Care  Services  has
experienced  significant  growth in its specialized cost containment services by
virtue  of  the  following  acquisitions:  (1) FOCUS HealthCare Management, Inc.
("FOCUS")  on  April  2, 1996, (2) Prompt Associates, Inc. ("PROMPT") on October
29,  1996,  (3)  First  Notice Systems, Inc. ("FNS"), on June 4, 1997, (4) About
Health,  Inc.  ("ABOUT  HEALTH")  by  PPS in a two-step transaction on August 1,
1997  and  October  31,  1997  and  (5) other smaller acquisitions. Managed Care
Services  currently  derives  most  of  its  revenues  on  a  fee-for-service or
percentage of savings basis.
     Field  case  management services involve working on a one-on-one basis with
injured  employees  and  their  various health care professionals, employers and
insurance  company  adjusters  to  assist in maximizing medical improvement and,
where  appropriate, to expedite the return to work. Managed Care Services' field
case  management  revenue growth has resulted from both local market share gains
and  geographic  office  expansion;  however, field case management gross profit
margins  deteriorated  in  the second half of 1998 prompting a reorganization in
the  fourth  quarter  of  1998  to  improve efficiency. As a result, the Company
recorded  a  non-recurring  charge  of $20,514,000 primarily associated with the
reorganization  of  its  Managed  Care  Services  division to improve efficiency
through  facility  consolidations and related headcount reductions, to recognize
an  impairment  loss on the intangible related to an acquired contract and costs
associated  with  settling  claims  on  other  expired  contracts.  Managed Care
Services  believes  that  the  current  size of its field case management office
network  is  sufficient  to  serve  the  needs of its nationwide customers. As a
result,  Managed  Care  Services  anticipates  opening only a few new field case
management  offices per year if client needs in selected regions require it. The
Company  would,  however,  continue  to  examine  the  possibility  of acquiring
additional  field  case  management  offices  or  businesses  if  an appropriate
strategic opportunity arose.
     The  following  table provides certain information concerning the Company's
service locations:



<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
                                                                        ------------------------------------
                                                                           1996         1997         1998
                                                                        ----------   ----------   ----------
<S>                                                                     <C>          <C>          <C>
Service locations at the end of the period:
 Occupational healthcare centers (1) ................................        109          140          156
 Cost containment services offices ..................................         70           83           85
 Field case management offices (2) ..................................        118          123           89
Physician practices acquired during the period (3) ..................         32           22           12
Physician practices developed during the period .....................         10            8            4
Number of affiliated physicians at the end of the period ............        196          252          278
Occupational healthcare centers - same market revenue growth (4).....       10.7%        11.0%        11.4%
</TABLE>



--------
(1) Does  not  include  the  assets  of  the  practices  which were acquired and
    subsequently  divested  or  consolidated  into  existing  centers within the
    market.
(2) The  decline  in  field  case management offices in 1998 is primarily due to
    the   fourth   quarter   of  1998  reorganization  which  included  facility
    consolidations.
(3) Represents  the  assets  of practices which were acquired during each period
    presented and not subsequently divested.
(4) Same  market  revenue  growth  sets  forth the aggregate net change from the
    prior  period  for  all  markets  in  which Health Services has operated for
    longer  than  one  year  (excluding  revenue  growth  due to acquisitions of
    additional centers).


RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997


REVENUES

     Total  revenues  increased  24.9% in 1998 to $611,056,000 from $489,318,000
in  1997. Health Services' revenues increased 24.9% in 1998 to $259,481,000 from
$207,676,000  in  1997.  Managed Care Services' revenues increased 24.8% in 1998
to  $351,575,000  from  $281,642,000  in  1997,  as specialized cost containment
revenues


                                       23
<PAGE>


increased  28.6%  in  1998  to  $183,734,000 from $142,919,000 in 1997 and field
case   management   revenues  increased  21.0%  in  1998  to  $167,841,000  from
$138,723,000 in 1997.

     The  Health  Services  revenue  growth  resulted  from  the  acquisition of
practices  (including the acquisition of 16 occupational medical centers and the
management  of  an  additional four medical centers from Vencor, Inc. ("VMC") in
the  fourth  quarter  of  1997),  an  increase  in business in existing markets,
development  of  sites  in new markets, as well as an increase in consulting and
other  ancillary  services.  The  specialized cost containment revenue growth is
largely  attributable  to  the  growth  of  PPS  (including  the  impact  of its
acquisition  of  ABOUT  HEALTH in August 1997), the acquisition of FNS and other
immaterial  acquisitions, as well as revenue increases attributable to growth in
retrospective  medical bill review, telephonic case management and claims review
services  in  existing  service  locations.  The  field  case management revenue
growth  is  primarily  due  to  the  business  generated  from  two  field  case
management  acquisitions  and continued growth in revenues from existing service
locations.

     The  Company's  total contractual allowances offset against revenues during
the  years  ended  December  31, 1998 and 1997 were $16,095,000 and $14,718,000,
respectively.


COST OF SERVICES
     Total  cost  of  services  increased  25.9%  in  1998  to $469,297,000 from
$372,639,000  in 1997. Health Services' cost of services increased 29.5% in 1998
to  $201,181,000 from $155,376,000 in 1997, while Managed Care Services' cost of
services increased 23.4% in 1998 to $268,116,000 from $217,263,000 in 1997.
     Total  gross profit margins decreased slightly to 23.2% in 1998 compared to
23.8%  in 1997. Health Services' gross profit margins decreased to 22.5% in 1998
compared  to  25.2%  in  1997, while Managed Care Services' gross profit margins
increased to 23.7% in 1998 compared to 22.9% in 1997.
     Health  Services'  gross  profit margins decreased primarily as a result of
an  acceleration  in  the roll- out of patient tracking and billing systems into
the  medical  centers, increased spending on marketing and facility improvements
and  the  impact  of lower gross profit margins from practices recently acquired
and  developed.  Historically,  as  certain functions are consolidated and other
staff-related  changes  occur,  coupled with increased patient volume, the gross
profit margins of acquired or developed practices have tended to improve.
     Managed  Care  Services  has  seen  improvement  in  gross  profit  margins
primarily  resulting  from  a  shift in its revenue mix towards specialized cost
containment  services,  including  the  services  provided by PPS (including its
acquisition  of  ABOUT HEALTH) and FNS, which historically have had higher gross
profit  margins  than  revenues derived from field case management. Although the
gross  profit  margins  improved slightly in 1998, they were negatively affected
by  a  decrease  in provider bill review gross profit margins and a slow down in
the  growth  of  field  case  management  revenues  and  resulting  gross profit
margins.  The  provider  bill  review  gross  profit  margins  decrease  was due
primarily  to  start-  up  costs,  pricing  concessions  on new customers and an
increase  in  the  level of uncollectable accounts receivable charges. Concentra
expects  the  gross  profit  margin  for  provider bill review to continue to be
affected  negatively  for  the  first half of 1999 compared to the first half of
1998  due  to  the impact of pricing concessions made in the second half of 1998
and a higher level of bad debt provision.


GENERAL AND ADMINISTRATIVE EXPENSES
     General  and administrative expenses increased 13.8% in 1998 to $45,326,000
from  $39,831,000  in 1997, or 7.4% and 8.1% as a percentage of revenue for 1998
and  1997,  respectively. The increase in general and administrative expenses in
1998  was  due primarily to the continued investment in the Information Services
and Technology Group and in accounting and administrative personnel.


AMORTIZATION OF INTANGIBLES
     Amortization  of  intangibles  increased  37.4%  in 1998 to $8,119,000 from
$5,908,000  in  1997,  or 1.3% and 1.2% as a percentage of revenues for 1998 and
1997,  respectively.  This  increase  is  the  result  of  amortizing additional
intangible  assets  such  as  goodwill,  customer lists and assembled workforces
primarily  associated  with  the  purchases of FNS, ABOUT HEALTH by PPS, VMC and
various smaller acquisitions by Health Services.

NON-RECURRING CHARGE
     The  Company  recorded  non-recurring  charges for the years ended December
31, 1998 and 1997 of $33,114,000 and $38,625,000, respectively.

                                       24
<PAGE>


     In  the  first quarter of 1998, the Company recorded a non-recurring charge
of  $12,600,000  primarily associated with the merger of PPS. The utilization of
this  charge  through  December  31,  1998,  was  approximately  $5,136,000  for
professional  fees  and  services, $2,355,000 in costs associated with personnel
reductions,   $746,000  in  facility  consolidations  and  closings,  $1,627,000
associated  with  the  write-off  of deferred financing fees on PPS indebtedness
retired  and  $1,264,000  of  other  non-recurring  costs. At December 31, 1998,
approximately  $1,472,000  of the non-recurring charge remains primarily related
     to remaining facility lease obligations.  In  the  fourth  quarter of 1998,
the  Company recorded a non-recurring charge of $20,514,000 primarily associated
with  the  reorganization  of  its  Managed  Care  Services  division to improve
efficiency  through facility consolidations and related headcount reductions, to
recognize  an  impairment loss on the intangible related to an acquired contract
and  costs  associated  with  settling  claims  on  other expired contracts. The
utilization   of  this  charge  through  December  31,  1998  was  approximately
$7,416,000  in  charges  related to the recognition of an impairment loss on the
intangible  related to an acquired contract, $2,490,000 in costs associated with
personnel  reductions and $1,140,000 in facility consolidations. At December 31,
1998,  approximately  $9,468,000  of the non- recurring charge remains primarily
related  to  remaining  facility  lease  obligations  and  costs associated with
settling claims or other expired contracts.
     The  Company's  reorganization  plan of its Managed Care Services division,
including  headcount  reductions  and  facility  consolidations,  was  developed
between  early  September  and  the end of October 1998. The reorganization plan
was  carried  out  in  late  October  and early November 1998 with all headcount
reductions  of  168  employees completed and most of the facility consolidations
completed  or underway in the fourth quarter of 1998. The restructuring plan has
not  changed  significantly  from  the Company's original estimate since most of
the  actions  were  completed  or  underway by December 31, 1998. The Company is
realizing  savings  of  approximately  $2,400,000  per  quarter in personnel and
facility  related expenses and has not experienced any significant interruptions
in its operations as a result of the restructuring.
     In  the  third quarter of 1997, the Company recorded a non-recurring charge
of  $38,625,000  associated  with  the  merger  of  CRA  Managed  Care, Inc. and
OccuSystems,  Inc.  The  Company finalized its merger and transition plan during
the  third  quarter  of  1997  with  much  of the detailed planning occurring in
August  and  September  1997,  prior  to  the end of the quarter. The merger and
transition  plan  was  approved  by  senior  management in September 1997 and it
identified  all  significant  actions  to  be  taken,  including  reductions  in
duplicative  personnel The utilization of this charge through December 31, 1998,
was  approximately  $11,569,000  for professional fees and services, $16,216,000
in  costs  associated  with  personnel reductions and the consolidation of CRA's
and  OccuSystems'  employee  benefits, $5,945,000 in facility consolidations and
closings,  $2,541,000  for  the  write-off  of  start-up costs and $2,354,000 of
other charges.
     The  Company  expects  to  expend  approximately  $8,400,000  over the next
twelve  months  relating to the first quarter of 1998 and fourth quarter of 1998
non-recurring  changes,  consisting  of  approximately  $1,800,000  of severance
related  costs,  $3,200,000  of  facility  related  costs,  $3,000,000  of costs
associated  with  settling  claims  on  expired  contracts and $400,000 of other
costs.

INTEREST EXPENSE
     Interest   expense   increased  $5,354,000  in  1998  to  $18,021,000  from
$12,667,000  in 1997 due primarily to increased outstanding borrowings under the
credit  facilities  to  finance acquisitions and the issuance of $230,000,000 in
4.5%  Convertible Subordinated Notes in March and April 1998 partially offset by
the  repayment  of  borrowings under the Senior Credit Facility and debt assumed
in the merger with PPS.

INTEREST INCOME
     Interest  income increased $2,362,000 in 1998 to $4,659,000 from $2,297,000
in  1997  due  primarily to the investment of excess cash as a result of the net
proceeds  of  $223,589,000  from  the issuance the 4.5% Convertible Subordinated
Notes  after the payment of approximately $122,000,000 of outstanding borrowings
under  the  Senior  Credit Facility, debt assumed in the merger with PPS and the
payment to PPS dissenting shareholders.

OTHER EXPENSE, NET
     Other  expense,  net decreased $839,000 in 1998 to $44,000 from $883,000 in
1997  primarily  as  a result of PPS' 1997 minority interest expense of $556,000
related  to  the  two-step acquisition of ABOUT HEALTH and the 1997 amortization
of  start-up  costs  of  $315,000  recorded  prior to the write- off of start-up
costs   in   the  third  quarter  of  1997,  partially  offset  by  earnings  in
unconsolidated affiliates.



                                       25
<PAGE>


PROVISION FOR INCOME TAXES
     The  Company's  provision for income taxes in 1998 and 1997 was $19,308,000
and  $11,062,000,  respectively.  On a pro forma basis, giving effect to the PPS
transaction,  the  Company's  provision  for income taxes in 1998 and 1997 would
have  been  $19,308,000  and  $13,873,000,  respectively, resulting in pro forma
effective  tax rates of 46.2% and 65.9%, respectively. Excluding the tax effects
of  the non-recurring charges in the third quarter of 1997, the first quarter of
1998  and  the  fourth  quarter  of 1998, the pro forma effective tax rate would
have  been 41.0% for 1998 and 39.3% for 1997. The Company expects to provide for
its taxes at an effective tax rate of approximately 41% to 42% for 1999.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

REVENUES

     Total  revenues  increased  31.3% in 1997 to $489,318,000 from $372,683,000
in  1996.  Health  Services'  revenues  increased 22.1 % in 1997 to $207,676,000
from  $170,035,000  in  1996. Managed Care Services' revenues increased 39.0% in
1997  to $281,642,000 from $202,648,000 in 1996, as specialized cost containment
revenues  increased  70.6%  in 1997 to $142,919,000 from $83,784,000 in 1996 and
field  case  management  revenues  increased  16.7% in 1997 to $138,723,000 from
$118,864,000 in 1996.

     The  Health  Services  revenue  growth  resulted  from  the  acquisition of
practices  (including the acquisition of 16 occupational medical centers and the
management  of an additional four medical centers from VMC in the fourth quarter
of  1997),  development  of  sites  in  new  markets, an increase in business in
existing  markets,  as  well  as  an  increase in consulting and other ancillary
services.   The   specialized   cost   containment  revenue  growth  is  largely
attributable  to  the  acquisitions  of  FOCUS, PROMPT, FNS and ABOUT HEALTH, as
well  as  revenue increases attributable to growth in retrospective medical bill
review,  telephonic  case  management  and  claims  review  services in existing
service  locations  and  the  expansion  into  additional service locations. The
field  case  management  revenue  growth  is primarily due to growth in revenues
from  existing  service locations, and the opening of 13 offices during 1996 and
1997.

     The  Company's  total contractual allowances offset against revenues during
the  years  ended  December  31,  1997 and 1996 were $14,718,000 and $3,680,000,
respectively.

COST OF SERVICES
     Total  cost  of  services  increased  28.5%  in  1997  to $372,639,000 from
$289,928,000  in 1996. Health Services' cost of services increased 18.8% in 1997
to  $155,376,000 from $130,754,000 in 1996, while Managed Care Services' cost of
services increased 36.5% in 1997 to $217,263,000 from $159,174,000 in 1996.
     Total  gross profit margins increased to 23.8% in 1997 compared to 22.2% in
1996.  Health Services' gross profit margins increased to 25.2% in 1997 compared
to  23.1%  in  1996, while Managed Care Services' gross profit margins increased
to 22.9% in 1997 compared to 21.5% in 1996.
     Health   Services'  gross  profit  margin  improvement  has  resulted  from
increased  efficiencies  and productivity. As certain functions are consolidated
and  other  staff-related  changes occur, coupled with increased patient volume,
the  margins  of acquired or developed practices have tended to improve. Managed
Care  Services  has  seen improvement in gross margin primarily resulting from a
shift  in  its  revenue  mix  towards  specialized  cost  containment  services,
including  the  services  provided by FOCUS, PROMPT, FNS and ABOUT HEALTH, which
historically  have  had  higher  gross profit margins than revenues derived from
field case management.

GENERAL AND ADMINISTRATIVE EXPENSES
     General  and administrative expenses increased 20.1% in 1997 to $39,831,000
from  $33,155,000  in 1996, or 8.1% and 8.9% as a percentage of revenue for 1997
and  1996,  respectively. The increase in general and administrative expenses in
1997  was  due  primarily  to  expenses  associated  with  acquisitions  and the
continued investment in the Information Services and Technology Group.


AMORTIZATION OF INTANGIBLES
     Amortization  of  intangibles  increased  71.6%  in 1997 to $5,908,000 from
$3,442,000  in  1996,  or 1.2% and 0.9% as a percentage of revenues for 1997 and
1996,  respectively.  This  increase  is  the  result  of  amortizing additional
intangible  assets  such  as  goodwill,  customer lists and assembled workforces
primarily  associated  with  the purchase of FOCUS, PROMPT, FNS, ABOUT HEALTH by
PPS, VMC and other smaller acquisitions.



                                       26
<PAGE>


NON-RECURRING CHARGE
     The  Company recorded a non-recurring charge of $38,625,000 associated with
the  1997  Merger.  The  charges  incurred  were  approximately  $11,569,000 for
professional  fees  and services, $16,216,000 in costs associated with personnel
reductions  and  the  consolidation of CRA's and OccuSystems' employee benefits,
$5,945,000   in   facility  consolidations  and  closings,  $2,541,000  for  the
write-off  of  start-up  costs  and $2,354,000 of other charges. At December 31,
1997,  approximately  $7,527,000  of  the non-recurring charge remains primarily
related to personnel related charges and facility consolidations and closings.


INTEREST EXPENSE
     Interest   expense   increased  $8,926,000  in  1997  to  $12,667,000  from
$3,741,000  in  1996  due  primarily  to  the  issuance  of  $97,750,000  of  6%
Convertible   Subordinated   Notes   in  December  1996,  the  issuance  of  PPS
indebtedness  in  August  1996  and  to  increased  outstanding  credit facility
borrowings used to finance acquisitions.


INTEREST INCOME
     Interest  income  increased  $1,438,000 in 1997 to $2,297,000 from $859,000
in  1996  due  primarily  to  the  investment  of excess cash generated from the
issuance  of the 6% Convertible Subordinated Notes until the funds were utilized
to finance certain acquisitions.


OTHER EXPENSE, NET
     Other  expense,  net increased $47,000 in 1997 to $883,000 from $836,000 in
1996 primarily due to minority interests.


PROVISION FOR INCOME TAXES
     The  Company's  provision for income taxes in 1997 and 1996 was $11,062,000
and  $13,437,000,  respectively.  On a pro forma basis, giving effect to the PPS
transaction,  the  Company's  provision  for income taxes in 1997 and 1996 would
have  been  $13,873,000  and  $16,167,000,  respectively, resulting in pro forma
effective  tax rates of 65.9% and 39.0%, respectively. Excluding the tax effects
of  the  non-recurring  charge, the pro forma effective tax rate would have been
39.3% for 1997.


SEASONALITY
     The  Company's  business  is  seasonal  in nature. Health Services' patient
visits  at  its  medical  centers  are  lower  in the first and fourth quarters,
primarily  because  of  fewer  occupational  injuries and illnesses during those
time  periods  due  to  plant  closings,  vacations  and  holidays. In addition,
employers  generally  hire  fewer  employees  in  the  fourth  quarter,  thereby
reducing  the number of pre-placement physical examinations and drug and alcohol
tests  conducted  at  the  medical  centers  during  that  quarter. Managed Care
Services'  field  case  management  revenues  have historically been flat in the
fourth  quarter compared to the third quarter due to the impact of vacations and
holidays.  Although  the  Company's  revenue  growth  may  obscure the effect of
seasonality  in  the  Company's financial results, the first and fourth quarters
generally  reflect  lower  revenues  when  compared  to the Company's second and
third quarters.


INFORMATION SYSTEMS - YEAR 2000
     The  Year  2000  concern,  which  is common to most companies, concerns the
inability   of  information  and  non-information  systems,  primarily  computer
software  programs, to properly recognize and process date sensitive information
as   the   Year   2000   approaches.   System   database   modifications  and/or
implementation  modifications  will  be  required to enable such information and
non-information  systems to distinguish between 21st and 20th century dates. The
Company  has  completed  a  number  of  acquisitions  in  recent  years, and the
information  systems  of  some  of  the  acquired operations have not been fully
integrated with the Company's information systems.
     The  Company has formed a Year 2000 Program Office to provide a centralized
management   function   for   the   entire  organization  that  will  assist  in
identifying,  addressing  and  monitoring  the Company's Year 2000 readiness and
compliance  programs.  The  Year 2000 Program Office has organized teams at each
division  to  research Year 2000 compliance status and implement the appropriate
solutions.  The  Company's  Year  2000 Program includes five phases - awareness,
assessment, remediation, testing and implementation. The awareness and



                                       27
<PAGE>


assessment   phases  are  substantially  complete  with  the  exception  of  the
assessment  phase  of  the  Company's  information systems infrastructure (i.e.,
desktops and other hardware) Year 2000 compliance.

     The  Company's  Year  2000  Program Office engaged an outside consultant to
assist  in  an  inventory  and  assessment  of  Year 2000 affected areas, with a
primary  focus  on  information technology systems, third party software and key
suppliers  and  selected  customers. This inventory and assessment was completed
in  the  fourth  quarter of 1998. The Company's Year 2000 Program Office engaged
an  outside  consultant  in the first quarter of 1999 to assist in an inventory,
assessment   and  remediation  efforts  of  the  Company's  information  systems
infrastructure  Year  2000  compliance.  The  Company  completed  in  the fourth
quarter  of  1998  an  internal  inventory  and  assessment  of  non-information
technology  systems  (e.g.  embedded  systems  contained  in medical equipment).
Remediation  or replacement of noncompliant Year 2000 medical equipment began in
the  first  quarter of 1999 and is expected to be completed by the third quarter
of 1999.

     The  Year  2000  Program  Office  has established a protocol for soliciting
Year  2000 compliance information from third parties and requests for compliance
information  from  all  key  suppliers  and  selected customers were sent in the
fourth  quarter  of 1998 and the first quarter of 1999. The Company continues to
gather  Year  2000  compliance  information  from  third parties and anticipates
receiving  the  majority  of responses by the end of the second quarter of 1999.
To  the  extent  responses  have not been received, the Year 2000 Program Office
has  ranked the third parties by level of importance to the Company's operations
and  is  following  up  with  phone surveys, additional mailings and research of
public  information  issued  by  the  third-party  (i.e., "web research"). These
responses  should  indicate  the  extent  to  which the Company is vulnerable to
those third parties' failure to remediate their own Year 2000 issues.

     The  Company's  identified  Year  2000  projects  overlap  with its ongoing
investments  in  information  technology, as such, there are presently Year 2000
projects  at the assessment, remediation, testing and implementation phases. The
Company  believes  that it has identified most "mission critical" issues and has
developed  or  is in the process of modifying appropriate action plans which may
include  software  upgrades,  replacement of noncompliant components or referral
of  problems  related to third party-provided software to the original supplier.
The  Company has prepared its plans to have all "mission critical" projects Year
2000   compliant  by  the  end  of  the  fourth  quarter  of  1999.  While  some
non-critical  systems  may  not  be  addressed  until  after  December 1999, the
Company  believes  such  systems  will not disrupt the Company's operations in a
material  manner.  Any  additional  issues  that may arise will be classified as
either  "mission critical" or non-critical, and appropriate action plans will be
developed   and   implemented.  The  Company  expects  to  have  formulated  any
contingency plans deemed necessary by the third quarter of 1999.

     The  Company  currently  estimates  that the total cost of implementing its
Year  2000  Program will be between $5,000,000 and $10,000,000. This preliminary
estimate  is  based  upon presently available information and will be updated as
the  Company  finalizes its assessments and continues through implementation. In
particular,  the  estimate may also need to be increased as the Company receives
feedback  from  key  suppliers and selected customers and formulates contingency
plans,  if  required.  It  is  expected  these  costs  will not be significantly
different   from  the  Company's  current  planned  investment  for  information
technology,  and  therefore,  should  not  have a material adverse effect on the
Company's  long-term  results of operations, liquidity or consolidated financial
position.  However,  until  the  information  systems  infrastructure assessment
phase  is  completed  in the second quarter of 1999, the Company is uncertain if
its  present  plans  and  resources  will  be  sufficient  to  ensure  Year 2000
compliance  of all "mission critical" projects by January 1, 2000. The Company's
capital  and  noncapital  investment  in the Information Services and Technology
Group  was approximately $32,000,000 in 1998 and is expected to be approximately
$50,000,000  in 1999. Of this investment, the Company's Year 2000 Program Office
incurred  expenses of approximately $300,000 in fiscal 1998 primarily associated
with  the  engagement  of  an  outside  consultant to assist in an inventory and
assessment of Year 2000 affected areas.

     Although  the  Company does not anticipate any disruption in its operations
or  financial  reporting  as a result of system upgrades or system integrations,
there  can  be  no  assurance  that  such  disruption will not occur or that the
desired  benefits from the Year 2000 compliance of the Company's information and
non-information  systems  will be realized. If the Company does not identify and
remediate  Year  2000  issues  prior to January 1, 2000, its operations could be
disrupted  which  could have a material adverse effect on the Company's business
or  operating  results or financial condition. In addition, the Company places a
high  degree  of  reliance  on  computer  systems  of  third  parties,  such  as
customers,  trade  suppliers  and  computer  hardware  and  commercial  software
suppliers.  Although  the  Company  is  assessing  the  readiness of these third
parties, there can be no guarantee that the



                                       28
<PAGE>


failure  of  these  third parties to modify their systems in advance of December
31,  1999  would not have a material adverse effect on the Company. In addition,
the  Company's  operations  could  be  disrupted if the companies with which the
Company  does business do not identify and correct any Year 2000 issues and such
failure  adversely affects their ability to do business with the Company. If all
Year  2000  issues are not identified and all action plans are not completed and
contingency  plans  become necessary, the Company may not be Year 2000 compliant
which  could  have  a material adverse effect on the Company's long-term results
of  operations,  liquidity,  or  consolidated  financial position. The amount of
potential liability and lost revenue has not been estimated.

LIQUIDITY AND CAPITAL RESOURCES
     Cash   flows   generated  from  (used  for)  operations  were  $34,949,000,
($487,000)  and  $15,595,000  for  the  years  ended December 31, 1998, 1997 and
1996,  respectively.  During  1998,  working  capital  used  $20,283,000 of cash
primarily  due  to an increase in accounts receivable of $19,765,000 and prepaid
expenses  and  income  taxes of $1,480,000 and offset by an increase in accounts
payable,  accrued  expenses  and  income  taxes of $962,000. Accounts receivable
increased  primarily  due  to  continued revenue growth, while accounts payable,
accrued  expenses  and  income  taxes was affected by the timing of payments and
the  remaining  obligations  relating to the first quarter and fourth quarter of
1998 non-recurring charges.
     The  Company  expects  to  expend  approximately  $8,400,000  over the next
twelve  months  relating to the first quarter of 1998 and fourth quarter of 1998
non-recurring  charges,  consisting  of  approximately  $1,800,000  of severance
related  costs,  $3,200,000  of  facility  related  costs,  $3,000,000  of costs
associated  with  settling  claims  on  expired  contracts and $400,000 of other
costs.
     The   Company   utilized   net  cash  of  $18,070,000  in  connection  with
acquisitions,  $15,523,000  to purchase marketable securities and $34,187,000 of
cash  to  purchase property and equipment during 1998, the majority of which was
spent  on  new  computer hardware and software technology. The Company's capital
and  non-capital investment in the Information Services and Technology Group was
approximately   $32,000,000  in  1998  and  are  expected  to  be  approximately
$50,000,000 in 1999.
     Cash  flows  provided  by financing activities of $121,555,000 were derived
primarily  from  the  issuance  of $230,000,000 in 4.5% Convertible Subordinated
Notes,  or  $223,589,000 net of deferred finance fees. A portion of the proceeds
from  the  issuance of the 4.5% Convertible Subordinated Notes was used to repay
borrowings  under  the  Senior Credit Facility, repay debt assumed in the merger
with  PPS,  and  for  the payment of $15,047,000 to PPS dissenting shareholders.
Net  proceeds  from  the  issuance of Common Stock under employee stock purchase
and option plans and the related tax benefit was $14,403,000.
     The  Company  believes  that  its  current  cash  balances,  the  cash flow
generated  from  operations  and  its  borrowing capacity under the $100,000,000
Senior  Credit  Facility,  if  needed,  will be sufficient to fund the Company's
working   capital,   medical   center   acquisitions   and  capital  expenditure
requirements  for  at  least  the  next twelve months. As a result of the fourth
quarter  1998  non-recurring  charge,  the  Company  was  not in compliance with
certain  leverage  ratio covenants under the $100,000,000 Senior Credit Facility
in  the  fourth  quarter  of  1998  and  the  Company  expects it will not be in
compliance  with  those  covenants  in  the  first  quarter of 1999. The Company
received  a waiver on all financial covenants through the first quarter of 1999.
The  Company  does  not  have any borrowings outstanding under the Senior Credit
Facility  and  does  not  anticipate  the need to borrow under the Senior Credit
Facility for the next twelve months.
     The  Company's  long-term  liquidity  needs  consist of working capital and
capital  expenditure  requirements,  the  funding of any future acquisitions and
the  repayment  of  the  6%  Convertible  Subordinated  Notes  in  2001 and 4.5%
Convertible  Subordinated  Notes  in  2003.  The  Company  intends to fund these
long-term  liquidity  needs  from  the cash generated from operations, available
borrowings  under  the  Senior Credit Facility and, if necessary, future debt or
equity  financing.  There  can  be  no  assurance that any future debt or equity
financing will be available on terms favorable to the Company.



SUBSEQUENT EVENTS
     On  March  2,  1999, Concentra entered into a definitive agreement to merge
(the  "Merger")  with  Yankee Acquisition Corp. ("Yankee"), a corporation formed
by  Welsh,  Carson,  Anderson  &  Stowe  ("WCAS"),  a  14.9%  stockholder of the
Company.  Concentra's  Board  of  Directors unanimously approved the transaction
based  upon  the  recommendation  of  its  special  committee  of  the  Board of
Directors,   which  was  formed  on  October  29,  1998  to  evaluate  strategic
alternatives   in  response  to  several  unsolicited  expressions  of  interest
regarding  the  possible  acquisition  of  some  or  all of the Company's Common
Stock. On March 24, 1999, Concentra entered into an



                                       29
<PAGE>


Amended  and  Restated  Agreement  and  Plan of Merger with Yankee (the "Amended
Merger  Agreement").  Pursuant  to  the  Amended  Merger  Agreement, Yankee will
acquire  approximately  87%,  funds  managed  by  Ferrer  Freeman Thompson & Co.
("FFT")   will  acquire  approximately  7%  and  other  investors  will  acquire
approximately  6%  of  the post-merger shares of common stock of the Company for
$16.50  per  share.  As  a  result  of  the  Merger,  each  outstanding share of
Concentra  Common  Stock  will  be converted into the right to receive $16.50 in
cash.
     In  connection  with the Merger, effective March 2, 1999, Concentra amended
its  Rights  Agreement.  The amendment provides, among other things, that Yankee
and  its  affiliates  will  not  be  deemed an Acquiring Person (as such term is
defined  in  the  Rights  Agreement)  and  that the Rights Agreement will expire
immediately prior to the effective time of the Merger.
     The transaction is valued at  approximately  $1,100,000,000,  including the
refinancing of $327,750,000 of the 6% and 4.5%  Convertible  Subordinated  Notes
which  contain  change in control  provisions  in the  related  indentures.  The
transaction  is  structured  to be accounted  for as a  recapitalization  and is
expected  to be  completed  in the third  quarter of 1999.  The  transaction  is
conditioned upon, among other things, approval of the shareholders of Concentra,
receipt of financing and certain regulatory approvals.
     To  finance  the acquisition of the Company, WCAS will invest approximately
$369,432,000  in equity financing, including the value of shares and convertible
notes   already   owned   by  WCAS,  and  up  to  $110,000,000  in  subordinated
indebtedness.  Additionally, FFT will invest approximately $30,600,000 and other
investors  will  invest  approximately  $23,000,000  in  equity.  WCAS  has also
received  commitments  from  various lenders to provide Yankee with $190,000,000
in  senior  subordinated  notes,  a  $375,000,000  term  loan and a $100,000,000
revolving  credit  facility  to  replace  the  Company's  existing Senior Credit
Facility.  Additionally,  Yankee would also utilize the Company's excess cash on
hand  at  the  time  of  the  merger  to help finance the purchase of the Common
Stock.  Subsequent  to  the exchange of shares for cash, Yankee would merge with
Concentra Managed Care, Inc. with Concentra Managed Care, Inc. surviving.
     As  of  March 26, 1999, Concentra is aware of three lawsuits that have been
filed  by  alleged  stockholders  of Concentra relating to the Merger. All three
lawsuits  were filed in the Chancery Court for New Castle County, Delaware. Each
of  the  lawsuits  names  Concentra, its directors and Yankee as defendants. The
plaintiff  in  each  lawsuit  seeks  to represent a putative class of all public
holders  of  Concentra  common  stock.  The lawsuits allege, among other things,
that  the  directors of Concentra breached their fiduciary duties to Concentra's
stockholders  by  approving  the  Merger. The lawsuits seek, among other things,
preliminary  and  permanent  injunctive  relief  prohibiting consummation of the
Merger,  unspecified  damages,  attorneys'  fees  and  other  relief.  Concentra
expects  that  these  lawsuits  will  be  consolidated into a single action. The
Company intends to contest these lawsuits vigorously.



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     Concentra   has  not  entered  into  derivative  financial  instruments  or
derivative  commodity  instruments. Other financial instruments are described in
Note 7 of Notes to Consolidated Financial Statements, beginning on page F-13.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
     The  audited  consolidated  financial  statements  of the Company and other
information  required by this Item 8 are included in this Form 10-K beginning on
page F-1.


ITEM  9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING AND
       FINANCIAL DISCLOSURE
     Not Applicable

                                       30
<PAGE>

                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


DIRECTORS


GOVERNANCE OF THE COMPANY; BOARD OF DIRECTORS AND COMMITTEES

     Pursuant  to  the  Delaware  General Corporation Law, as implemented by the
Company's  Certificate  of  Incorporation and Bylaws, the business, property and
affairs  of  the  Company  are  managed  under  the  direction  of  the Board of
Directors.  Members  of  the  Board  are kept informed of the Company's business
through  discussions  with  the  Chairman,  the President and other officers, by
reviewing  materials  provided  to  them and by participating in meetings of the
Board and its committees.

     The  Board  of  Directors  is  divided  into three classes and is presently
comprised  of  eight  members.  The  directors  of  each  class  are elected for
three-year  terms,  with  terms of the three classes staggered so that directors
from  a  single class are elected at each annual meeting of stockholders. George
H.  Conrades,  Robert  A. Ortenzio, and Lois E. Silverman are Class II directors
whose  terms  of  office  expire  at the annual meeting of stockholders in 1999.
John  K.  Carlyle  is  a  Class III director whose term of office expires at the
annual  meeting  of stockholders in 2000. Hon. Willis D. Gradison, Jr., Mitchell
T.  Rabkin,  M.D.,  Richard  D.  Rehm,  M.D.  and  Daniel  J. Thomas are Class I
directors  whose terms of office expire at the annual meeting of stockholders in
2001.

     During  1998, the Board of Directors held a total of 13 meetings, including
4  regular meetings and 9 special meetings. Each director attended more than 75%
of  the  aggregate  of  (i)  the  total  number of meetings held by the Board of
Directors  and  (ii)  the total number of meetings held by all committees of the
Board of Directors on which he served.


COMMITTEES OF THE BOARD OF DIRECTORS

     During  1998,  the  Board  of  Directors  of  the  Company had two standing
committees: an Audit Committee and an Option and Compensation Committee.

     The  Audit Committee held two meetings in 1998. The Audit Committee reviews
the  adequacy  of  the  Company's  system  of  internal  controls and accounting
practices.  In  addition,  the  Audit  Committee reviews the scope of the annual
audit  of  the  Company's  independent  public accountants, Arthur Andersen LLP,
prior  to  its  commencement,  and  reviews  the types of services for which the
Company  retains  Arthur Andersen LLP. Commencing in December 1998, the Board of
Directors  designated  the Audit Committee as the committee charged with primary
oversight   of  the  Company's  Corporate  Integrity  Program,  currently  under
development.

     The  Option  and  Compensation  Committee  held  six  meetings in 1998. The
functions  of  the  Option  and  Compensation  Committee are to establish annual
salary  levels,  approve fringe benefits and administer any special compensation
plans  or  programs  for  officers of the Company, review and approve the salary
administration  program  for  the Company and administer the Company's incentive
and stock option plans.

     Hon.  Willis  D.  Gradison,  Jr.,  Mitchell  T.  Rabkin,  M.D.  and Lois E.
Silverman  currently  serve  on  the Audit Committee. John K. Carlyle, George H.
Conrades  and  Robert A. Ortenzio currently serve on the Option and Compensation
Committee.


VOTING AGREEMENT

     Pursuant  to an agreement entered into between Lois E. Silverman and Donald
J.  Larson,  Mr.  Larson has agreed to vote his shares in favor of Ms. Silverman
or  her  designee  as  a  member  of the Board for as long as Ms. Silverman, her
family  and  trusts  established  by  her hold at least 519,113 shares of Common
Stock.


                                       31
<PAGE>

Tabular  information  and a brief  biography  of each  Director  of the  Company
follow.



<TABLE>
<CAPTION>
             NAME                 AGE                        POSITION
------------------------------   -----   ------------------------------------------------
<S>                              <C>     <C>
John K. Carlyle                  44      Chairman, Director
Daniel J. Thomas                 40      President and Chief Executive Officer, Director
George H. Conrades               60      Director
Hon. Willis D. Gradison, Jr.     70      Director
Robert A. Ortenzio               41      Director
Mitchell T. Rabkin, M.D.         68      Director
Richard D. Rehm, M.D.            53      Director
Lois E. Silverman                58      Director
</TABLE>

     JOHN  K. CARLYLE has served as a Director of the Company since August 1997.
Mr.  Carlyle  has  served  as  Chairman of the Board of Directors of the Company
since  September  1998.  In  addition,  he  served  as  Chairman of the Board of
Directors  of  the  Company  from  August  1997  to January 1998. Mr. Carlyle is
currently  President  and  CEO  of  MAGELLA  Healthcare  Corporation,  a private
physician  practice  management  company devoted to the areas of neonatology and
perinatology.  Mr.  Carlyle  served  as  Chairman and Chief Executive Officer of
OccuSystems,  Inc.,  one  of  Concentra's predecessor companies ("OccuSystems"),
from  January  1997  until  August  1997.  He  joined OccuSystems in 1990 as its
President  and  served  in that capacity until December 1996. Mr. Carlyle served
as  the  Chief  Executive  Officer and a director of OccuSystems from 1991 until
August  1997.  Mr. Carlyle has served as a director of National Surgery Centers,
Inc.,  an  owner  and  operator  of  free  standing,  multi-specialty ambulatory
surgery  centers,  since  1991.  He also serves as a director of several private
companies. Mr. Carlyle is a certified public accountant.

     DANIEL  J.  THOMAS  has  served  as a Director of the Company since January
1998.  He  has  served  as President and Chief Executive Officer since September
1998,  and  he  served  as  President and Chief Operating Officer of the Company
from  January  1998  until September 1998. He served as Executive Vice President
and  President  of  the  Practice  Management Services subsidiary of the Company
from  August 1997 until January 1998. He served as a director of OccuSystems and
as  its  President and Chief Operating Officer from January 1997 to August 1997.
From  April  1993  through  December  1996,  Mr.  Thomas  served as OccuSystems'
Executive   Vice  President  and  Chief  Operating  Officer.  Prior  to  joining
OccuSystems  in  1993, Mr. Thomas served in various capacities with Medical Care
International,  Inc.,  most recently as its Senior Vice President and Divisional
Director. Mr. Thomas is a certified public accountant.

     GEORGE  H.  CONRADES  has  served as a Director of the Company since August
1997.  He  served  as  a  director of CRA Managed Care, Inc., one of Concentra's
predecessor  companies  ("CRA"),  from July 1994 until August 1997. Since August
1998,  Mr.  Conrades  has  been a Venture Partner with Polaris Venture Partners.
Mr.   Conrades   served   as  President  and  Chief  Executive  Officer  of  BBN
Corporation/GTE   Internetworking,   a  provider  of  internetworking  services,
products  and  application  solutions from 1994 to August 1998. He had served as
Chairman  of  the  Board  of  BBN  from  November  1995  to  July 1997, when GTE
Corporation  acquired  BBN.  From  1992  to  1994, Mr. Conrades was a partner in
Conrades/Reilly  Associates,  a  business consulting company. From 1961 to 1992,
Mr.  Conrades  held a number of management positions with International Business
Machines  Corp.,  most  recently  as Senior Vice President and a member of IBM's
Corporate  Management Board. Mr. Conrades is also a director of CBS Corporation,
Infinity Broadcasting, and Cubist Pharmaceuticals, Inc.

     HON.  WILLIS D. GRADISON, JR. has served as a Director of the Company since
May  1998.  He  currently  serves  as  Senior Public Policy Counselor for Patton
Boggs,  L.L.P.  From  1993 to December 1998, Mr. Gradison served as President of
the   Health   Insurance  Association  of  America  ("HIAA"),  the  trade  group
representing  the  nation's  commercial  health  insurance  companies.  Prior to
assuming  his position with HIAA, Mr. Gradison served in the United States House
of  Representatives  for  18 years where, most recently, he was ranking Minority
Member  of  the  House Budget Committee and the Health Subcommittee of the House
Ways and Means Committee.

     ROBERT  A.  ORTENZIO  has  served as a Director of the Company since August
1997.  He served as director of OccuSystems from May 1992 until August 1997. Mr.
Ortenzio  currently  serves  as  the  President of Select Medical Corporation, a
private  healthcare company based in Mechanicsburg, Pennsylvania, and has served
in  such  capacity  since  August  1996.  From  1986  to  1996, Mr. Ortenzio was
employed  by  Continental  Medical  Systems,  Inc.,  a  nationwide  provider  of
rehabilitation  services,  from  1986  until  1988 as its Senior Vice President,
from 1988 until June 1995


                                       32
<PAGE>

as  its  President and Chief Operating Officer and from July 1995 to August 1996
as  its  President  and Chief Executive Officer. Mr. Ortenzio also served as the
Executive  Vice  President  and a director of Horizon/CMS Healthcare Corporation
from July 1995 to August 1996.

     MITCHELL  T.  RABKIN,  M.D.  has  served as a Director of the Company since
August  1997.  He  served  as  a director of CRA from February 1995 until August
1997.  Dr.  Rabkin  is  currently  a  Distinguished  Institute  Scholar  for the
Institute  for  Education  and Research of Beth Israel Deaconess Medical Center.
From  1966  to  September  1996, Dr. Rabkin served as Chief Executive Officer of
Boston's  Beth  Israel  Hospital.  He holds the rank of Professor of Medicine at
Harvard  Medical School. From October 1996 to October 1998, Dr. Rabkin served as
Chief  Executive  Officer  of  CareGroup,  Inc.,  the parent corporation of Beth
Israel  Deaconess  Medical  Center.  Dr. Rabkin is a graduate of Harvard College
and received his M.D. from Harvard Medical School.

     RICHARD  D.  REHM,  M.D.  has served as a Director of the Company since May
1998.  He  currently  serves  as President of Network Health Services, a private
company  based in Nashville, Tennessee. Dr. Rehm founded OccuSystems in 1990 and
served  as  its  Chairman  of the Board from 1991 through December 1996 and as a
director  through  August  1997.  Dr.  Rehm  has  owned,  operated and developed
occupational healthcare centers since 1979.

     LOIS  E.  SILVERMAN  has  served  as a Director of the Company since August
1997.  She  co-founded  CRA  in  1978  and  served  as  Chairman of the Board of
Directors  of  CRA  from March 1994 until August 29, 1997 and as Chief Executive
Officer  of  CRA  from  1988  to  December  31, 1995. Prior to founding CRA, Ms.
Silverman  held  the  position  of  Northeast  Regional Manager at IntraCorp., a
Division  of  Cigna  Corporation.  Ms. Silverman is a director of Sun Healthcare
Group,  Inc.,  and  CareGroup, Inc., parent corporation of Beth Israel Deaconess
Medical  Center,  and  serves  as  a  Trustee of Simmons College and Overseer of
Tufts Medical Schools.


EXECUTIVE OFFICERS

     Executive   officers  are  generally  elected  annually  by  the  Board  of
Directors  to  serve, subject to the discretion of the Board of Directors, until
their  respective  successors  are  elected.  Tabular  information  and  a brief
biography  of  each  executive  officer  of  the Company follow. For information
about  Mr.  Carlyle  and  Mr.  Thomas,  see  their biographies under "Directors"
above.




<TABLE>
<CAPTION>
         NAME             AGE                           POSITION
----------------------   -----   ------------------------------------------------------
<S>                      <C>     <C>
John K. Carlyle          44      Chairman, Director
Daniel J. Thomas         40      President and Chief Executive Officer, Director
James M. Greenwood       38      Executive Vice President of Corporate Development
Richard A. Parr II       40      Executive Vice President, General Counsel and
                                 Secretary
Joseph F. Pesce          50      Executive Vice President, Chief Financial Officer and
                                 Treasurer
W. Tom Fogarty, M.D.     51      Senior Vice President and Chief Medical Officer
Kenneth Loffredo         41      Senior Vice President of Marketing and Sales
</TABLE>

     JAMES  M.  GREENWOOD  has  served  as Executive Vice President of Corporate
Development  since  February  1998  and  as  Senior  Vice President of Corporate
Development  of  the  Company  from  August  1997 to February 1998. He served as
OccuSystems'  Chief  Financial Officer from 1993 when he joined OccuSystems as a
Vice  President  until  August  1997.  Mr.  Greenwood  served  as  a Senior Vice
President  of  OccuSystems since May 1994. From 1988 until he joined OccuSystems
in  1993, Mr. Greenwood served in numerous positions with Bank One, Texas, N.A.,
and  its  predecessors,  most  recently  as Senior Vice President and Manager of
Mergers and Acquisitions. Mr. Greenwood is a certified public accountant.

     RICHARD  A. PARR II has served as Executive Vice President, General Counsel
and  Secretary  of  the  Company  since  August  1997. He served as OccuSystems'
Executive  Vice  President,  General  Counsel  and Secretary from August 1996 to
August  1997.  Prior  to  joining OccuSystems, Mr. Parr served as Vice President
and   Assistant  General  Counsel  of  OrNda  HealthCorp,  a  national  hospital
management  company,  from  April  1993  through  August  1996  and as Associate
General Counsel of OrNda HealthCorp from September 1991 through March 1993.


                                       33
<PAGE>
     JOSEPH  F.  PESCE  has  served as Executive Vice President, Chief Financial
Officer  and  Treasurer  of  the  Company since August 1997. He served as Senior
Vice  President-Finance  and  Administration  of  CRA from August 1996 to August
1997  and  as  Chief Financial Officer and Treasurer of CRA from October 1994 to
August  1997.  Mr.  Pesce served as Vice President-Finance and Administration of
CRA  from  October 1994 to August 1996. From October 1981 to September 1994, Mr.
Pesce  held  various financial positions with Computervision Corporation and its
predecessor,  Prime Computer, Inc., including Director of Corporate Planning and
Analysis,  Director  of  Leasing,  Corporate  Controller,  Treasurer  and,  most
recently,  Vice  President-Finance  and  Chief Financial Officer. Mr. Pesce is a
certified public accountant.

     W.  TOM FOGARTY, M.D. has served as Senior Vice President and Chief Medical
Officer  of the Company since August 1997. He served as OccuSystems' Senior Vice
President  and  Chief  Medical  Officer from September 1995 to August 1997. From
1993  to  September  1995,  Dr.  Fogarty  served  as  Vice President and Medical
Director  of  OccuSystems.  From  1992  to 1993, he served as a Regional Medical
Director  of OccuSystems and, from 1985 until 1992, as a medical director of one
of OccuSystems' centers.

     KENNETH  LOFFREDO  has  served  as  Senior  Vice President of Marketing and
Sales  of  the  Company since August 1997. Mr. Loffredo served as Vice President
of  Sales  of  CRA  from February 1995 to August 1997. From July 1993 to January
1995  he  was  CRA's  Regional  Sales  Manager  for  the New England states. Mr.
Loffredo  joined  CRA  in  July  of  1981,  and  from 1981 to June 1993, he held
positions of Case Manager, Account Manager and Regional Manager.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section  16(a)  of  the  Securities  Exchange  Act  of  1934  requires  the
Company's  Directors,  executive  officers  and persons who own more than 10% of
the  Company's  Common  Stock  to  file  reports of holdings and transactions in
Common  Stock  with  the  Securities  and  Exchange  Commission and the National
Association  of  Securities  Dealers,  Inc.  Based  on Company records and other
information,  the  Company  believes that all applicable Section 16(a) reporting
requirements were complied with for all transactions which occurred in 1998.

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

     The  following  table  summarizes  the  compensation  paid to the Company's
Chief  Executive  Officer,  to the Company's former Chief Executive Officer, and
to  the Company's four most highly compensated executive officers other than the
Chief  Executive Officer and the former Chief Executive Officer who were serving
as  executive  officers  at  the  end  of fiscal year 1998 (the "Named Executive
Officers")  during  (a)  fiscal  year  1998 by the Company, and (b) fiscal years
1997  and  1996  by the Company and its predecessors, CRA Managed Care, Inc., or
OccuSystems, Inc.

<TABLE>
<CAPTION>
                                                                              LONG-TERM
                                                                            COMPENSATION
                                                                               AWARDS
                                                                             SECURITIES
                                            ANNUAL COMPENSATION              UNDERLYING       ALL OTHER
                                  --------------------------------------    OPTIONS/SARS     COMPENSATION
  NAME AND PRINCIPAL POSITION      YEAR     SALARY ($)(1)     BONUS ($)        (#)(2)           ($)(3)
-------------------------------   ------   ---------------   -----------   --------------   -------------
<S>                               <C>      <C>               <C>           <C>              <C>
Daniel J. Thomas                  1998         294,241               0         250,000         3,276(4)
President and Chief Executive     1997         248,807          65,000         130,000           198
Officer, Director                 1996         225,000          60,000               0           198

James M. Greenwood                1998         247,495               0         250,000         3,250
Executive Vice President of       1997         212,974          52,500          85,000           198
Corporate Development             1996         170,000          40,000               0           198

Richard A. Parr II                1998         230,000               0          30,000         5,718
Executive Vice President,         1997         212,879          52,500          50,000           198
General Counsel and Secretary     1996          79,166          35,000          50,000            66
</TABLE>
                                       34
<PAGE>



<TABLE>
<CAPTION>
                                                                               LONG-TERM
                                                                              COMPENSATION
                                                                                 AWARDS
                                                                               SECURITIES
                                              ANNUAL COMPENSATION              UNDERLYING        ALL OTHER
                                    --------------------------------------    OPTIONS/SARS     COMPENSATION
   NAME AND PRINCIPAL POSITION       YEAR     SALARY ($)(1)     BONUS ($)        (#)(2)           ($)(3)
---------------------------------   ------   ---------------   -----------   --------------   --------------
<S>                                 <C>        <C>                 <C>             <C>           <C>
Joseph F. Pesce                     1998         289,221               0         230,000          9,243
Executive Vice President, Chief     1997         245,096          86,500         130,000         12,720
Financial Officer and Treasurer     1996         235,000         108,100         160,740         17,955
W. Tom Fogarty, M.D.                1998         240,000               0          30,000          3,416
Senior Vice President and Chief     1997         223,671          55,000          75,000            864
Medical Officer                     1996         166,667          15,000               -            522
Donald J. Larson                    1998         434,540               0               -          5,161(5)
Former Chairman, President and      1997         320,204         116,500         100,000          3,200
Chief Executive Officer             1996         250,000         161,000         178,600          3,000
</TABLE>

--------
(1) Salaries for  the  currently-employed  N amed  Executives Officers effective
    January  1,  1999  are  $400,000  for  Mr.  Thomas,  $300,000 for Mr. Pesce,
    $270,000  for  Mr.  Greenwood, $260,000 for Dr. Fogarty and $250,000 for Mr.
    Parr.

(2) Represents  long-term awards of options and restricted stock. See the tables
    "Option  Grants  in  Last Fiscal Year" and "Long-Term Incentive Plans-Awards
    in Last Fiscal Year."

(3) Amounts  shown  represent,  to  the  extent that the Named Executive Officer
    participated  in  the  Employee Stock Purchase and the 401(k) Plans, (i) the
    purchase  discount  on  shares  of  the  Company's  Common  Stock  purchased
    pursuant  to  the Company's Employee Stock Purchase Plan, (ii) the Company's
    matching  provision  under the Company's 401(k) Plan and (iii) premiums paid
    by  the  Company  for group term life insurance that is taxable compensation
    to the Named Executive Officers.

(4) Excludes  relocation  related  costs  and benefits totaling $158,709 paid to
    Mr.  Thomas  in  1998  associated  with his relocation from Dallas, Texas to
    Boston, Massachusetts.


(5) Excludes  payments totaling $1,354,092 paid to Mr. Larson in connection with
    his  resignation  from  the  Company  as  its  Chairman, President and Chief
    Executive  Officer  in  September  of  1998 comprised of salary continuation
    payments   of  $1,150,000,  transfer  of  the  cash  surrender  value  of  a
    split-dollar  life  insurance policy of $168,592, consulting fees of $25,000
    and  other  benefits of $10,500. The Company is further obligated to pay Mr.
    Larson an additional $125,000 under his consulting agreement in 1999.

                                       35
<PAGE>
OPTION AND RESTRICTED STOCK GRANTS IN 1998
     The  following  tables  set  forth certain information concerning grants by
the  Company  of  stock  options  and  restricted stock to each of the Company's
Named  Executive  Officers  during  1998.  In  accordance  with the rules of the
Securities  and  Exchange Commission, the potential realizable values under such
options  are  shown  based  on  assumed  rates  of  annual  compound stock price
appreciation  of  5%  and 10% over the full option term from the date the option
was granted.

                       Option Grants in Last Fiscal Year

<TABLE>
<CAPTION>
                                                                                            POTENTIAL REALIZABLE
                                                                                              VALUE AT ASSUMED
                             NUMBER OF        % OF TOTAL                                      ANNUAL RATES OF STOCK
                            SECURITIES          OPTIONS                                      PRICE APPRECIATION FOR
                            UNDERLYING        GRANTED TO      EXERCISE OR                      OPTION TERM ($)(2)
                              OPTIONS        EMPLOYEES IN     BASE PRICE     EXPIRATION   ----------------------------
                          GRANTED (#)(1)      FISCAL YEAR      ($/SHARE)        DATE           5%           10%
                         ----------------   --------------   ------------   -----------   -----------   -----------
<S>                      <C>                <C>              <C>            <C>           <C>           <C>
Daniel J. Thomas              220,000       7.47%            $ 30.44          3/18/08      4,457,606    11,064,401
James M. Greenwood            200,000       6.79%            $ 29.44          5/13/08      3,702,617    9,383,159
Richard A. Parr II             30,000       1.02%            $ 29.44          5/13/08        555,393    1,407,474
Joseph F. Pesce               200,000       6.79%            $ 29.44          5/13/08      3,702,617    9,383,159
W. Tom Fogarty, M.D.           30,000       1.02%            $ 29.44          5/13/08        555,393    1,407,474
Donald J. Larson                    -          -                  -                 -              -            -
</TABLE>

--------
(1) The  vesting of each option is cumulative, and no vested portion will expire
    until  the  expiration  of  the  option. These options vest over a four-year
    period  beginning  on  the  January  1  subsequent to the date of the grant,
    with   25%   of  the  options  vesting  and  becoming  exercisable  on  each
    subsequent   January   1.   All  options  will  vest  immediately  upon  the
    occurrence  of  a  change  in  control  triggering  event,  which includes a
    consolidation  or  merger  of  the  stock  of  the  Company,  or  a  sale of
    substantially  all  of  the assets of the Company. The Merger of the Company
    with  Yankee  (see  "Item 1. Business-General") would be considered a change
    in  control  triggering  event,  and,  therefore,  all  unexercisable shares
    would become vested at the time of the Merger.

(2) These  amounts  represent certain assumed rates of appreciation only. Actual
    gains,  if  any,  on  stock  option  exercises  will  depend upon the future
    performance of the Common Stock.

             LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                                                            POTENTIAL REALIZABLE
                              NUMBER OF                                                       VALUE AT ASSUMED
                        SECURITIES UNDERLYING                   % OF TOTAL                   ANNUAL RATES OF STOCK
                         AWARDS GRANTED (#)     PERFORMANCE       OPTIONS      EXERCISE     PRICE APPRECIATION FOR
                       ----------------------   PERIOD UNTIL    GRANTED TO     PRICE OF       OPTION TERM ($)(2)
                         STOCK    RESTRICTED     MATURATION    EMPLOYEES IN     OPTIONS   --------------------------
                        OPTIONS      STOCK     OR PAYOUT (1)    FISCAL YEAR   ($/SHARES)       5%           10%
                       --------- ------------ --------------- -------------- ------------ ------------ ------------
<S>                    <C>         <C>          <C>             <C>            <C>          <C>          <C>
Daniel J. Thomas        21,000       9,000       1998-2005         1.02%       $ 29.44       820,240    1,672,322
James M. Greenwood      35,000      15,000       1998-2005         1.70%       $ 29.44     1,367,067    2,787,202
Richard A. Parr II           -           -               -            -             -              -            -
Joseph F. Pesce         21,000       9,000       1998-2005         1.02%       $ 29.44       820,240    1,672,322
W. Tom Fogarty, M.D.         -           -               -            -             -              -            -
Donald J. Larson             -           -               -            -             -              -            -
</TABLE>
--------
(1) The  awards listed  in  the table relate to the performance period beginning
    January  1,  1998  and  ending  December 31, 2005. The vesting of awards for
    each  officer  will  be  based on the level of attainment of an earnings per
    share   growth  objective.  All  options  will  vest  immediately  upon  the
    occurrence  of  a  change  in  control  triggering  event,  which includes a
    consolidation  or  merger  of  the  stock  of  the  Company,  or  a  sale of
    substantially  all  of  the assets of the Company. The Merger of the Company
    with  Yankee  (see  "Item 1. Business-General") would be considered a change
    in  control  triggering  event,  and,  therefore,  all  unexercisable shares
    would become vested at the time of the Merger.

(2) These  amounts  represent certain assumed rates of appreciation only. Actual
    gains,  if  any,  on  stock  option  exercises  will  depend upon the future
    performance of the Common Stock of the Company.


                                       36
<PAGE>

OPTION EXERCISES AND FISCAL YEAR END VALUES
     The  following  table  provides  information  about option exercises by the
Named  Executive  Officers  during  1998 and the value realized by them (whether
through  the  Company  or  one  of  its  predecessors).  The table also provides
information  about  the  number and value of options held by the Named Executive
Officers at December 31, 1998.


                 AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
            AND FISCAL YEAR-END OPTION AND RESTRICTED STOCK VALUES




<TABLE>
<CAPTION>
                                                                NUMBER OF SECURITIES
                                                               UNDERLYING UNEXERCISED            VALUE OF IN-THE-MONEY
                                                                  OPTIONS AT FISCAL                OPTIONS AT FISCAL
                             SHARES                                  YEAR END (#)                    YEAR END ($)(2)(3)
                           ACQUIRED ON         VALUE       -------------------------------   ---------------------------------
         NAME             EXERCISE (#)     REALIZED ($)     EXERCISABLE     UNEXERCISABLE     EXERCISABLE     UNEXERCISABLE
----------------------   --------------   --------------   -------------   ---------------   -------------   --------------
<S>                      <C>              <C>              <C>             <C>               <C>             <C>
Daniel J. Thomas         -                -                   389,000          266,000         1,020,312        352,357
James M. Greenwood       -                -                   123,000          262,000                 -        352,358
Richard A. Parr II       -                -                    62,750           67,250                 -        160,163
Joseph F. Pesce          -                -                   179,803          368,834           272,857        364,754
W. Tom Fogarty, M.D.     -                -                   103,800           79,500           211,719        192,195
Donald J. Larson         -                -                         -                -                 -              -
</TABLE>


--------
(1) Market  value  of  underlying  securities  based on the closing price of the
    Company's  Common  Stock  on  the  Nasdaq  National  Market  on  the date of
    exercise, minus the exercise price.

(2) Market  value  of  securities  underlying  in-the-money options based on the
    closing  price  of the Company's Common Stock on December 31, 1998 (the last
    trading  day  of  the  fiscal year) on the Nasdaq National Market of $10.69,
    minus the exercise price.

(3) All  options for the Named Executive Officers will vest immediately upon the
    occurrence  of  a  change  in  control  triggering  event,  which includes a
    consolidation  or  merger  of  the  stock  of  the  Company,  or  a  sale of
    substantially  all  of  the assets of the Company. The Merger of the Company
    with  Yankee  (see  "Item 1. Business-General") would be considered a change
    in  control  triggering  event,  and,  therefore,  all  unexercisable shares
    would become vested at the time of the Merger.


COMPENSATION OF DIRECTORS
     Concentra  pays  each  non-employee  Director  an  annual fee of $15,000 in
restricted stock (subject to pro-rata  forfeiture  in the event a director fails
to  attend  at  least  75%  of  board  meetings  in  such  year) and grants each
non-employee  Director  options  each  year to acquire 5,000 shares of Concentra
Common  Stock.  Each  annual  grant  of options vests, and the restrictions with
respect  to  each  annual  grant  of restricted stock lapses, after one year. In
addition,  each  of  the  Company's  Directors  receives  reimbursement  of  all
ordinary  and  necessary expenses incurred in attending any meeting of the Board
of  Directors  or  any committee of the Board of Directors. The Company does not
otherwise  compensate,  and  does not anticipate compensating, its Directors for
their services as Directors.


OTHER COMPENSATION ARRANGEMENTS


EMPLOYMENT AGREEMENTS

     The  Company  has entered into employment agreements with Daniel J. Thomas,
James  M.  Greenwood,  Richard A. Parr II, Joseph F. Pesce, W. Tom Fogarty, M.D.
and  Kenneth  Loffredo.  Each of the agreements provides for the payment of base
salary  amounts,  bonuses  at the discretion of the Company's Board of Directors
and  participation  in  any employee benefit plan adopted by the Company for its
employees.  The  term  of  each  of  the  agreements  is  two  years, subject to
automatic  renewal for additional terms of one year each. Each of the agreements
entitles  each  such  individual  to  receive  severance payments if the Company
terminates   such  individual's  employment  without  cause  or  the  individual
terminates  his  employment for good reason. Such severance payments shall equal
two  years'  base  salary  for Mr. Thomas and one year's base salary for Messrs.
Greenwood,  Parr,  Pesce,  Fogarty  and Loffredo. The Employment Agreements also
provide that, if the Company


                                       37
<PAGE>

terminates   such  individual's  employment  without  cause  or  the  individual
terminates  his  employment  for  a  defined  reason within one year following a
change  in  control  of the Company which occurs on or before December 31, 1999,
the  severance  payments  to  which  the  individuals would be entitled would be
increased  to  two and one-half years' base salary for Mr. Thomas and two year's
base salary for Messrs. Greenwood, Parr, Pesce, Fogarty and Loffredo.


INDEMNITY AGREEMENTS AND LIMITATIONS ON DIRECTORS' LIABILITY

     The  Company  has  entered  into  indemnity  agreements  with  each  of its
Directors  and  executive  officers.  Pursuant  to these agreements, the Company
will,  to  the  extent  permitted  under applicable law, indemnify these persons
against  all  expenses,  judgments,  fines  and penalties incurred in connection
with  the defense or settlement of any actions brought against them by reason of
the  fact  that  they  are  or were Directors or officers of the Company or that
they assumed certain responsibilities at the direction of the Company.

     In  addition,  the  Company's  Certificate  of  Incorporation  provides for
certain   limitations  on  Director  liability.  The  Company's  Certificate  of
Incorporation  provides  that  no  Director  of  the Company shall be personally
liable  to  the  Company  or its stockholders for monetary damages for breach of
fiduciary  duty  as  a  director, except for liability (i) for any breach of the
Director's  duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions  not  in  good  faith  or  which  involve  intentional misconduct or a
knowing  violation  of  law,  (iii)  in  respect  of  certain  unlawful dividend
payments  or  stock redemptions or repurchases, or (iv) for any transaction from
which  the  Director  derived  an improper personal benefit. The effect of these
provisions  is  to  eliminate  the  rights  of  the Company and its stockholders
(through  stockholders'  derivative  suits  on behalf of the Company) to recover
monetary  damages  against a Director for breach of fiduciary duty as a director
(including  breaches  resulting  from grossly negligent behavior), except in the
situations described above.


COMPENSATION PLANS


1997 LONG-TERM INCENTIVE PLAN

     GENERAL

     The  Company  may grant awards with respect to shares of Common Stock under
the  Company's 1997 Long-Term Incentive Plan (the "Incentive Plan") to officers,
directors,  employees and certain consultants and advisors. The awards under the
Incentive  Plan include (i) incentive stock options qualified as such under U.S.
Federal  income  tax  laws,  (ii) stock options that do not qualify as incentive
stock  options,  (iii) stock appreciation rights ("SARs"), (iv) restricted stock
awards and (v) performance units.

     The  number  of  shares  of Common Stock that may be subject to outstanding
awards  under  the Incentive Plan at any one time is equal to ten percent of the
total  number of outstanding shares of Common Stock (treating as outstanding all
shares  of  Common  Stock issuable within 60 days upon exercise of stock options
or  conversion  or  exchange  of  outstanding,  publicly-traded  convertible  or
exchangeable  securities  of  the  Company)  minus the total number of shares of
Common  Stock  subject  to  outstanding  awards under the Incentive Plan and any
stock-based  plan  for  employees  or directors of the Company adopted after the
adoption  of  the  Incentive  Plan.  The  number  of shares authorized under the
Incentive  Plan and the number of shares subject to an award under the Incentive
Plan  will  be  adjusted  for  stock splits, stock dividends, recapitalizations,
mergers and other changes affecting the capital stock of the Company.

     The  Board  of  Directors  or any committee designated by it may administer
the  Incentive  Plan (the "Committee"). The Option and Compensation Committee of
the  Board  of  Directors is currently designated as the Committee to administer
the  Incentive  Plan.  The  Committee  has  broad  discretion  to administer the
Incentive  Plan,  interpret  its  provisions and adopt policies for implementing
the  Incentive  Plan.  This  discretion  includes  the  ability  to  select  the
recipient  of  an  award, determine the type and amount of each award, establish
the  terms  of  each  award,  accelerate  vesting or exercisability of an award,
extend   the  exercise  period  for  an  award,  determine  whether  performance
conditions  have  been  satisfied,  waive conditions and provisions of an award,
permit  the  transfer  of  an  award  to  family  trusts  and  other persons and
otherwise  modify  or amend any award under the Incentive Plan. Nevertheless, no
awards  for  more  than  250,000 shares or more than $2.5 million in cash may be
granted to any one employee in a calendar year.


                                       38
<PAGE>

     Awards


     The  Committee  determines  the exercise price of each option granted under
the  Incentive  Plan.  The exercise price for an incentive stock option must not
be  less  than  the  fair market value of the Common Stock on the date of grant,
and  the exercise price of non-qualified stock options must not be less than 85%
of  the  fair  market  value  of  the  Common  Stock on the date of grant. Stock
options  may  be  exercised  as the Committee determines, but not later than ten
years  from  the  date  of  grant in the case of incentive stock options. At the
discretion  of  the  Committee,  holders  may  use  shares  of  stock to pay the
exercise  price,  including  shares  issuable upon exercise of the option. Under
the  Incentive Plan, each non-employee Director who is a director of the Company
as  of both the day immediately preceding the annual meeting of stockholders and
the  day  immediately  following  that  annual  meeting  shall  automatically be
granted  a  Nonstatutory Option for the purchase of 5,000 shares of Common Stock
and  a Restricted Stock Award having a fair market value of $15,000 effective on
the  date  of  the first meeting of the Board of Directors following that annual
meeting, whether or not that director is in attendance at that Board meeting.


     An  SAR  may be awarded in connection with or separate from a stock option.
An  SAR  is  the right to receive an amount in cash or stock equal to the excess
of  the fair market value of a share of the Common Stock on the date of exercise
over  the  exercise price specified in the agreement governing the SAR (for SARs
not  granted  in  connection  with  a stock option) or the exercise price of the
related  stock  option  (for SARs granted in connection with a stock option). An
SAR  granted  in  connection  with  a stock option will require the holder, upon
exercise,  to  surrender the related stock option or portion thereof relating to
the  number  of  shares  for  which  the SAR is exercised. The surrendered stock
option  or portion will then cease to be exercisable. Such an SAR is exercisable
or  transferable only to the extent that the related stock option is exercisable
or  transferable.  An  SAR  granted  independently  of  a  stock  option will be
exercisable  as  the  Committee  determines.  The Committee may limit the amount
payable  upon  exercise  of  any  SAR. SARs may be paid in cash or stock, as the
Committee provides in the agreement governing the SAR.


     A  restricted  stock  award  is  a grant of shares of Common Stock that are
nontransferable  or  subject to risk of forfeiture until specific conditions are
met.  The  restrictions  will  lapse  in  accordance  with  a  schedule or other
conditions  as  the  Committee  determines.  During  the restriction period, the
holder  of  a  restricted  stock  award may, in the Committee's discretion, have
certain  rights  as a stockholder, including the right to vote the stock subject
to  the  award  or receive dividends on that stock. Restricted stock may also be
issued upon exercise or settlement of options, SARs or performance units.


     Performance  units are performance-based awards payable in cash, stock or a
combination  of  both.  The  Committee  may  select  any  performance measure or
combination  of  measures  as  conditions  for  cash payments or stock issuances
under  the  Incentive  Plan,  except  that  performance  measures  for executive
officers  must  be  objective  measures chosen from among the following choices:
(a)  total  stockholder  return  (Common Stock appreciation plus dividends); (b)
net  income;  (c)  earnings  per  share;  (d) cash flow per share; (e) return on
equity;  (f)  return  on  assets,  (g)  revenues;  (h)  costs;  (i)  costs  as a
percentage  of  revenues;  (j)  increase  in the market price of Common Stock or
other  securities;  (k)  the  performance  of  the  Company  in any of the items
mentioned  in clause (a) through (j) in comparison to the average performance of
the  companies  included  in the Nasdaq Health Services Stocks Index; or (1) the
performance  of  the Company in any of the items mentioned in clause (a) through
(j)  in  comparison  to  the  average  performance  of  the  companies used in a
self-constructed  peer group established before the beginning of the performance
period.   The  Committee  may  choose  different  performance  measures  if  the
stockholders  so approve, if tax laws or regulations change so as not to require
stockholder  approval  of different measures in order to deduct the compensation
related  to  the  award  for  federal  income  tax purposes, or if the Committee
determines  that  it  is  in  the  Company's  best  interest to grant awards not
satisfying  the  requirements  of Section 162(m) of the Internal Revenue Code or
any successor law.


     Other Provisions


     At  the Committee's discretion and subject to conditions that the Committee
may  impose,  a  participant's  tax  withholding with respect to an award may be
satisfied  by  the  withholding  of  shares  of  Concentra Common Stock issuable
pursuant  to  the  award or the delivery of previously owned shares of Concentra
Common Stock, in either case based on the fair market value of the shares.


                                       39
<PAGE>

     The  Committee  has  discretion  to  determine  whether  an award under the
Incentive  Plan  will  have  change-of-control  features. The Committee also has
discretion  to vary the change of control features as its deems appropriate. The
following  describes  the  change of control features that the Company generally
expects  may  apply  to additional awards, if any such feature applies. An award
agreement  under  the  Incentive Plan may provide that, upon a change of control
of  the Company with respect to awards held by Participants who are employees or
directors  at  the occurrence of the change of control, (1) all outstanding SARs
and  options  will  become immediately and fully vested and exercisable in full,
(2)  the  restriction  period  on any restricted stock award will be accelerated
and  the  restrictions  will  expire,  and  (3)  the  target  payout opportunity
attainable  under the performance units will be deemed to have been fully earned
for  all  performance  periods as of the effective date of the change in control
and  the  holder  will  be  paid  a  pro rata portion of all associated targeted
payout  opportunities  (based  on  the  number  of complete and partial calendar
months  elapsed  as  of  the  change  of  control)  in  cash  within thirty days
following  the  change  of  control  or  in  stock effective as of the change of
control, for cash and stock-based  performance  units,  respectively.  The award
may  also  provide that it will remain exercisable for its original term whether
or  not  employment  is  terminated  at  or  following  a  change in control. In
general,  a  change  in control of the Company occurs in any of four situations:
(1)  a  person other than the Company or certain affiliated companies or benefit
plans  becomes  the  beneficial  owner of 20% or more of the voting power of the
Company's  outstanding  voting  securities (except acquisitions from the Company
or  in  a transaction meeting the requirements of the parenthetical exception in
clause  (3) below); (2) a majority of the Board of Directors is not comprised of
the  members  of  the  Board  immediately  following August 29, 1997 and persons
whose  elections as directors were approved by those directors or their approved
successors;  (3)  the Company merges or consolidates with another corporation or
entity  (whether  Concentra or the other entity is the survivor), or the Company
and  the  holders  of  the voting securities of such other corporation or entity
(or  the  stockholders  of  Concentra  and  such  other  corporation  or entity)
participate  in  a  securities  exchange  (other than a merger, consolidation or
securities  exchange in which the Company's voting securities are converted into
or  continue  to represent securities having the majority of voting power in the
surviving  company,  in  which  no person other than that surviving company owns
20%  or  more  of the outstanding shares of common stock or voting shares of the
surviving  corporation,  and  in  which  at  least  a  majority  of the board of
directors  of  the  surviving corporation were members of the incumbent board of
Concentra);  or  (4)  Concentra  liquidates or sells all or substantially all of
its  assets,  except  sales to an entity having substantially the same ownership
as Concentra.

     If  a  restructure of Concentra occurs that does not constitute a change in
control  of  Concentra, the Committee may (but need not) cause Concentra to take
any  one  or  more  of the following actions: (1) accelerate in whole or in part
the  time  of  vesting  and  exercisability of any outstanding stock options and
stock  appreciation rights in order to permit those stock options and SARs to be
exercisable  before,  upon or after the completion of the restructure; (2) grant
each  optionholder  corresponding cash or stock SARS; (3) accelerate in whole or
in  part  the  expiration  of  some or all of the restrictions on any restricted
stock  award;  (4)  treat  the  outstanding performance units as having fully or
partially  met  their  targets and pay, in full or in part, the targeted payout;
(5)  if  the  restructure  involves  a transaction in which Concentra is not the
surviving  entity,  cause the surviving entity to assume in whole or in part any
one  or  more of the outstanding awards under the Incentive Plan upon such terms
and  provisions  as  the Committee deems desirable; or (6) redeem in whole or in
part   any  one  or  more  of  the  outstanding  awards  (whether  or  not  then
exercisable)  in  consideration  of  a  cash  payment,  adjusted for withholding
obligations.  A restructure generally is any merger of the Company or the direct
or  indirect  transfer  of  all  or  substantially  all  of the Company's assets
(whether  by  sale,  merger,  consolidation,  liquidation  or  otherwise) in one
transaction or a series of transactions.

     Without  stockholder  approval,  the  Board  of Directors may not amend the
Incentive  Plan  to increase materially the aggregate number of shares of Common
Stock  that  may  be  issued  under  the  Incentive Plan (except for adjustments
pursuant  to the terms of the Incentive Plan). Otherwise, the Concentra Board of
Directors  may  at  any  time  and  from  time  to time alter, amend, suspend or
terminate  the  Incentive  Plan  in  whole or in part and in any way, subject to
requirements  that  may  exist in stock exchange rules or in securities, tax and
other  laws  from  time to time. No award may be issued under the Incentive Plan
after August 29, 2007.


OTHER OUTSTANDING OPTIONS AND WARRANTS

     In  addition to the options and awards granted under the Incentive Plan and
warrants  to  purchase  350,000  shares  of  Common  Stock for $7.00 per Warrant
granted  to  Creditanstalt-Bankverein  (of  which 200,000 were unexercised as of
December  31,  1998),  the Company has as of December 31, 1998 issued or assumed
from its


                                       40
<PAGE>

predecessors  or acquired companies options or warrants to purchase an aggregate
of  2,525,564 shares of Common Stock pursuant to separate agreements between the
Company  and  the  holders  thereof.  The  2,525,564  options that are currently
outstanding  have an average exercise price of $15.96 per share, and are subject
to various vesting provisions.

     Unexercised  options and warrants, and their exercise price, are subject to
adjustment  if  the  Company issues Common Stock for a price per share less than
the  exercise  price  or  if  there  is  a  subdivision  or consolidation of the
Company's  Common  Stock,  the  payment of a stock dividend or other increase or
decrease  in  the  number of shares of Common Stock outstanding, and the Company
does  not  receive  compensation therefor. In addition, the number (and type) of
securities  subject  to  an  option  or warrant are subject to adjustment if the
Company is party to a merger or consolidation.


401(K) PLAN

     The  Company has a defined contribution retirement plan which complies with
Section  401(k) of the Internal Revenue Code. Substantially all employees of the
Company,  including  certain  officers  and  Directors  of the Company, who have
completed  six  months  of  service are eligible to participate in the Concentra
Managed   Care,   Inc.  401(k)  Plan  (the  "Plan").  Generally,  Employees  may
contribute  amounts up to a maximum of 15% of the employee's compensation. Under
the  Plan,  the  Company  has  the option of matching up to 50% of participants'
pretax  contributions  up  to  a  maximum of 6% of compensation. For fiscal year
1998, the Company elected to match 50% of up to 4% of compensation.


EMPLOYEE STOCK PURCHASE PLAN

     Until  March  2,  1999,  the  Company maintained an Employee Stock Purchase
Plan  that permitted substantially all employees to acquire the Company's Common
Stock  at  the  end  of  each specified period at a purchase price of 85% of the
lower  of the fair market value at the beginning or the end of the participation
period.  Periods  were  semi-annual  and  began  on January 1 and July 1 of each
year.  Employees  were allowed to designate up to 15% of their base compensation
for  the  purchase  of  Common  Stock.  The  Option  and  Compensation Committee
administered  the  Employee  Stock  Purchase Plan. On March 2, 1999, the Company
terminated  the  Employee  Stock  Purchase  Plan.  The  final  period  for which
participating  employees  acquired shares of the Company's common stock began on
January 1, 1999 and ended March 2, 1999.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
     John  K. Carlyle, Concentra's non-employee Chairman, has served as a member
of the Option and Compensation Committee since December, 1998.


                                       41
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
     The  following  table  sets  forth certain information regarding the amount
and  nature  of  the  beneficial  ownership  of the Common Stock as of March 15,
1999,  by  (i) each person known by the Company to own beneficially more than 5%
of  any  class  of the Company's outstanding voting securities, (ii) each of the
Company's  directors, (iii) each currently-employed officer of the Company named
in  the  Summary Compensation Table under the heading "Compensation of Executive
Officers,"  and (iv) all current directors and executive officers of the Company
as  a  group.  Unless otherwise indicated, the Company believes that each person
or  entity  named below has sole voting and investment power with respect to all
shares  shown  as  beneficially  owned  by  such  person  or  entity, subject to
community  property  laws  where applicable and the information set forth in the
footnotes to the table below.




<TABLE>
<CAPTION>
                                                        STOCK OPTIONS
                                                             AND
                                                         CONVERTIBLE        SHARES
                                                        SUBORDINATED     BENEFICIALLY    PERCENTAGE OF
                 NAME                       SHARES        NOTES(1)         OWNED (2)         CLASS
--------------------------------------   -----------   --------------   --------------  --------------
<S>                                      <C>           <C>              <C>              <C>
Welsh, Carson, Anderson
& Stowe and affiliates                    6,433,203         836,364        7,269,567         15.1%(3)
320 Park Avenue
New York, NY 10022
Massachusetts Financial
Services Company                          5,852,888         672,785        6,525,673         13.6%
500 Boylston
Boston, MA 02116
T. Rowe Price Associates                  5,629,587               -        5,629,587         11.9%
100 E. Pratt Street
Baltimore, MD 21202
Directors
John K. Carlyle                                 510          75,000           75,510            *
George H. Conrades                            1,326          51,971           53,297            *
Hon. Willis D. Gradison, Jr.                  1,510           5,000            6,510            *
Robert A. Ortenzio                           15,188          25,000           40,188            *
Mitchell T. Rabkin, M.D.                      1,326          51,971           53,297            *
Richard D. Rehm, M.D.                        10,000          38,750           48,750            *
Lois E. Silverman                           641,512          10,000          651,512          1.4%
Executive Officers
Daniel J. Thomas                             33,367         369,000          402,367            *
James M. Greenwood                           33,000         123,000          156,000            *
Richard A. Parr II                           17,773          62,750           80,523            *
Joseph F. Pesce                              40,411         179,803          220,214            *
W. Tom Fogarty, M.D.                         99,389         103,800          203,189            *
All directors and executive officers
as a group (14 persons)                     921,859       1,160,338        2,082,197          4.3%
</TABLE>


--------
  * Less than 1%
(1) Includes  shares  that may be acquired within 60 days pursuant to conversion
    of  convertible  subordinated notes or pursuant to exercise of stock options
    awarded under incentive compensation plans.
(2) A  person  is  considered to beneficially own any shares (a) over which such
    person  exercises  sole  or  shared  voting  or  investment power, or (b) of
    which  such  person  has  the  right  to acquire beneficial ownership at any
    time  within  60  days  of  March  15,  1999 (i.e. through the conversion of
    securities  or  the  exercise  of  stock  options).  Shares are deemed to be
    outstanding  for  the  purposes of computing the percentage ownership of the
    person  holding  such shares, but are not deemed outstanding for purposes of
    computing the percentage of any other person shown on the table.
(3) The  ownership  percentage  includes  both shares and shares  which would be
    issued upon the  conversion of  convertible  subordinated  notes owned as of
    March 15,  1999.  Between  July 2, 1999 and July 6, 1999,  WCAS sold  90,000
    shares decreasing its beneficial ownership to 14.9% as of July 6, 1999


                                       42
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On March 2, 1999,  Concentra entered into the Merger Agreement with Yankee.
On March 24, 1999,  Concentra  entered  into an Amended  Merger  Agreement  with
Yankee, amending the Merger Agreement. The Amended Merger Agreement contemplates
Merger of  Yankee  with and into  Concentra.  As a result  of the  Merger,  each
outstanding  share of Concentra Common Stock will be converted into the right to
receive  $16.50 in cash.  The Merger is  conditioned  upon,  among other things,
approval by the  stockholders  of  Concentra,  receipt of financing  and certain
regulatory  approvals.  The  transaction  is structured to be accounted for as a
recapitalization.

     Lois  E.  Silverman,  a Director of the Company, is one of the trustees and
beneficiaries  of  Colonial  Realty  Trust,  which  leases twelve offices to the
Company  for an annual aggregate consideration of $700,000. The Company believes
that  the  rental  rates  paid  to  Colonial Realty Trust are fair market rental
rates.
     The  Company is party to a Registration Rights Agreement with Comprehensive
Rehabilitation  Associates  Inc.,  J.H. Whitney & Co., Whitney 1990 Equity Fund,
L.P.,  Whitney  Subordinated  Debt  Fund,  L.P.,  First  Union  Corporation, Ms.
Silverman  and  Donald  J.  Larson,  which  was  entered  into on March 8, 1994.
Pursuant  to  the  Registration Rights Agreement, the holders of at least 25% of
the  shares  of  Common Stock of the Company subject to the Agreement (excluding
Ms.   Silverman   and  Mr.  Larson)  may  require  the  Company  to  effect  the
registration  of  the shares of Common Stock of the Company held by such parties
for  sale  to  the  public on three occasions, subject to certain conditions and
limitations.  In addition, under the terms of the Registration Rights Agreement,
if  the  Company proposes to register any of its securities under the Securities
Act  of  1933,  whether  for  its  own  account or otherwise, the parties to the
Registration  Rights  Agreement  (including  Ms.  Silverman  and Mr. Larson) are
entitled  to  receive  notice  of  such registration and to include their shares
therein,  subject  to certain conditions and limitations. The Company has agreed
to  pay  fees,  costs and expenses of any registration effected on behalf of the
parties  to the Registration Rights Agreement (other than underwriting discounts
and commissions).
     W.  Tom  Fogarty,  M.D.,  an  executive  officer  of  the  Company,  is the
President,  a  director  and  a  member  of  Occupational  Health Centers of the
Southwest,  P.A.  ("OHCSW"), and several other Physician Groups. The Company has
entered  into  a 40 year management agreement with each of the Physician Groups.
OHCSW  paid approximately $119,091,000 in management fees to the Company in 1998
under its management agreement.
     The  Company  has entered into employment agreements with Daniel J. Thomas,
James  M.  Greenwood,  Richard A. Parr II, Joseph F. Pesce, W. Tom Fogarty, M.D.
and   Kenneth   Loffredo.   See   "Executive   Compensation-Other   Compensation
Arrangements" for a discussion of the terms of these agreements.


                                       43
<PAGE>

                                    PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a) 1. Consolidated Financial Statements

     The   following  consolidated  financial  statements  of  the  Company  are
   included in Item 8.



<TABLE>
<S>                                                                     <C>
     Report of Independent Public Accountants .......................   F-1
     Consolidated Balance Sheets-December 31, 1997 and 1998 .........   F-2
     Consolidated Statements of Operations-Years Ended
      December 31, 1996, 1997 and 1998 ..............................   F-3
     Consolidated Statements of Cash Flows-Years Ended
      December 31, 1996, 1997 and 1998 ..............................   F-4
     Consolidated Statements of Stockholders' Equity-Years Ended
      December 31, 1996, 1997 and 1998 ..............................   F-5
     Notes to Consolidated Financial Statements .....................   F-6
</TABLE>


     2. Financial Statement Schedule


     The  financial statement schedule, Supplemental Schedule II - Valuation and
Qualifying  Accounts  for  the  years ended December 31, 1996, 1997 and 1998, is
filed with this report and appears on page S-1.

     The  Report  of  Independent  Public  Accountants  on  Financial  Statement
Schedule is filed with this report and appears on page S-2.


     All  other  schedules  for which provision is made in Regulation S-X of the
Securities   and   Exchange  Commission  are  not  required  under  the  related
instructions or are not applicable and, therefore, have been omitted.

     3. Exhibits:

     The following is a list of exhibits filed as part of the Form 10-K:



<TABLE>
<CAPTION>
 Exhibit
 Number                                                   Description
-------- -------------------------------------------------------------------------------------------------------------
<S>      <C>
2.1      Agreement and Plan of Merger dated February 24, 1998 among the Registrant and Preferred Payment Sys-
         tems, Inc. (incorporated by reference to Exhibit 2.2 to the Registrant's Annual Report on Form 10-K (File
         No. 000-22751) filed with the SEC on March 31, 1998)
2.2      Agreement and Plan of Merger dated March 2, 1999 between Yankee Acquisition Corp. and the Registrant
         (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K (File No. 000-
         22751) filed with the SEC on March 3, 1999)
2.3      Amended and Restated Agreement and Plan of Merger dated March 24, 1999 between Yankee Acquisition
         Corp. and the Registrant (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on
         Form 8-K (File No. 000-22751) filed with the SEC on July 14, 1999)
3.1      Amended and Restated Certificate of Incorporation dated August 27, 1997 (incorporated by reference to
         Exhibit 3.1 to the Registrant's Annual Report on Form 10-K (File No. 000-22751) filed with the SEC on
         March 31, 1998)
3.2      Bylaws of Registrant (incorporated by reference to Exhibit 3.3 to the Registrant's Registration Statement on
         Form S-4 (File No. 333-27105) filed with the SEC on July 31, 1997)
4.1      Form of Certificate of Common Stock, par value $.01 per share, of the Registrant (incorporated by refer-
         ence to Exhibit 4.1 to the Registrant's Registration Statement on Form S-4 (File No. 333-27105) filed with
         the SEC on July 31, 1997)
4.2      Indenture dated December 24, 1996 between OccuSystems and United States Trust Company of New York,
         as Trustee, (the "OccuSystems Indenture") relating to the 6% Convertible Subordinated Notes due 2001
         (incorporated by reference to Exhibit 4.1 to OccuSystems' Registration Statement on Form S-3 (File No.
         333-20933) as filed with the SEC on January 31, 1997)
</TABLE>

                                       44
<PAGE>


<TABLE>
<CAPTION>
 Exhibit
Number                                                      Description
-------- -----------------------------------------------------------------------------------------------------------------
<S>      <C>
 4.3     First Supplemental Indenture dated August 29, 1997 between OccuSystems, the Registrant and United States
         Trust Company of New York, as Trust, relating to the 6% Convertible Subordinated Notes due 2001 (incor-
         porated by reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-K (File No. 00-22751)
         filed with the SEC on March 31, 1998)
 4.4     Indenture dated as of March 16, 1998 between the Registrant and Chase Bank of Texas, N.A., as Trustee,
         (the "Concentra Indenture") relating to the 4.5% Convertible Subordinated Notes due 2003 (incorporated by
         reference to the Registrant's Current Report on Form 8-K (File No. 000-22751) filed with the SEC on
         March 30, 1998)
 4.5     Form of 6% Convertible Subordinated Note due 2001, establishing the terms of the 6% Convertible Subor-
         dinated Notes due 2001 pursuant to the OccuSystems Indenture (incorporated by reference to Exhibit A to
         the OccuSystems Indenture which Indenture is incorporated by reference to Exhibit 4.1 to OccuSystems'
         Registration Statement on Form S-3 (File No. 333-20933) as filed with the SEC on January 31, 1997)
 4.6     Form of 4.5% Convertible Subordinated Notes due 2003, establishing the terms of the 4.5% Convertible
         Subordinated Notes due 2003 pursuant to the Concentra Indenture (incorporated by reference to the Regis-
         trant's Current Report on Form 8-K (File No. 000-22751) filed with the SEC on March 30, 1998)
 4.7     Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by reference to
         Exhibit 4.6 to the Registrant's Annual Report on Form 10-K (File No. 000-22751) filed with the SEC on
         March 31, 1998)
 4.8     Form of Right Certificate (included as Exhibit B to the Rights Agreement filed as Exhibit 10.2 hereto). Pur-
         suant to the Rights Agreement, printed Right Certificates will not be delivered until as soon as practicable
         after the Distribution Date (as defined in the Rights Agreement)
 4.9     Registration Rights Agreement dated as of March 11, 1998, among the Registrant, BT Alex. Brown Incor-
         porated, BancAmerica Robertson Stephens, Donaldson, Lufkin & Jenrette Securities Corporation and Piper
         Jaffray Inc. (incorporated by reference to the Registrant's Current Report on Form 8-K (File No. 000-22751)
         filed with the SEC on March 30, 1998)
 4.10    Registration Rights Agreement dated as of March 8, 1994, among Comprehensive Rehabilitation Associates,
         Inc., J.H. Whitney & Co., Whitney 1990 Equity Fund, L.P., Whitney Subordinated Debt Fund, L.P., First
         Union Corporation, Lois E. Silverman and Donald J. Larson (incorporated by reference to Exhibit 10.7 to
         CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
10.1     Amended and Restated Credit Agreement dated as of February 20, 1998, between the Registrant, as Bor-
         rower, and First Union National Bank, as Administrative Agent, Fleet National Bank, as Documentation
         Agent, and the banks and financial institutions listed as signatories thereto, as amended by that certain letter
         agreement dated as of March 9, 1998, and as further amended by that certain letter agreement dated as of
         March 12, 1998 (incorporated by reference to Exhibit 10.1 to the Registrant's Annual Report on Form 10-K
         (File No. 000-22751) filed with the SEC on March 31, 1998)
10.2     Purchase Agreement dated as of March 11, 1998, among the Registrant, BT Alex. Brown Incorporated,
         BancAmerica Robertson Stephens, Donaldson, Lufkin & Jenrette Securities Corporation and Piper Jaffray,
         Inc. (incorporated by reference to the Registrant's Current Form on Form 8-K (File No. 000-22751) filed
         with the SEC on March 30, 1998)
10.3     Rights Agreement dated September 29, 1997 between the Registrant and ChaseMellon Shareholder Ser-
         vices, L.L.C. (incorporated by reference to Exhibit 1 to the Registrant's Registration Statement on Form 8-A
         filed with the SEC on October 1, 1998)
10.4     Concentra Managed Care, Inc. 1997 Long-Term Incentive Plan (incorporated by reference to Appendix G
         to the Joint Proxy Statement/Prospectus forming a part of the Registrant's Registration Statement on Form
         S-4 (File No. 333-27105) filed with the SEC on July 31, 1997)
10.5     Concentra Managed Care, Inc. 1997 Employee Stock Purchase Plan (incorporated by reference to Appendix
         H to the Joint Proxy Statement/Prospectus forming a part of the Registrant's Registration Statement on Form
         S-4 (File No. 333-27105) filed with the SEC on July 31, 1997)
10.6     CRA Managed Care, Inc. 1995 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.25
         to CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
</TABLE>

                                       45
<PAGE>


<TABLE>
<CAPTION>
 Exhibit
Number                                                    Description
-------- ------------------------------------------------------------------------------------------------------------
<S>      <C>
10.7     CRA Managed Care, Inc. 1994 Non-Qualified Stock Option Plan for Non-Employee Directors (incorporated
         by reference to Exhibit 10.3 to CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with
         the SEC on March 17, 1995)
10.8     CRA Managed Care, Inc. 1994 Non-Qualified Time Acceleration Restricted Stock Option Plan (incorporated
         by reference to Exhibit 10.5 to CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with
         the SEC on March 17, 1995)
10.9     OccuSystems, Inc. 1995 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.10 to OccuSys-
         tems' Registration Statement on Form S-1 (File No. 33-79734) filed with the SEC on May 8, 1995)
10.10    First Amended and Restated OccuSystems, Inc. and its Subsidiaries and Affiliates Stock Option and
         Restricted Stock Purchase Plan dated April 28, 1992 (incorporated by reference to Exhibit 10.11 to Occu-
         Systems' Registration Statement on Form S-1 (File No. 33-79734) filed with the SEC on May 8, 1995)
10.11    Employment Agreement dated April 21, 1997, between the Registrant and Joseph F. Pesce (incorporated by
         reference to Exhibit 10.9 to the Registrant's Registration Statement on Form S-4 (File No. 333-27105) filed
         with the SEC on July 31, 1997)
10.12    Employment Agreement dated April 21, 1997, between the Registrant and Richard A. Parr II (incorporated
         by reference to Exhibit 10.11 to the Registrant's Registration Statement on Form S-4 (File No. 333-27105)
         filed with the SEC on July 31, 1997)
10.13    Employment Agreement dated April 21, 1997, between the Registrant and W. Tom Fogarty (incorporated
         by reference to Exhibit 10.13 to the Registrant's Registration Statement on Form S-4 (File No. 333-27105)
         filed with the SEC on July 31, 1997)
10.14    Employment Agreement dated April 21, 1997, between the Registrant and James M. Greenwood (incorpo-
         rated by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form S-4 (File No. 333-
         27105) filed with the SEC on July 31, 1997)
10.15    Indemnification Agreement dated September 17, 1997, between the Registrant and Daniel J. Thomas (iden-
         tical agreements were executed between the Registrant and each of the following: Joseph F. Pesce, Richard
         A. Parr II, James M. Greenwood, W. Tom Fogarty, Kenneth Loffredo, Mitchell T. Rabkin, George H. Con-
         rades, Robert A. Ortenzio, Lois E. Silverman, Paul B. Queally, John K. Carlyle) (incorporated by reference
         to Exhibit 10.17 to the Registrant's Annual Report on Form 10-K (File No. 000-22751) filed with the SEC
         on March 31, 1998)
10.16    Agreement of Acceptance dated as of July 29, 1997, among the Registrant, Donald J. Larson and Lois E.
         Silverman (incorporated by reference to Exhibit 10.19 to the Registrant's Registration Statement on Form
         S-4 (File No. 333-27105) filed with the SEC on July 31, 1997)
10.17    Software License Agreement dated February 10, 1995 between CRA and CompReview, Inc. (confidential
         treatment granted) (incorporated by reference to CRA's Registration Statement on Form S-1 (File No.
         33-90426) filed with the SEC on March 17, 1995)
10.18    Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
         located at 168 U.S. Route 1, Falmouth, ME 04105 (incorporated by reference to Exhibit 10.10 to CRA's
         Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
10.19    Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
         located at 46 Austin Street, Newtonville, MA 02160 (incorporated by reference to Exhibit 10.11 to CRA's
         Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
10.20    Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
         located at 312 Union Wharf, Boston, MA 02109 (incorporated by reference to Exhibit 10.17 to CRA's Reg-
         istration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
10.21    Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
         located at 565 Turnpike Street, North Andover, MA 01845 (incorporated by reference to Exhibit 10.18 to
         CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
10.22    Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
         located at 15A Riverway Place, Bedford, NH 03110 (incorporated by reference to Exhibit 10.19 to CRA's
         Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
</TABLE>

                                       46
<PAGE>


<TABLE>
<CAPTION>
  Exhibit
Number                                                      Description
---------- -------------------------------------------------------------------------------------------------------------
<S>        <C>
 10.23     Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
           located at 509 Stillwells Corner Road, Freehold, NJ 07728 (incorporated by reference to Exhibit 10.20 to
           CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
 10.24     Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
           located at 732 Thimble Shoals Blvd., Newport News, VA 23606 (incorporated by reference to Exhibit 10.21
           to CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
 10.25     Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
           located at 10132 Colvin Run Road, Suite A, Great Falls, VA 22066 (incorporated by reference to Exhibit
           10.22 to CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17,
           1995)
 10.26     Occupational Medicine Center Management and Consulting Agreement dated December 31, 1993, between
           Concentra Health Services, Inc. (formerly OccuCenters, Inc.) ("CHS") and Occupational Health Centers of
           Southwest, P.A., a Texas professional association (incorporated by reference to Exhibit 10.6 to OccuSys-
           tems' Annual Report on Form 10-K (File No. 0-24440) filed with the SEC on March 29, 1996)
 10.27     Occupational Medicine Center Management and Consulting Agreement dated December 31, 1993, between
           CHS and Occupational Health Centers of Southwest, P.A., a Arizona professional association (incorporated
           by reference to Exhibit 10.7 to OccuSystems' Annual Report on Form 10-K (File No. 0-24440) filed with
           the SEC on March 29, 1996)
 10.28     Occupational Medicine Center Management and Consulting Agreement dated December 31, 1993, between
           CHS and Occupational Health Centers of New Jersey, a New Jersey professional association (incorporated
           by reference to Exhibit 10.8 to OccuSystems' Registration Statement on Form S-1 (File No. 33-01660) filed
           with the SEC on March 28, 1996)
 10.29     Warrant Agreement dated January 3, 1995 between OccuSystems and Creditanstalt- Bankverein (incorpora-
           tion by reference to Exhibit 10.13 to OccuSystems' Registration Statement on Form S-1 (File No. 33-01660)
           filed with the SEC on March 28, 1996)
 10.30     Voting Agreement dated May 15, 1997, by and between Lois E. Silverman and Donald J. Larson (incorpo-
           rated by reference to Exhibit 10.34 to the Registrant's Annual Report on Form 10-K (File No. 000-22751)
           filed with the SEC on March 31, 1998)
 10.31     Amendment No. 1 to Rights Agreement dated March 2, 1999 between the Registrant and ChaseMellon
           Shareholder Services, L.L.C. (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on
           Form 8-K (File No. 000-22751) filed with the SEC on March 31, 1998)++
+10.32     Amendment No. 1 to Employment Agreement dated January 12, 1999 between the Registrant and Joseph F.
           Pesce
+10.33     Amendment No. 1 to Employment Agreement dated January 12, 1999 between the Registrant and Richard
           A. Parr II
+10.34     Employment Agreement dated January 12, 1999 between the Registrant and Daniel J. Thomas
+10.35     Amendment No. 1 to Employment Agreement dated January 12, 1999 between the Registrant and W. Tom
           Fogarty
+10.36     Amendment No. 1 to Employment Agreement dated January 12, 1999 between the Registrant and James
           M. Greenwood
 10.37     Employment Agreement dated September 17, 1997, between the Registrant and Kenneth Loffredo (incorpo-
           rated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q (File No. 000-22751)
           filed with the SEC on November 13, 1998)
+10.38     Amendment No. 1 to Employment Agreement dated January 12, 1999 between the Registrant and Kenneth
           Loffredo
 10.39     Employment Agreement dated January 12, 1998 between the Registrant and Richard D. Rehm, M.D.
           (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q (File No.
           000-22751) filed with the SEC on August 13, 1998)
 10.40     Employment Agreement dated February 10, 1998 between the Registrant and Stephen Read (incorporated
           by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q (File No. 000-22751) filed
           with the SEC on August 13, 1998)
</TABLE>

                                       47
<PAGE>


<TABLE>
<CAPTION>
Exhibit
Number                                                     Description
----------- ---------------------------------------------------------------------------------------------------------
<S>         <C>
 10.41      Indemnification Agreement dated May 13, 1998 between the Registrant and Hon. Willis D. Gradison, Jr.
            (identical agreements executed between the Registrant and Stephen Read (dated December 16, 1997), Rich-
            ard D. Rehm, M.D. (dated May 13, 1998), Eliseo Ruiz III (dated May 11, 1998), Scott Henault (dated Sep-
            tember 17, 1997), Darla Walls (dated December 16, 1997), Jeffrey R. Luber (dated December 16, 1997) and
            Martha Kuppens (dated December 16, 1997)) (incorporated by reference to Exhibit 10.3 to the Registrant's
            Quarterly Report on Form 10-Q (File No. 000-22751) filed with the SEC on August 13, 1998.
+21.1       List of Subsidiaries
+23.1       Consent of Arthur Andersen LLP
+27.1       Financial Data Schedule
</TABLE>

--------
+ Filed herewith.

     (b) Reports on Form 8-K.


Reports on Form 8-K
     During  the  quarter  ended  December  31,  1998,  the Registrant filed the
following Current Reports on Form 8-K:
     (1)  On  November  20, 1998, the Company filed a Current Report on Form 8-K
dated  November  18,  1998,  reporting under Item 5 (Other Events) the Company's
board  of  directors  naming  Daniel  J.  Thomas  President  and Chief Executive
Officer on a permanent basis.
     (2)  On  October  29,  1998, the Company filed a Current Report on Form 8-K
dated  October  29, 1998, reporting under Item 5 (Other Events) the earnings for
the  quarter  ended  September  30,  1998  for  the  Company  and  the Company's
formation  of a special committee to evaluate strategic alternatives in response
to  several  unsolicited  expressions  of  interest regarding the acquisition of
some or all of the Company's common stock.


                                       48
<PAGE>

                                   SIGNATURES

     Pursuant  to  the  requirements  of  Section  13 or 15(d) of the Securities
Exchange  Act  of  1934, the Registrant has duly caused this Report to be signed
on  its behalf by the undersigned, thereunto duly authorized, on the 15th day of
July, 1999.


                                      CONCENTRA MANAGED CARE, INC.


                                      By:      /s/ Thomas E. Kiraly
                                        -------------------------------------
                                                   Thomas E. Kiraly

                                      Executive Vice President, Chief
                                      Financial Officer and Treasurer (Principal
                                      Financial and Accounting Officer)


     Pursuant  to  the requirements of the Securities Exchange Act of 1934, this
Report  has  been  signed  below  by  the  following  persons  on  behalf of the
Registrant and in the capacities indicated.




<TABLE>
<CAPTION>
                SIGNATURE                                  TITLE                       DATE
-----------------------------------------   ----------------------------------   ----------------
<S>                                         <C>                                  <C>
         /s/ Daniel J. Thomas                   President, Chief Executive       July 15, 1999
-------------------------------------           Officer and Director (Principal
             Daniel J. Thomas                   Executive Officer)

         /s/ Thomas E. Kiraly                   Executive Vice President, Chief  July 15, 1999
-------------------------------------           Financial Officer and Treasurer
             Thomas E. Kiraly                   (Principal Financial and Account-
                                                           ing Officer)

         /s/ John K. Carlyle                     Chairman and Director           July 15, 1999
-------------------------------------
             John K. Carlyle

        /s/ George H. Conrades                           Director                July 15, 1999
-------------------------------------
            George H. Conrades

   /s/ Hon. Willis D. Gradison, Jr.                      Director                July 15, 1999
-------------------------------------
       Hon. Willis D. Gradison, Jr.

        /s/ Robert A. Ortenzio                           Director                July 15, 1999
-------------------------------------
            Robert A. Ortenzio

      /s/ Mitchell T. Rabkin, M.D.                       Director                July 15, 1999
-------------------------------------
          Mitchell T. Rabkin, M.D.

       /s/ Richard D. Rehm, M.D.                         Director                July 15, 1999
-------------------------------------
           Richard D. Rehm, M.D.

         /s/ Lois E. Silverman                           Director                July 15, 1999
-------------------------------------
             Lois E. Silverman

</TABLE>



                                       49
<PAGE>


                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of
Concentra Managed Care, Inc.:

We  have  audited  the  accompanying  consolidated  balance  sheets of Concentra
Managed  Care,  Inc.  (a Delaware corporation) as of December 31, 1997 and 1998,
and   the   related  consolidated  statements  of  operations,  cash  flows  and
stockholders'  equity  for  each of the three years in the period ended December
31,  1998.  These  financial  statements are the responsibility of the Company's
management.  Our  responsibility  is  to  express  an opinion on these financial
statements based on our audits.

We   conducted  our  audits  in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance  about  whether  the  financial  statements  are  free  of
material  misstatement.  An  audit includes examining, on a test basis, evidence
supporting  the  amounts  and  disclosures in the financial statements. An audit
also   includes   assessing  the  accounting  principles  used  and  significant
estimates  made  by  management,  as  well  as  evaluating the overall financial
statement  presentation.  We  believe that our audits provide a reasonable basis
for our opinion.

In  our  opinion,  the financial statements referred to above present fairly, in
all  material  respects,  the financial position of Concentra Managed Care, Inc.
as  of  December  31,  1997  and 1998, and the results of its operations and its
cash  flows  for  each of the three years in the period ended December 31, 1998,
in conformity with generally accepted accounting principles.

/s/ ARTHUR ANDERSEN LLP



ARTHUR ANDERSEN LLP
Boston, Massachusetts
June 9, 1999


                                      F-1
<PAGE>


                         CONCENTRA MANAGED CARE, INC.

                          CONSOLIDATED BALANCE SHEETS







<TABLE>
<CAPTION>
                                                                                                  DECEMBER 31,
                                                                                       -----------------------------------
                                                                                             1997               1998
                                       ASSETS                                          ----------------   ----------------
<S>                                                                                    <C>                <C>
Current Assets:
Cash and cash equivalents ..........................................................    $  11,964,000      $ 101,128,000
Marketable securities ..............................................................                -          5,000,000
Accounts receivable, net of allowances of $16,723,000 and $17,210,000, respectively.      106,284,000        127,615,000
Prepaid expenses and other current assets ..........................................       14,605,000         19,075,000
Prepaid and deferred income taxes ..................................................       12,096,000         14,019,000
                                                                                        -------------      -------------
    Total current assets ...........................................................      144,949,000        266,837,000
Land ...............................................................................        2,525,000          2,775,000
Buildings and improvements .........................................................        5,747,000          6,814,000
Leasehold improvements .............................................................       21,704,000         31,280,000
Computer hardware and software .....................................................       39,512,000         56,838,000
Furniture and equipment ............................................................       33,486,000         40,440,000
                                                                                        -------------      -------------
Property and equipment, at cost ....................................................      102,974,000        138,147,000
Accumulated depreciation and amortization ..........................................      (38,255,000)       (52,220,000)
                                                                                        -------------      -------------
 Property and equipment, net .......................................................       64,719,000         85,926,000
Other assets:
Goodwill, net ......................................................................      256,580,000        275,172,000
Assembled workforce and customer lists, net ........................................        3,524,000          2,781,000
Marketable securities ..............................................................                -         10,583,000
Other assets .......................................................................       12,761,000         15,495,000
                                                                                        -------------      -------------
                                                                                        $ 482,533,000      $ 656,794,000
                                                                                        =============      =============
                             LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Revolving credit facilities ........................................................    $  49,000,000      $           -
Current portion of long-term debt ..................................................        7,497,000             55,000
Accounts payable ...................................................................       12,137,000         13,098,000
Accrued expenses ...................................................................       14,950,000         22,276,000
Accrued payroll and related expenses ...............................................       20,022,000         25,973,000
Accrued and deferred income taxes ..................................................        4,589,000          3,565,000
                                                                                        -------------      -------------
    Total current liabilities ......................................................      108,195,000         64,967,000
Long-term debt, net of current portion .............................................      150,103,000        327,870,000
Deferred income taxes ..............................................................        7,713,000         13,575,000
Other liabilities ..................................................................       10,081,000         10,507,000
Commitments and Contingencies (see Note 10) ........................................
Stockholders' Equity:
Preferred stock - $.01 par value; 20,000,000 authorized; none issued and outstanding                -                  -
Common stock - $.01 par value; 100,000,000 authorized; 43,567,686 and 47,104,412
 shares issued and outstanding, respectively .......................................          436,000            471,000
Paid-in capital ....................................................................      257,022,000        270,654,000
Accumulated other comprehensive income - unrealized gain on marketable securities ..                -             60,000
Retained deficit ...................................................................      (51,017,000)       (31,310,000)
                                                                                        -------------      -------------
    Total stockholders' equity .....................................................      206,441,000        239,875,000
                                                                                        -------------      -------------
                                                                                        $ 482,533,000      $ 656,794,000
                                                                                        =============      =============
</TABLE>



   The accompanying notes are an integral part of these financial statements.

                                      F-2
<PAGE>


                         CONCENTRA MANAGED CARE, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS





<TABLE>
<CAPTION>
                                                                                       YEARS ENDED DECEMBER 31,
                                                                          --------------------------------------------------
                                                                                1996             1997             1998
                                                                          ---------------- ---------------- ----------------
<S>                                                                       <C>              <C>              <C>
REVENUE:
 Health Services ........................................................  $ 170,035,000    $ 207,676,000    $ 259,481,000
 Managed Care Services: .................................................
  Specialized cost containment ..........................................     83,784,000      142,919,000      183,734,000
  Field case management .................................................    118,864,000      138,723,000      167,841,000
                                                                           -------------    -------------    -------------
    Total Managed Care Services .........................................    202,648,000      281,642,000      351,575,000
                                                                           -------------    -------------    -------------
     Total revenue ......................................................    372,683,000      489,318,000      611,056,000
COST OF SERVICES:
 Health Services ........................................................    130,754,000      155,376,000      201,181,000
 Managed Care Services ..................................................    159,174,000      217,263,000      268,116,000
                                                                           -------------    -------------    -------------
   Total cost of services ...............................................    289,928,000      372,639,000      469,297,000
                                                                           -------------    -------------    -------------
    Total gross profit ..................................................     82,755,000      116,679,000      141,759,000
General and administrative expenses .....................................     33,155,000       39,831,000       45,326,000
Amortization of intangibles .............................................      3,442,000        5,908,000        8,119,000
Non-recurring charge ....................................................        964,000       38,625,000       33,114,000
                                                                           -------------    -------------    -------------
    Operating income ....................................................     45,194,000       32,315,000       55,200,000
Interest expense ........................................................      3,741,000       12,667,000       18,021,000
Interest income .........................................................       (859,000)      (2,297,000)      (4,659,000)
Other, net ..............................................................        836,000          883,000           44,000
                                                                           -------------    -------------    -------------
    Income before income taxes ..........................................     41,476,000       21,062,000       41,794,000
Provision for income taxes ..............................................     13,437,000       11,062,000       19,308,000
                                                                           -------------    -------------    -------------
Net income ..............................................................  $  28,039,000    $  10,000,000    $  22,486,000
                                                                           =============    =============    =============
Basic Earnings Per Share ................................................  $        0.69    $        0.23    $        0.48
                                                                           =============    =============    =============
 Weighted average common shares outstanding .............................     40,411,000       42,774,000       46,451,000
                                                                           =============    =============    =============
Diluted Earnings Per Share ..............................................  $        0.65    $        0.22    $        0.47
                                                                           =============    =============    =============
 Weighted average common shares and common share equivalents outstanding      43,344,000       46,895,000       47,827,000
                                                                           =============    =============    =============
</TABLE>



   The accompanying notes are an integral part of these financial statements.
                                      F-3
<PAGE>


                         CONCENTRA MANAGED CARE, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS





<TABLE>
<CAPTION>
                                                                                        YEARS ENDED DECEMBER 31,
                                                                          -----------------------------------------------------
                                                                                 1996              1997              1998
                                                                          ----------------- ----------------- -----------------
<S>                                                                       <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income .............................................................  $   28,039,000    $   10,000,000     $  22,486,000
 Adjustments to reconcile net income to net cash provided by
  (used in) operating activities:
  Depreciation of property and equipment ................................       6,706,000        10,630,000        14,805,000
  Amortization and write-off of intangibles .............................       3,442,000         5,908,000         8,119,000
  Amortization of deferred compensation .................................               -           562,000           805,000
  Amortization and write-off of start-up costs ..........................         322,000         2,845,000                 -
  Earnings in unconsolidated subsidiaries, net of distributions .........               -          (192,000)          (98,000)
  Amortization of deferred finance costs and debt discount ..............          58,000           777,000         1,699,000
  Write-off of contract intangibles .....................................               -                 -         7,416,000
 Change in assets and liabilities:
  Accounts receivable ...................................................     (14,967,000)      (27,003,000)      (19,765,000)
  Prepaid expenses and other assets .....................................      (5,330,000)      (16,326,000)       (1,480,000)
  Accounts payable, accrued expenses and income taxes ...................      (2,675,000)       12,283,000           962,000
                                                                           --------------    --------------     -------------
   Net cash provided by (used in) operating activities ..................      15,595,000          (487,000)       34,949,000
CASH FLOWS FROM INVESTING ACTIVITIES:
 Acquisitions, net of cash acquired .....................................     (68,805,000)     (103,291,000)      (18,070,000)
 Purchase of property and equipment .....................................     (24,024,000)      (25,535,000)      (34,187,000)
 Sale (purchase) of investments, net ....................................     (12,045,000)       12,045,000       (15,523,000)
 Proceeds from sale of property and equipment and other .................          21,000           626,000           440,000
                                                                           --------------    --------------     -------------
   Net cash used in investing activities ................................    (104,853,000)     (116,155,000)      (67,340,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
 Borrowings (payments) under revolving credit facilities, net ...........       1,400,000        43,300,000       (49,000,000)
 Proceeds from the issuance of long-term debt ...........................     158,739,000        26,489,000       230,000,000
 Payment of deferred financing costs ....................................      (1,226,000)         (596,000)       (6,411,000)
 Repayments of long-term debt ...........................................     (37,220,000)       (5,071,000)      (49,581,000)
 Net proceeds from the issuance of common stock under employee
  stock purchase and option plans .......................................      57,082,000        10,023,000        14,403,000
 Payments to dissenting shareholders ....................................               -                 -       (15,047,000)
 Dividends and distributions to shareholders ............................     (42,671,000)       (3,760,000)       (2,809,000)
                                                                           --------------    --------------     -------------
   Net cash provided by financing activities ............................     136,104,000        70,385,000       121,555,000
                                                                           --------------    --------------     -------------
NET INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS .......................................................      46,846,000       (46,257,000)       89,164,000
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ............................      11,375,000        58,221,000        11,964,000
                                                                           --------------    --------------     -------------
 CASH AND CASH EQUIVALENTS, END OF YEAR .................................  $   58,221,000    $   11,964,000     $ 101,128,000
                                                                           ==============    ==============     =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 Interest paid ..........................................................  $    3,316,000    $   11,941,000     $  13,912,000
 Income taxes paid ......................................................  $    8,557,000    $   12,305,000     $  15,961,000
 Conversion of notes payable into common stock ..........................  $      825,000    $      691,000     $  10,094,000
 Liabilities and debt assumed in acquisitions ...........................  $    9,030,000    $   13,242,000     $   8,386,000
</TABLE>


   The accompanying notes are an integral part of these financial statements.
                                      F-4
<PAGE>


                         CONCENTRA MANAGED CARE, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY





<TABLE>
<CAPTION>
                                                      $0.01 PAR VALUE            PAID-IN
                                                       COMMON STOCK              CAPITAL
                                                --------------------------- ----------------
                                                    NUMBER
                                                   OF SHARES       VALUE
                                                -------------- ------------

<S>                                             <C>            <C>          <C>
BALANCE, DECEMBER 31, 1995 ....................  34,772,833     $ 347,000    $ 151,385,000
Sale of Common Stock ..........................   2,143,200        21,000       51,819,000
Common Stock issued in connection
 with acquisitions ............................     715,246         7,000        6,725,000
Common Stock issued under employee
 stock purchase and option plans and
 related tax benefit ..........................     683,076         7,000        7,735,000
Exercise of Common Stock warrants .............     151,111         2,000        1,062,000
Conversion of notes payable into
 Common Stock .................................     105,983         1,000          824,000
Conversion of debenture payable into
 Common Stock .................................   1,854,141        19,000       14,766,000
Dividends and shareholder distributions
 by pooled companies ..........................           -             -                -
Net income ....................................           -             -                -
                                                 ----------     ---------    -------------
BALANCE, DECEMBER 31, 1996 ....................  40,425,590       404,000      234,316,000
Common Stock issued in connection
 with acquisitions ............................   2,162,995        22,000       11,441,000
Common Stock issued under employee
 stock purchase and option plans and
 related tax benefit ..........................     897,530         9,000       10,013,000
Amortization of deferred compensation .........           -             -          562,000
Conversion of notes payable into
 Common Stock .................................      81,571         1,000          690,000
Dividends and shareholder distributions
 by pooled companies ..........................           -             -                -
Net income ....................................           -             -                -
                                                 ----------     ---------    -------------
BALANCE, DECEMBER 31, 1997 ....................  43,567,686       436,000      257,022,000
Comprehensive net income:
Net income ....................................           -             -                -
Unrealized gain on marketable
 securities ...................................           -             -                -
Comprehensive net income ......................           -             -                -
                                                 ----------     ---------    -------------
Common Stock issued in connection
 with acquisitions ............................     430,750         4,000        3,408,000
Common Stock issued under employee
 stock purchase and option plans and
 related tax benefit ..........................     841,260         9,000       14,394,000
Amortization of deferred compensation .........           -             -          805,000
Conversion of notes payable into
 Common Stock .................................   2,735,387        27,000       10,067,000
Dividends and shareholder distributions
 by pooled companies ..........................           -             -                -
Payments to dissenting shareholders ...........    (470,671)       (5,000)     (15,042,000)
                                                 ----------     ---------    -------------
BALANCE, DECEMBER 31, 1998 ....................  47,104,412     $ 471,000    $ 270,654,000
                                                 ==========     =========    =============



<CAPTION>
                                                  ACCUMULATED
                                                     OTHER
                                                 COMPREHENSIVE       RETAINED        STOCKHOLDERS'
                                                     INCOME           DEFICIT           EQUITY
                                                --------------- ------------------ ----------------

<S>                                             <C>             <C>                <C>
BALANCE, DECEMBER 31, 1995 .................... $     -         ($ 42,349,000)     $ 109,383,000
Sale of Common Stock ..........................       -                   -          51,840,000
Common Stock issued in connection
 with acquisitions ............................       -             407,000           7,139,000
Common Stock issued under employee
 stock purchase and option plans and
 related tax benefit ..........................       -                   -           7,742,000
Exercise of Common Stock warrants .............       -                   -           1,064,000
Conversion of notes payable into
 Common Stock .................................       -                   -             825,000
Conversion of debenture payable into
 Common Stock .................................       -                   -          14,785,000
Dividends and shareholder distributions
 by pooled companies ..........................       -         (42,671,000)        (42,671,000)
Net income ....................................       -          28,039,000          28,039,000
                                                -------         -------------      -------------
BALANCE, DECEMBER 31, 1996 ....................       -         (56,574,000)        178,146,000
Common Stock issued in connection
 with acquisitions ............................       -            (969,000)         10,494,000
Common Stock issued under employee
 stock purchase and option plans and
 related tax benefit ..........................       -                   -          10,022,000
Amortization of deferred compensation .........       -                   -             562,000
Conversion of notes payable into
 Common Stock .................................       -                   -             691,000
Dividends and shareholder distributions
 by pooled companies ..........................       -          (3,474,000)         (3,474,000)
Net income ....................................       -          10,000,000          10,000,000
                                                -------         -------------      -------------
BALANCE, DECEMBER 31, 1997 ....................       -         (51,017,000)        206,441,000
Comprehensive net income:
Net income ....................................       -          22,486,000          22,486,000
Unrealized gain on marketable
 securities ...................................  60,000                   -              60,000
Comprehensive net income ......................  60,000          22,486,000          22,546,000
                                                -------         -------------      -------------
Common Stock issued in connection
 with acquisitions ............................       -              30,000           3,442,000
Common Stock issued under employee
 stock purchase and option plans and
 related tax benefit ..........................       -                   -          14,403,000
Amortization of deferred compensation .........       -                   -             805,000
Conversion of notes payable into
 Common Stock .................................       -                   -          10,094,000
Dividends and shareholder distributions
 by pooled companies ..........................       -          (2,809,000)         (2,809,000)
Payments to dissenting shareholders ...........       -                   -         (15,047,000)
                                                -------         -------------      -------------
BALANCE, DECEMBER 31, 1998 .................... $60,000         ($ 31,310,000)     $239,875,000
                                                =======         =============      ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-5
<PAGE>


                         CONCENTRA MANAGED CARE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(1) BASIS OF PRESENTATION

     On  August  29,  1997,  Concentra  Managed  Care,  Inc. ("Concentra" or the
"Company"),  a  Delaware  corporation,  was  formed  by  the  merger  (the "1997
Merger")   of   CRA   Managed   Care,   Inc.   ("CRA")   and  OccuSystems,  Inc.
("OccuSystems").  As  a  result  of  the  1997  Merger,  CRA changed its name to
Concentra   Managed   Care   Services,   Inc.   ("Managed  Care  Services")  and
OccuCenters,  Inc., the operating subsidiary of OccuSystems, changed its name to
Concentra  Health  Services,  Inc.  ("Health  Services").  The 1997 Merger was a
tax-free  stock  for stock exchange accounted for as a pooling of interests. The
Company  recorded  a non-recurring charge of $38,625,000 in the third quarter of
1997  associated  with  the  1997 Merger. The utilization of this charge through
December  31,  1998,  was  approximately  $11,569,000  for professional fees and
services,  $16,216,000  in  costs  associated  with personnel reductions and the
consolidation  of  CRA's  and  OccuSystems'  employee  benefits,  $5,945,000  in
facility  consolidations  and closings, $2,541,000 for the write-off of start-up
costs  and  $2,354,000  of  other  charges.  At December 31, 1997, approximately
$7,527,000  of  the  non-recurring charge remains primarily related to personnel
related charges and facility consolidations and closings.
     On  February  24,  1998, the Company acquired all of the outstanding common
stock  of  Preferred  Payment  Systems, Inc. ("PPS") of Naperville, Illinois, in
exchange  for  approximately  7,100,000  shares  of  Concentra common stock, the
assumption  of  PPS  options  totaling approximately 580,000 shares of Concentra
common  stock,  the  payment  of approximately $15,047,000 in cash to dissenting
PPS  shareholders  and the assumption of approximately $49,000,000 of debt which
was  repaid  at  the  time  of  the  merger.  This merger was accounted for as a
pooling  of  interests.  In  the  first  quarter of 1998, the Company recorded a
non-recurring  charge  of  $12,600,000  primarily  associated with the merger of
PPS.   The   utilization   of   this  charge  through  December  31,  1998,  was
approximately  $5,136,000  for  professional  fees  and  services, $2,355,000 in
costs  associated with personnel reductions, $746,000 in facility consolidations
and  closings,  $1,627,000  associated  with the write-off of deferred financing
fees  on  PPS  indebtedness retired and $1,264,000 of other non-recurring costs.
At  December  31,  1998,  approximately  $1,472,000  of the non-recurring charge
remains  primarily related to remaining facility lease obligations. PPS, founded
in  1990,  is  a  provider  of  retrospective bill review services for the group
healthcare market.
     In  the fourth quarter of 1998, the Company recorded a non-recurring charge
of  $20,514,000 primarily associated with the reorganization of its Managed Care
Services  division  to  improve  efficiency  through facility consolidations and
related  headcount reductions, to recognize an impairment loss on the intangible
related  to  an  acquired  contract and costs associated with settling claims on
other  expired  contracts.  The  utilization of this charge through December 31,
1998,  was  approximately $7,416,000 in charges related to the recognition of an
impairment  loss  on  the intangible related to an acquired contract, $2,490,000
in  costs  associated  with  personnel  reductions  and  $1,140,000  in facility
consolidations.  At  December  31,  1998,  approximately  $9,468,000 of the non-
recurring   charge   remains  primarily  related  to  remaining  facility  lease
obligations   and  costs  associated  with  settling  claims  on  other  expired
contracts.
     The  financial  statements  as of December 31, 1997 and for the years ended
December  31,  1996  and 1997 have been restated to reflect the merger of PPS in
accordance   with   Accounting   Principles  Board  Opinion  No.  16,  "Business
Combinations" ("APB 16").


(2) SIGNIFICANT ACQUISITIONS
     Managed  Care  Services  has experienced a significant amount of its growth
by  virtue  of  the acquisitions of FOCUS HealthCare Management, Inc. ("FOCUS"),
Prompt  Associates,  Inc.  ("PROMPT"), First Notice Systems, Inc. ("FNS"), About
Health,  Inc.  ("ABOUT  HEALTH")  and several other smaller acquisitions. Health
Services  has  also  experienced  a  significant  amount  of its growth from the
acquisition  of  practices, including the acquisition of 16 occupational medical
centers  and  contracts  to  manage four additional medical centers from Vencor,
Inc. ("VMC").
     On  April  2,  1996,  the  Company purchased FOCUS for $21,000,000 in cash.
FOCUS,  based  in  Brentwood,  Tennessee,  has  built  and  maintains one of the
nation's  largest  workers' compensation preferred provider organization ("PPO")
networks  and had annual revenues of approximately $9,900,000 for the year ended
December 31, 1995.



                                      F-6
<PAGE>


     On  October 29, 1996, the Company purchased PROMPT for $30,000,000 in cash.
PROMPT,  which is based in Salt Lake City, Utah, is one of the leading providers
of  hospital  bill audit services to the group health payor community for claims
that  fall  outside  of  an  indemnity  carrier's,  third-party  administrator's
("TPA")  or  health  maintenance  organization's  ("HMO") network of hospital or
outpatient  facilities  and had annual revenues of approximately $10,000,000 for
the year ended December 31, 1995.
     On  June  4,  1997, the Company purchased FNS for $40,000,000 in cash. FNS,
based  in  Boston,  Massachusetts,  is  a  leading  provider  of outsourced call
reporting  for  first  notice  of  loss/injury  to  the automobile insurance and
workers'  compensation  industries  and  had  annual  revenues  of approximately
$9,000,000 for the year ended December 31, 1996.
     PPS  acquired  ABOUT HEALTH in a two-step transaction on August 1, 1997 and
October  31,  1997  for  $25,800,000  in  cash  and  $9,733,000 in equity. ABOUT
HEALTH,  based  in  Rockville,  Maryland,  is  a  provider  of  specialized cost
containment  and  outsourcing  services  for  healthcare  payors  and had annual
revenues of approximately $10,000,000 for the year ended December 31, 1996.
     On  September  30,  1997,  the  Company  purchased  16 occupational medical
centers  and  the  management  of  four  additional medical centers from VMC for
approximately  $27,000,000 in cash. These medical centers had annual revenues of
approximately $23,000,000 for the year ended December 31, 1996.
     The  acquisitions  of  FOCUS,  PROMPT,  FNS, ABOUT HEALTH and VMC have been
accounted  for  by the Company as purchases whereby the basis for accounting for
their  assets  and  liabilities are based upon their fair values at the dates of
acquisition.  The  excess  of  the  purchase price over fair value of net assets
acquired  (goodwill  and  assembled workforce and customer lists, if applicable)
for  the  FOCUS, PROMPT, FNS, ABOUT HEALTH and VMC acquisitions was $19,900,000,
$29,550,000,  $37,001,000,  $34,291,000  and  $29,585,000, respectively. None of
these  acquisitions  were  significant in relation to the Company's consolidated
financial  statements  and,  therefore  pro  forma financial information has not
been  presented.  Goodwill  is being amortized over thirty to forty year periods
and  assembled  workforce  and  customer lists are being amortized over five and
seven-year periods, respectively.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) CONSOLIDATION

     The  consolidated  financial statements include the accounts of the Company
and  its  wholly-owned  subsidiaries. Investments in certain joint ventures with
less  than  a  51%  ownership  interest are accounted for on a equity basis and,
accordingly,  consolidated  income includes the Company's share of their income.
All  significant  intercompany  accounts  and  transactions  are  eliminated  in
consolidation.

     Physician  and  physical  therapy  services  are  provided  at  the  Health
Services   centers   under   management  agreements  with  affiliated  physician
associations   (the   "Physician  Groups"),  which  are  organized  professional
corporations  that  hire  licensed physicians and physical therapists to provide
medical  services  to  the  centers'  patients.  Health  Services  has a nominee
shareholder  relationship  with  the  Physician  Groups as defined in EITF 97-2,
Application  of  APB  Opinion  No.  16  and  FASB  Statement No. 94 to Physician
Practice  Entities,  and  as a result, the financial statements of the Physician
Groups are consolidated. Specifically:

     o Health  Services  can  at  all  times  establish  or effect change in the
       nominee shareholder;

     o Health  Services  can  cause  a  change  in  the  nominee  shareholder an
       unlimited number of times;

     o Health  Services  has  sole  discretion as to the choice of a new nominee
       shareholder;

     o Health  Services has sole discretion without cause to establish or change
       the nominee shareholders;

     o Health Services and  the  Physician  Groups  would  incur  no more than a
       nominal cost to cause a change in the nominee shareholder; and,

     o Neither Health  Services  nor  the  Physician  Groups  are subject to any
       significant adverse impact upon a change in the nominee shareholder.

     The  Company's  management fees from the Physician Groups are calculated as
collected  revenue  net of compensation, benefits and other expenses incurred by
the Physician Groups.

(B) CASH AND CASH EQUIVALENTS

     The  Company  considers  all  highly liquid debt instruments purchased with
original  maturities  of  three  months  or  less  to  be  cash equivalents. The
carrying  amount  approximates  fair  value  due  to the short maturity of those
instruments.



                                      F-7
<PAGE>


(C) REVENUE RECOGNITION


     The  Company  recognizes  revenue  primarily as services have been rendered
based  on  time  and  expenses  incurred.  A  certain  portion  of the Company's
revenues  are derived from fee schedule auditing which is based on the number of
charges  reviewed  and  based  on  a  percentage  of  savings  achieved  for the
Company's  customers.  In  these circumstances, the customer is obligated to pay
the  Company  when  the  services have been rendered and the savings identified.
During  the  fee  schedule  audit process (i.e., medical bill review), each bill
reviewed  and  audited is returned to the customer accompanied by an Explanation
of  Benefit  ("EOB"). The EOB details the total savings with respect to the bill
being  reviewed  as  well  as  the amount owed to the Company as a percentage of
savings  identified and the line charge associated with the bill being reviewed.



     The  Company's  Health  Services division's services consist of two primary
components  :  (i)  workers'  compensation injury care and related services; and
(ii)  non-injury  healthcare  services  related  to  employer needs or statutory
requirements.  The  workers'  compensation  injury  care  and  related services'
provider  reimbursement methods vary on a state-by-state basis. Of the 25 states
in  which  the  Company  currently  operates occupational healthcare centers, 21
have  fee  schedules  pursuant  to  which all healthcare providers are uniformly
reimbursed.  The fee schedules are set by each state and generally prescribe the
maximum  amounts  that  may be reimbursed for a designated procedure In the four
states  without  fee  schedules,  healthcare  providers  are reimbursed based on
usual,  customary and reasonable ("UCR") fees charged in the particular state in
which  the  services  are  provided.  Billing  for  services  in states with fee
schedules  are  included  in revenues net of allowance for estimated differences
between  list  prices  and  allowable  fee  schedule  rates.  Adjustments to the
allowance  based  on final payment from the states are recorded upon settlement.
The Company records the net revenue amount as accounts receivable.


     The  Company's  total contractual allowances offset against revenues during
the  years  ended December 31, 1998, 1997,1996 were $16,095,000, $14,718,000 and
$3,680,000, respectively.


     Insurance  claims  are  screened  by  PPS and PROMPT prior to the insurance
company's  internal  review  procedures  to  determine  if  the claims should be
further  negotiated  or  are  payable  by  the  insurance  company.  During  the
insurance  company's  review  process,  some claims have pre-existing PPO or HMO
arrangements,  or  other  pre-existing  conditions and disqualifying situations.
When  these situations occur, a refund (chargeback) is requested for the amounts
paid  (invoiced)  on  these  claims.  PPS  and PROMPT's policies are to record a
sales  allowance as an offset to revenues and accounts receivable based upon the
historical  tracking  of  discounts  and  chargebacks at the time the claims are
modeled.  A  portion  of the allowance for doubtful accounts attributable to PPS
and  PROMPT  is  based  on  historical experience of ineligible claims which are
either  charged  back  or  given  a  negotiated discount. PPS and PROMPT utilize
several  methods  to  project  unpresented discounts and chargebacks including a
tracking  of  the actual experience of contractual discounts. Other factors that
affect  collectability  and  bad  debts for each service line are also evaluated
and additional allowance amounts are provided as necessary.


     Accounts  receivable  at  December  31, 1997 and 1998 include $4,500,000 of
unbilled  accounts  receivable  relating  to services rendered during the period
but  not invoiced until after the period-end. These unbilled accounts receivable
relate  primarily  to  field  case  management  services, which are billed on an
hourly  basis,  whereby  the Company has not yet provided a sufficient amount of
services  to  warrant  the generation of an invoice. The customers are obligated
to  pay for the services once performed. The Company estimates unbilled accounts
receivable by tracking and monitoring its historical experience.



                                      F-8
<PAGE>


(D) DEPRECIATION

     The  Company  provides  for  depreciation  on  property and equipment using
straight-line  and  accelerated methods by charges to operations in amounts that
allocate the cost of depreciable assets over their estimated lives as follows:





<TABLE>
<CAPTION>
ASSET CLASSIFICATION                           ESTIMATED USEFUL LIFE
-------------------------------   -----------------------------------------------
<S>                               <C>
Furniture and fixtures                                7 Years
Office and computer equipment                       3 - 7 Years
Buildings and improvements                         30 - 40 Years
Leasehold improvements            The shorter of the life of lease or asset life
</TABLE>



(E) INTANGIBLE ASSETS


     The  value  of  goodwill,  assembled  workforces  and  customer  lists  are
recorded  at  cost  at  the  date  of  acquisition.  Through  December  31, 1998
goodwill,  including  any  excess  arising  from  earn-out  payments,  was being
amortized  on  a  straight-line  basis  over 30 to 40-year periods in accordance
with  Accounting  Principles  Board  Opinion  No. 17 ("APB No. 17"), "Intangible
Assets".  Effective  January  1,  1999,  the  Company  changed  its policy, on a
prospective  basis,  with  respect to the amortization of goodwill. All existing
and  future goodwill will be amortized over a period not to exceed 25 years, Had
the  Company adopted this policy at the beginning of 1998, amortization for 1998
would  have increased by approximately $3,300,000 and diluted earnings per share
would  have been $0.42. As of December 31, 1998, net intangible assets consisted
of  goodwill,  customer lists and assembled workforce. The Company believes that
the  life  of  the  core  businesses  acquired  and the delivery of occupational
healthcare  services  is  indeterminate  and  likely  to  exceed  25  years. The
assembled  workforces  and  customer  lists  are  being amortized over five- and
seven-year  periods, respectively. As of December 31, 1997 and 1998, the Company
has  recorded  accumulated  amortization on intangible assets of $29,834,000 and
$37,938,000 respectively.

     Subsequent  to  an  acquisition,  the Company continually evaluates whether
later  events  and  circumstances have occurred that indicate that the remaining
balance  of  goodwill  may  not be recoverable or that the remaining useful life
may  warrant  revision.  When factors indicate that goodwill should be evaluated
for  possible  impairment, the Company uses an estimate of the related operating
unit's  undiscounted  cash  flows  over  the  remaining life of the goodwill and
compares  it  to  the operating unit's goodwill balance to determine whether the
goodwill  is recoverable or if impairment exists, in which case an adjustment is
made  to  the  carrying  value of the asset to reduce it to its fair value based
upon  the present value of the future cash flows. When an adjustment is required
the  Company  evaluates  the  remaining  goodwill amortization using the factors
outlined in APB No. 17.


(F) DEFERRED FINANCE COSTS

     The  Company  has  capitalized  costs  associated primarily with the 6% and
4.5%  Convertible  Subordinated  Notes  and the PPS indebtedness (written-off at
the  time  of  the  merger and retirement of PPS indebtedness) and is amortizing
these  as  interest expense over the life of the notes. Included in other assets
at  December  31,  1997 and 1998 were deferred finance costs, net of accumulated
amortization, of $4,515,000 and $7,592,000, respectively.


(G) NON-RECURRING CHARGES

     The  following  are  rollforwards  of the non-recurring charges recorded by
the  Company  in  1997  and  1998.  See  Note  1,  "Basis of Presentation" for a
description  of  the  non-recurring  charges  and the breakout of the deductions
from revenue by major category:

Third quarter of 1997 $38,625,000 non-recurring charge:





<TABLE>
<CAPTION>
             Beginning        Charged                              Ending
              of Year        to Income           Usage            of Year
           ------------   --------------   -----------------   -------------
<S>        <C>            <C>              <C>                 <C>
  1997     $       -       $38,625,000       $ (31,098,000)     $7,527,000
  1998     7,527,000                 -          (7,527,000)              -
</TABLE>


                                      F-9
<PAGE>


First quarter of 1998 $12,600,000 non-recurring charge:





<TABLE>
<CAPTION>
            Beginning        Charged                              Ending
             of Year        to Income           Usage            of Year
           -----------   --------------   -----------------   -------------
<S>        <C>           <C>              <C>                 <C>
  1998     $      -       $12,600,000       $ (11,128,000)     $1,472,000
</TABLE>



Fourth quarter of 1998 $20,514,000 non-recurring charge:





<TABLE>
<CAPTION>
            Beginning        Charged                              Ending
             of Year        to Income           Usage            of Year
           -----------   --------------   -----------------   -------------
<S>        <C>           <C>              <C>                 <C>
  1998     $      -       $20,514,000       $ (11,046,000)     $9,468,000
</TABLE>



The  following is a rollforward of all non-recurring charges for the three years
ended December 31, 1996, 1997 and 1998:





<TABLE>
<CAPTION>
             Beginning       Charged                             Ending
              of Year       to Income           Usage           of Year
           ------------   -------------   ----------------   -------------
<S>        <C>            <C>             <C>                <C>
  1996     $       -      $  964,000       $    (964,000)    $        -
  1997             -      38,625,000         (31,098,000)     7,527,000
  1998     7,527,000      33,114,000         (29,701,000)    10,940,000
</TABLE>



(H) INVESTMENTS IN JOINT VENTURES


     Investments  in  the  net  assets of joint ventures accounted for under the
equity  method  amounted  to $3,937,000 and $ 3,839,000 at December 31, 1997 and
1998,  respectively. For the year ending December 31, 1997 and 1998, revenue for
these  entities  was  $4,561,000  and  $5,724,000, gross profit was $950,000 and
$919,000  and  net  income was $287,000 and $338,000, respectively. Total assets
for  the  joint  ventures were $4,277,000 and $4,306,000 as of December 31, 1997
and 1998, respectively.


(I) SELF INSURANCE


     Company  is  partially insured for workers' compensation, physician medical
malpractice,  automobile  and  certain  employee  health benefits. The Company's
self-insurance  retention liability on a per claim basis ranges from $100,000 to
$250,000.  Liabilities  in excess of these amounts are the responsibility of the
insurer.  The  Company's  policy  is  to  accrue  amounts  up  to  the insurance
carriers'  reserve  requirements  on  a claim-by-claim basis and an estimate for
claims incurred but not yet reported.


(J) DEFERRED START-UP COSTS


     Prior  to  the  1997 Merger, Health Services capitalized the start-up costs
associated   with   the  internal  development  of  its  medical  centers  until
operational  and  would  amortize  these  costs  over  a  three-year period. The
American  Institute  of Certified Public Accountants issued Statement of Opinion
98-5,  "Accounting  for  Start Up Costs" in April 1998, to change the accounting
and  reporting  treatment  of  start-up  costs  to  require start-up costs to be
expensed  as  incurred.  As  a  result  of  this  pending  change  in accounting
principle,  the  Company  wrote-off  deferred  start-up  costs  of approximately
$2,541,000  and included this in the third quarter of 1997 non-recurring charge.



(K) FOREIGN CURRENCY TRANSLATION


     All   assets   and  liabilities  of  the  Company's  Canadian  offices  are
translated  at  the  year-end  exchange  rate,  while  revenues and expenses are
translated  at  the  average  exchange rate for the year. Cumulative translation
adjustments  were  immaterial  for  the  years ended December 31, 1996, 1997 and
1998.


(L) USE OF ESTIMATES


     The  preparation  of  financial  statements  in  accordance  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that affect the reported amounts of assets and liabilities and



                                      F-10
<PAGE>


disclosure  of  contingent  assets  and liabilities at the date of the financial
statements  and  reported  amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.


(M) RECLASSIFICATIONS

     Certain   amounts  previously  reported  in  CRA's  and  OccuSystems'  1996
consolidated  financial statements and PPS' 1996 and 1997 consolidated financial
statements  have  been  reclassified  to conform to the presentation in the 1998
consolidated financial statements.


(N) NEW ACCOUNTING PRONOUNCEMENTS

     In  the  first  quarter  of  1998,  the  Company  adopted the provisions of
Statement  of  Financial  Accounting Standards No. 130, "Reporting Comprehensive
Income"  ("SFAS  130"). Comprehensive income for the Company includes unrealized
gains  on  marketable  securities  in  addition to net income as reported in the
Company's   Consolidated   Statements   of   Stockholders'  Equity  and  in  the
Stockholders' Equity section of the Company's Consolidated Balance Sheets.

     In  1998,  the  Company  adopted  the  provisions of Statement of Financial
Accounting  Standards  No. 131, "Disclosures about Segments of an Enterprise and
Related  Information" ("SFAS 131"). SFAS 131 requires the reporting of financial
and  descriptive  information  about  a company's reportable operating segments.
Operating   segments  are  components  of  an  enterprise's  separate  financial
information  that  is  evaluated regularly by the chief operating decision maker
in  deciding  how  to  allocate  resources  and in assessing performance of that
component.  The  statement  requires  reporting  segment profit or loss, certain
specific  revenue  and  expense items, and segment assets. See Note 13 - Segment
Information for disclosure


(4) PRO FORMA NET INCOME AND PRO FORMA EARNINGS PER SHARE
     Pro  forma  net  income  and basic and diluted pro forma earnings per share
for  the  years  ended December 31, 1996 and 1997 have been calculated as if the
merger  of PPS had been subject to federal and state income taxes for the entire
period,  based  upon  an effective tax rate indicative of the statutory rates in
effect.  Prior  to  its merger, PPS elected to be taxed as an S corporation, and
accordingly,  was  not  subject  to  federal  and  state income taxes in certain
jurisdictions.
     The  Financial  Accounting  Standards  Board  issued Statement of Financial
Accounting   Standards  No.  128,  "Earnings  Per  Share"  ("SFAS  128"),  which
supersedes  Accounting Principles Board Opinion No. 15. SFAS 128 establishes new
accounting  standards for the presentation of earnings per share whereby primary
earnings  per  share  is  replaced  with  "Basic  Earnings  Per Share" and fully
diluted  earnings  per  share  is  now  called  "Diluted Earnings Per Share". In
accordance  with  SFAS  128,  Basic  Earnings  Per  Share  has  been computed by
dividing  reported  net income by weighted average common shares outstanding and
Diluted  Earnings  Per  Share  has  been  computed  assuming,  if  dilutive, the
conversion  of  the  Company's  convertible  notes  and  the  elimination of the
related  interest  expense  and  the  exercise  of  stock  options, net of their
related income tax effect.



                                      F-11
<PAGE>


Basic  and  diluted  earnings  per  share for the years ended December 31, 1996,
                         1997 and 1998 are as follows:





<TABLE>
<CAPTION>
                                                                             1996               1997               1998
                                                                       ----------------   ----------------   ----------------
<S>                                                                    <C>                <C>                <C>
Basic Earnings Per Share:
Net income available to shareholders ...............................     $ 28,039,000       $ 10,000,000       $ 22,486,000
                                                                         ============       ============       ============
Pro forma net income available to shareholders (1) .................     $ 25,309,000       $  7,189,000
                                                                         ============       ============
Weighted average common shares outstanding .........................       40,411,000         42,774,000         46,451,000
                                                                         ============       ============       ============
Basic earnings per share ...........................................     $       0.69       $       0.23       $       0.48
                                                                         ============       ============       ============
Basic pro forma earnings per share (1) .............................     $       0.63       $       0.17
                                                                         ============       ============
Diluted Earnings Per Share:
Net income available to shareholders ...............................     $ 28,039,000       $ 10,000,000       $ 22,486,000
Interest on dilutive convertible notes, net of tax .................          290,000            308,000             52,000
                                                                         ============       ============       ============
Diluted net income .................................................     $ 28,329,000       $ 10,308,000       $ 22,538,000
                                                                         ============       ============       ============
Pro forma net income available to shareholders (1) .................     $ 25,309,000       $  7,189,000
Interest on dilutive convertible notes, net of tax .................          290,000            308,000
                                                                         ============       ============
Diluted pro forma net income (1) ...................................     $ 25,599,000       $  7,497,000
                                                                         ============       ============
Weighted average common shares outstanding .........................       40,411,000         42,774,000         46,451,000
Dilutive options, warrants and notes payable .......................        2,026,000          1,399,000          1,028,000
Dilutive convertible notes (2) .....................................          907,000          2,722,000            348,000
                                                                         ============       ============       ============
Weighted average common shares and equivalents outstanding .........       43,344,000         46,895,000         47,827,000
                                                                         ============       ============       ============
Diluted earnings per share .........................................     $       0.65       $       0.22       $       0.47
                                                                         ============       ============       ============
Diluted pro forma earnings per share (1) ...........................     $       0.59       $       0.16
                                                                         ============       ============
</TABLE>



--------
(1) Pro  forma net income and basic and diluted pro forma earnings per share for
    the  years  ended  December 31, 1996 and 1997 have been calculated as if PPS
    had  been  subject  to federal and state income taxes for the entire period,
    based  upon  an  effective  tax  rate  indicative  of the statutory rates in
    effect.  Prior  to  its  merger with the Company, PPS elected to be taxed as
    an  S  corporation  and,  accordingly,  was not subject to federal and state
    income taxes in certain jurisdictions.
(2) Excludes  common  stock  equivalents  of  3,291,243  shares  of Common Stock
    related  to  the  6%  Convertible Subordinated Notes issued in December 1996
    and  5,575,758  shares  of  Common  Stock  related  to  the 4.5% Convertible
    Subordinated   Notes   issued   in   March   and  April  1998  as  they  are
    anti-dilutive for the applicable years presented.


(5) REVOLVING CREDIT FACILITIES
     On  September  17,  1997,  the Company entered into the $100,000,000 Senior
Credit  Facility  with  a  syndicate  of  five banks ("Senior Credit Facility"),
replacing  the  $60,000,000  Managed Care Services Credit Facility, ("MCS Credit
Facility")  and  the  $60,000,000  Health  Services Credit Facility, ("HS Credit
Facility").  The  Senior Credit Facility matures on September 17, 2002. Interest
on  borrowings  under  the  Senior  Credit Facility is payable, at the Company's
option,  at the higher of the bank's prime rate of interest or the federal funds
rate  plus  an  additional  percentage  of  0.5%,  or  LIBOR  plus an additional
percentage  of up to 1.25%, depending on certain financial criteria. The Company
is  required  to pay a commitment fee of 0.125% to 0.25% per annum, depending on
certain  financial  criteria,  on  the  unused  portion  of  the  Senior  Credit
Facility.
     On  February  23,  1998,  the  Company  signed  an  amendment to expand the
Company's  borrowing  capacity  under the Senior Credit Facility to $200,000,000
under  similar  terms  and  conditions  in  order  to  finance  the repayment of
$49,000,000  of  PPS  outstanding  indebtedness (the PPS Credit Facility and 10%
Subordinated  Notes).  On  March  11, 1998, the Senior Credit Facility borrowing
capacity was reduced to the original $100,000,000 amount.
     The   Senior  Credit  Facility  contains  customary  covenants,  including,
without limitation, restrictions on the


                                      F-12
<PAGE>

incurrence   of   indebtedness,   the   sale  of  assets,  certain  mergers  and
acquisitions,  the  payment  of  dividends  on  the Company's capital stock, the
repurchase  or  redemption  of  capital  stock,  transactions  with  affiliates,
investments,  capital  expenditures and changes in control of the Company. Under
the  Senior  Credit  Facility,  the  Company is also required to satisfy certain
financial   covenants,  such  as  cash  flow,  capital  expenditures  and  other
financial  ratio  tests  including  fixed  charge coverage ratios. The Company's
obligations  under  the  Senior Credit Facility are secured by a pledge of stock
in the Company's subsidiaries.
     As  a  result  of the fourth quarter 1998 non-recurring charge, the Company
was  not  in  compliance  with certain leverage ratio covenants under the Senior
Credit  Facility  in  the fourth quarter of 1998 and the Company expects it will
not  be  in  compliance  with  those covenants in the first quarter of 1999. The
Company  received  a waiver on all financial covenants through the first quarter
of  1999.  The Company does not have any borrowings outstanding under the Senior
Credit  Facility  and  does  not  anticipate the need to borrow under the Senior
Credit Facility for the next twelve months.
     At  December  31,  1997, the Company had borrowings under the Senior Credit
Facility  of  $49,000,000,  at an average rate of interest of 6.94%. At December
31,  1998,  the  Company  had  no borrowings and $3,050,000 of letters of credit
outstanding  under  the Senior Credit Facility. For the years ended December 31,
1996,  1997  and  1998,  the  weighted  average borrowings under these revolving
credit  facilities  were  $8,184,000,  $9,615,000 and $14,205,000, respectively,
and   the   weighted  average  interest  rates  were  6.94%,  7.31%  and  7.69%,
respectively.


(6) Long-term Debt
     Long-term debt consists of the following at December 31:




<TABLE>
<CAPTION>
                                                                             1997              1998
                                                                       ---------------   ----------------
<S>                                                                    <C>               <C>
4.5% Convertible Subordinated Notes, interest at 4.5%, due March
 2003 ..............................................................    $          -      $ 230,000,000
6% Convertible Subordinated Notes, interest at 6%, due December
 2001 ..............................................................      97,750,000         97,750,000
Notes payable to various holders, interest ranging from 8.8% to 10%,
 payable in installments through 2005 ..............................         308,000            119,000
Obligations under capital leases ...................................         542,000             56,000
PPS indebtedness:
 PPS Term Loan .....................................................      42,000,000                  -
 5% Convertible Subordinated Notes due August 2006 .................      10,000,000                  -
 10% Subordinated Notes due August 2003 ............................       7,000,000                  -
                                                                        ------------      -------------
                                                                         157,600,000        327,925,000
Less: Current maturities ...........................................      (7,497,000)           (55,000)
                                                                        ------------      -------------
 Long-term debt, net of current maturities .........................    $150,103,000      $ 327,870,000
                                                                        ============      =============
</TABLE>



     As  of  December  31,  1998  and  1997, accrued interest was $3,276,000 and
$ 867,000 respectively

     On  March  11,  1998,  the  Company  issued  a  new  issue  of $200,000,000
aggregate  principal amount of 4.5% Convertible Subordinated Notes due March 15,
2003  (the  "4.5%  Convertible  Subordinated  Notes").  On  April  6,  1998, the
underwriters   exercised  the  $30,000,000  overallotment  provision.  The  4.5%
Convertible  Subordinated  Notes  will  be  convertible into 5,575,758 shares of
Common  Stock,  at the option of the holder, at a conversion price of $41.25 per
share,  representing a conversion premium of 25% over the previous day's closing
price.   The   4.5%   Convertible   Subordinated  Notes  are  general  unsecured
obligations  of  the  Company  ranking  equal  in  right  of payment with the 6%
Convertible  Subordinated  Notes  and  all  other  unsecured indebtedness of the
Company.  In addition, the Company is a holding company that conducts all of its
operations  through  subsidiaries,  and  the 4.5% Convertible Subordinated Notes
and  the  6%  Convertible Subordinated Notes are structurally subordinate to all
obligations  of  the  Company's  subsidiaries. The 4.5% Convertible Subordinated
Notes  were  sold  through a private placement under Rule 144A of the Securities
Act  of  1933,  as  amended  and  have  similar  terms  and conditions as the 6%
Convertible Subordinated Notes.

     In  December 1996, Health Services issued an aggregate of up to $97,750,000
in  principal  amount  of  6%  Convertible  Subordinated  Notes ("6% Convertible
Subordinated  Notes"). The 6% Convertible Subordinated Notes will be convertible
into  3,291,243 shares of Common Stock at the initial conversion price of $29.70
per share (equivalent


                                      F-13
<PAGE>

to  a  conversion  rate  of  33.67  shares  per  $1,000  principal  amount of 6%
Convertible  Subordinated  Notes),  subject to adjustment in certain events. The
notes  are convertible into Common Stock at the option of the holder on or after
February  through  December  2001.  The  6%  Convertible Subordinated Notes will
mature  on  December  15, 2001 with interest being payable semi-annually on June
15 and December 15 of each year, commencing on June 15, 1997.

     On  August 31, 1996, PPS completed a series of transactions involving funds
managed  by  a  private  equity  firm  and  senior  officers  of  PPS (the "1996
Transaction").  In connection with the 1996 Transaction, the private equity firm
invested  $17,000,000  to  acquire  $10,000,000  in  5% Convertible Subordinated
Notes  due  August 2006 (the "5% Convertible Subordinated Notes") and $7,000,000
of  10%  Subordinated  Notes due August 2003 (the "10% Subordinated Notes"). PPS
also  entered  into  a  credit  facility  with  a  syndicate of two banks, which
provided  for  $25,000,000  of senior debt, $20,000,000 of which was in the form
of  a  term  loan  and  $5,000,000  of which was available pursuant to a line of
credit.  PPS,  in  turn, used the net proceeds from these financing transactions
to   make   distributions   to  its  stockholders  in  an  aggregate  amount  of
approximately $36,000,000.

     On  July  31, 1997, in connection with the acquisition of ABOUT HEALTH (see
Note  2),  PPS  entered  into  an  amended  and  restated credit facility (as so
amended  and restated, the "PPS Term Loan") to increase the term loan portion by
$26.5  million.  The  Company  is  obligated  to  make  quarterly  principal and
interest  payments  on  the  term  loan  (bearing  interest  of 8.0% and 7.8% at
December  31,  1996  and  1997, respectively) and quarterly interest payments on
the  line of credit (bearing interest at 9.25% and 9.0% at December 31, 1996 and
1997, respectively).

     The  10%  Subordinated  Notes  bear  interest  at  10%  per  annum, payable
quarterly.  Beginning  February 2002, the Company is required to make semiannual
principal  payments on the 10% Subordinated Notes of $1.7 million. Under the 10%
Subordinated  Loan  Agreement,  the  Company  is  required  to  prepay  the  10%
Subordinated  Notes  in  whole  upon  a  qualifying public offering, sale of the
Company, or other change in control, as defined.

     The  5%  Convertible  Subordinated Notes are convertible at any time by the
holder  into  10,000  shares of PPS Redeemable Preferred Stock and 10,000 shares
of  PPS  Convertible  Preferred  Stock.  The  5%  Convertible Subordinated Notes
mature  in  August  2006,  subject to the right of the holders to accelerate the
maturity  of  the  5%  Convertible  Subordinated  Notes  upon  a  public  equity
offering,  a  qualifying  sale of the Company, or a merger resulting in a change
in  majority  ownership  of  the  Company. The 5% Convertible Subordinated Notes
bear  interest  at  5%,  2%  being  payable  quarterly and 3% being deferred and
payable upon redemption or maturity.

     On  February  24,  1998,  in  connection  with the merger of PPS, Concentra
repaid  $49,000,000  of PPS indebtedness (the PPS Term Loan and 10% Subordinated
Notes)  and  the 5% Convertible Subordinated Notes were converted into 2,721,904
shares of Concentra Common Stock.

(7) FINANCIAL INSTRUMENTS

     Effective  December  31,  1995,  the Company adopted Statement of Financial
Accounting  Standards  No.  107,  "Disclosures  About  Fair  Value  of Financial
Instruments".  This  statement  requires  entities to disclose the fair value of
their  financial  instruments, both assets and liabilities, and and off- balance
sheet,  for  which  it  is  practicable  to  estimate  fair value. The following
describes  the methods and assumptions that were used to estimate the fair value
of  each  class of financial instruments for which it is practicable to estimate
that value.

     The  Company's  marketable  securities  are  held  as available for sale in
accordance  with  the  provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities".

     The  following  is  a  summary  of marketable securities with a maturity of
greater than 90 days as of December 31, 1998:



<TABLE>
<CAPTION>
                                                 Amortized       Unrealized     Unrealized          Fair
                                                    Cost            Gains        (Losses)          Value
                                              ---------------   ------------   ------------   ---------------
<S>                                           <C>               <C>            <C>            <C>
U.S. government securities ................    $ 10,523,000       $ 62,000      ($  2,000)     $ 10,583,000
Corporate debt securities .................       3,000,000              -              -         3,000,000
Other debt securities .....................       2,000,000              -              -         2,000,000
                                               ------------       --------       --------      ------------
                                               $ 15,523,000       $ 62,000      ($  2,000)     $ 15,583,000
                                               ============       ========       ========      ============
Marketable securities, noncurrent .........    $ 10,523,000       $ 62,000      ($  2,000)     $ 10,583,000
                                               ============       ========       ========      ============
</TABLE>

                                      F-14
<PAGE>

     The  average maturity of the Company's marketable securities as of December
31, 1998 was approximately 20 months.

     Financial   instruments   that   potentially   subject   the   Company   to
concentrations   of   credit   risk   are  accounts  receivable  and  marketable
securities.  Mitigating factors related to the Company's accounts receivable are
that  they  are  spread over a large customer base and various product lines the
Company  offers. Further, the Company does monitor the financial performance and
credit  worthiness  of  its  large  customers. Mitigating factors related to the
Company's  marketable  securities  are  that  they are primarily U.S. government
securities  and  corporate  bonds  and  notes,  with  strong credit ratings. The
Company  limits  the  amount  of  its  investment  exposure  as  to institution,
maturity and investment type.

     The  carrying  amounts  of  cash and cash equivalents, accounts receivable,
other  current  assets,  accounts payable, and accrued expenses approximate fair
value  because of the short maturity of those instruments. The credit facilities
approximate  fair  value primarily due to the floating interest rates associated
with those debt instruments.

     The  fair  value  of  the  Company's  6% Convertible Subordinated Notes was
$125,120,000  and $83,088,000 as of December 31, 1997 and 1998 and the Company's
4.5%  Convertible  Subordinated  Notes was $173,650,000 as of December 31, 1998.
The  fair market values of the convertible subordinated notes are the average of
the  NASDAQ's  bid and ask amounts as of the respective year end. As of December
31,  1997,  the  approximate fair value of the 5% Convertible Subordinated Notes
is  $15,700,000.  Although  the  interest  rate on the 10% Subordinated Notes is
fixed,  the  carrying  value  reasonably approximates the fair value at December
31, 1997.

(8) Income Taxes
     The  provision  for  income  taxes  consists of the following for the years
ended December 31: of the following for the years ended December 31:



<TABLE>
<CAPTION>
                         1996            1997            1998
                   --------------- --------------- ---------------
<S>                <C>             <C>             <C>
Current:
 Federal .........  $ 11,429,000    $ 15,112,000    $ 11,252,000
 State ...........     2,473,000       3,968,000       1,369,000
                    ------------    ------------    ------------
                      13,902,000      19,080,000      12,621,000
Deferred:
 Federal .........      (214,000)     (6,873,000)      5,961,000
 State ...........      (251,000)     (1,145,000)        726,000
                    ------------    ------------    ------------
                        (465,000)     (8,018,000)      6,687,000
                    ------------    ------------    ------------
Total ............  $ 13,437,000    $ 11,062,000    $ 19,308,000
                    ============    ============    ============
</TABLE>


                                      F-15
<PAGE>


Significant  items  making  up  deferred tax liabilities and deferred tax assets
                        were as follows at December 31:



<TABLE>
<CAPTION>
                                                                                  1997             1998
                                                                             --------------   --------------
<S>                                                                          <C>              <C>
Deferred tax assets:
Allowance for doubtful accounts ..........................................    $ 4,624,000      $ 5,752,000
 Accrued vacation ........................................................      1,760,000        1,117,000
 Accrued self insurance ..................................................        580,000        1,220,000
 Acquired goodwill .......................................................      1,678,000        1,310,000
 Non-recurring accruals and reserves .....................................      5,107,000        5,255,000
 Net operating losses ....................................................        506,000                -
 Other ...................................................................        109,000        1,446,000
                                                                              -----------      -----------
  Deferred tax assets ....................................................    $14,364,000      $16,100,000
                                                                              ===========      ===========
Deferred tax liabilities: ................................................
 Book to tax depreciation ................................................    $ 1,716,000      $ 2,307,000
 Joint venture deferred liabilities ......................................              -        1,280,000
 Goodwill, principally due to differences in amortization periods ........      4,400,000        4,758,000
 Accounts receivable mark-to-market ......................................              -        1,596,000
 Research and development expense ........................................      1,520,000        4,864,000
 Other ...................................................................         77,000        1,331,000
                                                                              -----------      -----------
  Deferred tax liabilities ...............................................    $ 7,713,000      $16,136,000
                                                                              ===========      ===========
</TABLE>



 A  reconciliation  of the federal statutory rate to the Company's effective tax
 rate was as follows for the years ended December 31:



<TABLE>
<CAPTION>
                                                         1996           %
                                                   --------------- ----------
<S>                                                <C>             <C>
Tax provision at federal statutory rate ..........  $ 14,309,000       34.5%
State taxes, net of federal income tax ...........
benefit ..........................................     1,488,000        3.6
PPS S corporation status .........................    (2,441,000)      (5.9)
Non-deductible goodwill ..........................       367,000        0.9
Non-deductible non-recurring charges .............
and acquisition costs ............................             -          -
Other items, net .................................      (286,000)      (0.7)
                                                    ------------       ----
                                                    $ 13,437,000       32.4%
                                                    ============       ====
<CAPTION>
                                                        1997            %           1998           %
                                                   ---------------- ---------- --------------- ----------
<S>                                                <C>              <C>        <C>             <C>
Tax provision at federal statutory rate ..........   $  7,372,000       35.0%   $ 14,628,000       35.0%
State taxes, net of federal income tax ...........
benefit ..........................................        925,000        4.4       1,766,000        4.2
PPS S corporation status .........................     (2,582,000)     (12.3)              -          -
Non-deductible goodwill ..........................      1,003,000        4.8       1,149,000        2.8
Non-deductible non-recurring charges .............
and acquisition costs ............................      4,064,000       19.3       1,815,000        4.3
Other items, net .................................        280,000        1.3         (50,000)      (0.1)
                                                     ------------      -----    ------------       ----
                                                     $ 11,062,000       52.5%   $ 19,308,000       46.2%
                                                     ============      =====    ============       ====
</TABLE>



     PPS'  shareholders  had  elected  S  Corporation  taxing status. Thus, PPS'
taxable  income  was taxed directly to its shareholders. PPS did pay state taxes
in  Illinois,  Pennsylvania,  California  and  Utah based on its taxable income.
Effective  with  the  merger  with Concentra, PPS' taxable income is included in
Concentra's consolidated income tax returns.

(9) STOCKHOLDERS' EQUITY

(A) PREFERRED STOCK

     The  Board  of  Directors is authorized to issue shares of Preferred Stock,
in  one  or  more  series,  and to fix for each such series the number of shares
thereof  and  voting  powers  and  such preferences and relative, participating,
optional  or  other  special  rights  and  such  qualifications,  limitations or
restrictions  as  are  permitted  by  the  Delaware General Corporation Law. The
Board  of  Directors  could  authorize the issuance of shares of Preferred Stock
with  terms and conditions that could discourage a takeover or other transaction
that  holders  of  some or a majority of shares of Common Stock might believe to
be  in their best interests or in which such holders might receive a premium for
their  shares of stock over the then market price of such shares. As of the date
hereof,  no shares of Preferred Stock are outstanding and the Board of Directors
has  no  present  intention  to issue any shares of Preferred Stock. See Note 14
"Subsequent Events" for related disclosure.

                                      F-16
<PAGE>

(B) STOCKHOLDER RIGHTS PLAN

     Shortly  after  the  1997  Merger,  on  September  17,  1997,  the Board of
Directors  declared,  pursuant to a rights agreement (the "Rights Agreement"), a
dividend  distribution  of  one  common  share purchase right ("Right") for each
outstanding  share  of  Common  Stock.  Each  Right  will entitle the registered
holder  to  purchase from Concentra one thousandth of a share of Series A Junior
Participating  Preferred  Stock, par value $.01 per share (the "Junior Preferred
Shares"),  of  Concentra  at  a price per share to be determined by the Board of
Directors  with  the  advice  of  its  financial  advisor  about  the  long-term
prospects   for   the   Company's  value  (the  "Purchase  Price"),  subject  to
adjustment.  Each  thousandth  of  a Junior Preferred Share will be economically
equivalent  to  one  share  of  Concentra  Common  Stock.  The Purchase Price is
expected  to be significantly higher than the trading price of the Common Stock.
Therefore,  the  dividend  will  have  no  initial  value  and  no impact on the
consolidated  financial  statements  of  the  Company.  See Note 14, "Subsequent
Events" for related disclosure.


(C) COMMON STOCK

     At  December  31,  1998,  the Company has reserved approximately 16,839,000
unissued  shares  of  its Common Stock for possible issuance under the Company's
stock  option  or  stock  purchase  plans  and  for  the  issuance upon possible
conversion of the Company's 6% and 4.5% Convertible Subordinated Notes.


(10) COMMITMENTS AND CONTINGENCIES

     The  Company  leases  certain corporate office space, operating and medical
facilities,  and  office  and  medical  equipment  under  various non-cancelable
operating  and  capital  lease  agreements.  Certain facility leases require the
Company  to pay increases in operating costs and real estate taxes. In addition,
the  Company  leases  certain  office  facilities  from  related  parties  under
operating  lease  agreements  that  expire on various dates through December 31,
2003.  The  Company made rental payments of $726,000 to Colonial Realty Trust, a
real  estate  company owned by a shareholder and board member of the Company for
each of the years ended December 31, 1996, 1997 and 1998.

     The  following  is  a  schedule  of  rent expense by major category for the
years ended December 31:






<TABLE>
<CAPTION>
                                   1996           1997           1998
                              -------------- -------------- --------------
<S>                           <C>            <C>            <C>
 .Facilities .................  $13,009,000    $17,179,000    $22,307,000
Office equipment ............    1,166,000      2,029,000      3,091,000
Automobiles .................    2,729,000      2,976,000      3,647,000
                               -----------    -----------    -----------
Total rent expense ..........  $16,904,000    $22,184,000    $29,045,000
                               ===========    ===========    ===========
</TABLE>



     The  following  is  a  schedule  of  future  minimum  lease  payments under
non-cancelable operating and capital leases for the years ending December 31:






<TABLE>
<CAPTION>
                                                         OPERATING LEASES
                                         ------------------------------------------------
                             CAPITAL         RELATED         UNRELATED
                              LEASES         PARTIES          PARTIES           TOTAL
                           -----------   --------------   --------------   --------------
<S>                        <C>           <C>              <C>              <C>
Year Ending December 31,
1999 ...................    $ 34,000      $   700,000      $22,464,324      $23,164,324
2000 ...................      22,000          700,000       18,051,724       18,751,724
2001 ...................           -          700,000       14,319,611       15,019,611
2002 ...................           -          700,000       12,399,364       13,099,364
2003 ...................           -          700,000        9,068,364        9,768,364
Thereafter .............           -                -        8,083,018        8,083,018
                            --------      -----------      -----------      -----------
                            $ 56,000      $ 3,500,000      $84,386,405      $87,886,405
                            ========      ===========      ===========      ===========
</TABLE>



     A  wholly-owned  subsidiary  of  Health Services has committed to guarantee
$21,408,000  in senior discount notes, plus interest, issued by four development
corporations   (Concentra   Development   Corporation,   Concentra   Development
Corporation  II,  Concentra/Sherrer  Development  Corporation and Concentra/RDA,
Inc.).  The  stated  principal amount of the notes total $42,768,000, which will
be  their  accreted  value at their stated maturity (two to five years after the
date  of  issuance  of  each  note).  These corporations have been organized and
capitalized by a third party to develop



                                      F-17
<PAGE>


occupational  healthcare  centers  in  selected  markets  in  the United States.
Health  Services  also  has  the  right to acquire the developed centers at fair
market  value  in  the  future.  Health  Services  has entered into a management
agreement  with  the  development corporations to manage the healthcare centers'
daily operations.

     The  Company  is  party  to  certain claims and litigation initiated in the
ordinary  course  of  business.  The  Company  is  not  involved  in  any  legal
proceeding  that it believes will result, individually or in the aggregate, in a
material  adverse  effect upon its financial condition or results of operations.
See  Note 14, "Subsequent Events" for further claims and litigation disclosures.



(11) EMPLOYEE BENEFIT PLANS


(A) CONCENTRA 401(K) PLAN

     The  Company has a defined contribution plan (the "Concentra 401(k) Plan"),
formerly  the  Managed  Care  Services  401(k)  Plan  (the "MCS Concentra 401(k)
Plan"),  pursuant  to  which  employees who are at least 21 years of age and who
have  completed  at  least  six  months  of service are eligible to participate.
Participants  in  the  Concentra  401(k)  Plan  may not contribute more than the
lesser  of  a  specified  statutory  amount  or  15%  of his or her pretax total
compensation.   The  Concentra  401(k)  Plan  permits,  but  does  not  require,
additional   matching  contributions  of  up  to  50%  of  participants'  pretax
contributions  up  to  a maximum of 6% of compensation by the Company. Employees
are  100% vested in their own contributions while Company contributions vest 20%
per  year  with  employees  being  fully  vested after five years. For 1998, the
Company  is  making  a  matching  contribution  of  50%  of participant's pretax
contributions up to 4% of compensation.


(B) HEALTH SERVICES 401(K) PLAN

     Health  Services'  defined  contribution plan (the "HS 401(k) Plan") merged
into  the  Concentra  401(k)  Plan  as  of  July 1, 1998. The HS 401(k) Plan had
similar  terms  to  those  of  the Concentra 401(k) Plan. There were no matching
contributions under the plan in 1996, 1997 and 1998.


(C) PPS 401(K) PLAN

     PPS'  defined  contribution  plan  (the  "PPS 401(k) Plan") merged into the
Concentra  401(k)  Plan  as  of  August 1, 1998. The PPS 401(k) Plan had similar
terms  to  those  of the Concentra 401(k) Plan. For the years ended December 31,
1996  and  1997  and the seven-month period in 1998, PPS elected to match 25% of
employee contributions up to 7% of gross earnings.

     The  Company has expensed $910,000, $1,053,000 and $1,508,000 for the years
ended   December   31,   1996,   1997   and  1998,  respectively,  for  matching
contributions  to the Concentra 401(k), the MCS 401(k) and the PPS 401(k) Plans.



(12) STOCK PURCHASE PLAN AND STOCK OPTION PLANS


(A) CONCENTRA 1997 EMPLOYEE STOCK PURCHASE PLAN

     The  Concentra 1997 Employee Stock Purchase Plan (the "1997 Purchase Plan")
for  employees of the Company authorizes the issuance of up to 500,000 shares of
Common  Stock  pursuant  to  the  exercise of nontransferable options granted to
participating   employees.  The  1997  Purchase  Plan  is  administered  by  the
Compensation Committee of the Board of Directors.

     Under  the  terms of the 1997 Purchase Plan, an employee must authorize the
Company  in writing to deduct an amount (not less than 1% nor more than 15% of a
participant's  base  compensation  and  in any event not more than $25,000) from
his  or  her  pay during six month periods commencing on January 1 and July 1 of
each  year  (each  a "Purchase Period"). The exercise price for shares purchased
under  the  1997  Purchase Plan for each Purchase Period is the lesser of 85% of
the  fair  market value of the Common Stock on the first or last business day of
the  Purchase Period. The fair market value will be the closing selling price of
the Common Stock as quoted.


                                      F-18
<PAGE>


(B) MANAGED CARE SERVICES AND HEALTH SERVICES EMPLOYEE STOCK PURCHASE PLANS

     Managed  Care Services and Health Services each had employee stock purchase
plans  under similar terms and conditions as those under the 1997 Purchase Plan.

     The  Company issued the following shares of Common Stock under the employee
stock purchase plans for each of the following purchase periods:




<TABLE>
<CAPTION>
                                             Weighted
                                              Average
                                 Number        Price
Purchase Periods Ended         of Shares     Per Share
---------------------------   -----------   ----------
<S>                           <C>           <C>
December 31, 1995 .........      32,682      $ 10.49
June 30, 1996 .............      29,089      $ 10.59
December 31, 1996 .........      44,606      $ 22.18
June 30, 1997 .............      50,056      $ 21.38
December 31, 1997 .........      47,245      $ 24.86
June 30, 1998 .............      64,587      $ 22.10
December 31, 1998 .........     160,512      $  9.08
</TABLE>



(C) CONCENTRA 1997 LONG-TERM INCENTIVE PLAN

     Concentra  may  grant  awards  with  respect  to shares under the Company's
Long-term  Incentive Plan (the "Concentra Incentive Plan"). The awards under the
Concentra  Incentive Plan include: (i) incentive stock options qualified as such
under  U.S.  federal  income tax laws, (ii) stock options that do not qualify as
incentive   stock  options,  (iii)  stock  appreciation  rights  ("SARs"),  (iv)
restricted stock awards and (v) performance units.

     The  number  of  shares  of Common Stock that may be subject to outstanding
awards  under  the  Concentra  Incentive  Plan  at  any one time is equal to ten
percent  of  the  total  number  of outstanding shares of Concentra Common Stock
(treating  as  outstanding  all  shares  of Common Stock issuable within 60 days
upon  exercise  of  stock  options  or  conversion  or  exchange of outstanding,
publicly-  traded convertible or exchangeable securities of Concentra) minus the
total  number  of shares of Common Stock subject to outstanding awards under the
Concentra  Incentive  Plan  and  any  future  stock-based  plan for employees or
directors  of Company. At December 31, 1998, the Company was authorized to award
grants  of  approximately  5,019,000  shares under the Concentra Incentive Plan.
The  number  of  shares  authorized  under  the Concentra Incentive Plan and the
number  of shares subject to an award under the Concentra Incentive Plan will be
adjusted  for  stock  splits,  stock  dividends,  recapitalizations, mergers and
other changes affecting the capital stock of Concentra.

     During  1997,  the  Company  granted restricted stock for 357,000 shares of
Common  Stock  under  the 1997 Incentive Plan which were valued at approximately
$9,903,000  based  upon  the market value of the shares at the time of issuance.
As  of December 31, 1998, 93,000 shares of the restricted stock granted in 1997,
valued  at  $2,806,000,  have  been canceled due to forfeiture. During 1998, the
Company  granted  restricted  stock  for 48,000 shares of Common Stock under the
1997  Incentive Plan which were valued at $1,413,000 based upon the market value
of  the shares at the time of issuance. The restricted stock grants vest 25% per
year  beginning  January 1, 2002. If the Company's financial performance exceeds
certain  established  performance  goals,  however,  the vesting of these shares
could  accelerate  whereby  33-1/3% of the shares could become vested on January
1,  2000  and  each  year  thereafter. For the years ended December 31, 1997 and
1998,  the Company recorded amortization of $562,000 and $805,000, respectively,
in  connection  with  the  deferred  compensation associated with the restricted
stock  grants.  During  1997  and 1998, the Company also granted 2,754 and 3,570
shares of restricted stock to outside directors that vest over one year.

     After  the 1997 Merger, no additional awards were made under the former CRA
and  OccuSystems  stock  option  plans  and only that number of shares of Common
Stock  issuable  upon  exercise  of  awards  granted  under  the  former CRA and
OccuSystems  stock option plans as of the 1997 Merger were reserved for issuance
by the Company.

     In  connection  with  the  1996  Transaction,  PPS canceled all outstanding
stock  options and terminated all existing stock option plans. In return for the
cancellation  of  outstanding options, PPS made a cash payment to the holders of
these  options,  which  resulted  in  a  compensation  charge  of  approximately
$484,000.  Upon  the  cancellation  of  the  options,  PPS  adopted the 1996 PPS
Replacement Stock Option Plan and the 1996 PPS Incentive


                                      F-19
<PAGE>


Stock  Option  Plan for its key employees. The plan provided for the issuance of
up  to  325,000 shares of PPS common stock. The exercise price for the incentive
stock  options  could  not  be less than the fair market value of the underlying
PPS  common  stock  on the date of grant. After the merger, no additional awards
were  made  under  the former PPS stock option plans and outstanding PPS options
were  assumed  by  the  Concentra  Incentive Plan totaling approximately 580,000
shares of Concentra common stock.


     A  summary  of the status for all outstanding options at December 31, 1996,
1997  and 1998 and changes during the years then ended is presented in the table
below:






<TABLE>
<CAPTION>
                                                           WEIGHTED
                                           NUMBER        AVERAGE PRICE
                                         OF SHARES         PER SHARE
                                      ---------------   --------------
<S>                                   <C>               <C>
Balance December 31, 1995 .........       2,697,593        $   8.18
 Granted ..........................       1,959,777           18.07
 Exercised ........................        (633,143)           4.41
 Canceled .........................        (158,485)          13.79
                                          ---------        --------
Balance December 31, 1996 .........       3,865,742           13.59
 Granted ..........................       2,925,655           22.51
 Exercised ........................        (801,593)           9.02
 Canceled .........................        (268,017)          20.71
                                          ---------        --------
Balance December 31, 1997 .........       5,721,787           18.46
 Granted ..........................       2,945,570           21.43
 Exercised ........................        (696,473)           6.77
 Canceled .........................      (1,277,335)          24.53
                                         ----------        --------
Balance December 31, 1998 .........       6,693,549        $  20.21
                                         ==========        ========
</TABLE>



     The  weighted average fair market value of options granted in 1997 and 1998
were  $25.89  and  $21.95,  respectively. A further breakdown of the outstanding
options at December 31, 1998 is as follows:






<TABLE>
<CAPTION>
                                                         WEIGHTED
                                          WEIGHTED        AVERAGE       EXERCISABLE      WEIGHTED
        RANGE OF            NUMBER OF      AVERAGE      CONTRACTUAL      NUMBER OF       AVERAGE
     EXERCISE PRICES         OPTIONS        PRICE      LIFE (YEARS)       OPTIONS         PRICE
------------------------   -----------   ----------   --------------   -------------   -----------
<S>                        <C>           <C>          <C>              <C>             <C>
$ 0.00 - $12.39.........    2,357,919     $   6.00          8.06           840,105      $   5.61
$12.74 - $23.13.........    1,065,591        20.43          7.60           408,339         19.50
$23.17 - $27.88.........      521,789        26.24          8.15           198,800         26.30
$29.44 - $32.63.........    2,479,250        30.88          9.15           153,250         32.63
$32.75 - $33.88.........      269,000        33.75          8.87            81,000         33.46
                            ---------     --------          ----           -------      --------
                            6,693,549     $  20.21          8.43         1,681,494      $  15.23
                            =========     ========          ====         =========      ========
</TABLE>



(D) SFAS 123 DISCLOSURES


     The  Company  accounts  for  these  plans  under APB No. 25, under which no
compensation  cost  has  been  recognized  related  to  stock option grants. Had
compensation  cost  for these plans been determined consistent with Statement of
Financial   Accounting   Standards   No.   123,   "Accounting   for  Stock-Based
Compensation"  ("SFAS  123"),  the  Company's  net income, pro forma net income,
earnings  per  share and pro forma earnings per share would have been reduced to
the following supplemental pro forma amounts:



                                      F-20
<PAGE>

<TABLE>
<CAPTION>
                                               1996                1997                1998
                                        -----------------   -----------------   -----------------
<S>                                     <C>                 <C>                 <C>
Net Income:
 As reported ........................     $  28,039,000       $  10,000,000       $  22,486,000
 Supplemental pro forma .............     $  22,555,000       $   3,612,000       $   8,864,000
 Pro forma as reported (1) ..........     $  25,309,000       $   7,189,000
 Supplemental pro forma (1) .........     $  19,825,000       $     801,000
Basic Earnings Per Share:
 As reported ........................     $        0.69       $        0.23       $        0.48
 Supplemental pro forma .............     $        0.56       $        0.08       $        0.19
 Pro forma as reported (1) ..........     $        0.63       $        0.17
 Supplemental pro forma (1) .........     $        0.49       $        0.02
Diluted Earnings Per Share:
 As reported ........................     $        0.65       $        0.22       $        0.47
 Supplemental pro forma .............     $        0.53       $        0.08       $        0.19
 Pro forma as reported (1) ..........     $        0.59       $        0.16
 Supplemental pro forma (1) .........     $        0.46       $        0.02
</TABLE>



--------
(1) Pro  forma net income and basic and diluted pro forma earnings per share for
    the  years  ended  December 31, 1996 and 1997 have been calculated as if PPS
    had  been  subject  to federal and state income taxes for the entire period,
    based  upon  an  effective  tax  rate  indicative  of the statutory rates in
    effect.  Prior  to  its  merger with the Company, PPS elected to be taxed as
    an  S  corporation,  and  accordingly,  was not subject to federal and state
    income taxes in certain jurisdictions.

     Because  the  method  of  accounting under SFAS 123 has not been applied to
options  granted  prior to January 1, 1995, the resulting pro forma compensation
cost  may  not  be  representative  of  that  to  be  expected  in future years.
Additionally,  the  1996,  1997  and  1998  pro  forma amounts include $229,000,
$396,000  and  $509,000,  respectively, related to purchase discounts offered on
employee  stock  purchase  plans.  The  fair  value  of  each  option granted is
estimated  on  the  date  of  grant using the Black-Scholes option pricing model
with  the  following  assumptions  used  for  grants  in  1996,  1997  and 1998,
respectively:




<TABLE>
<CAPTION>
                                                                   1996         1997         1998
                                                                   ----         ----         ----
<S>                                                                <C>          <C>          <C>
Risk-free interest rates ....................................       5.25%        5.50%        5.18%
Expected volatility .........................................      45.29%       45.29%       78.91%
Expected dividend yield .....................................          -            -            -
Expected weighted average life of options in years ..........       3.4          3.7          3.0
</TABLE>



(13) SEGMENT INFORMATION
     Operating  segments represent components of the Company's business that are
evaluated  regularly  by  key  management  in assessing performance and resource
allocation.  The  Company has determined that its reportable segments consist of
its  Health  Services,  Specialized  Cost  Containment and Field Case Management
Groups.
     Health  Services  manages  occupational  healthcare  centers  at  which  it
provides  support  personnel,  marketing,  information  systems  and  management
services  to  its  affiliated physicians. Health Services owns all the operating
assets  of  the  occupational  healthcare centers, including leasehold interests
and medical equipment.
     Specialized  Cost  Containment  services  include  first  report of injury,
utilization  management  (precertification  and concurrent review) retrospective
medical   bill   review,   telephonic   case   management,   preferred  provider
organization  ("PPO") network access, independent medical examinations ("IMEs"),
peer  reviews  and hospital bill auditing. These services are designed to reduce
the  cost of workers' compensation claims, automobile accident injury claims and
group health claims.



                                      F-21
<PAGE>


     Field  Case Management provides services involving case managers and nurses
working  on  a one- on-one basis with injured employees and their various health
care  professionals,  employers  and  insurance  company  adjusters to assist in
maximizing  medical  improvement  and, where appropriate, to expedite the return
to work.
     The  Health Services Group is managed separately and has different economic
characteristics  from the Specialized Cost Containment and Field Case Management
groups,  and is therefore shown as a separate reportable segment. The Field Case
Management  Group  and  certain  operating  segments included in the Specialized
Cost  Containment  Group have similar economic characteristics and may share the
same  management  and/or  locations. However, the Field Case Management Group is
reported  as  a  separate  segment  for  management  reporting  purposes  and it
represents  58.7%,  49.3%  and  47.7% of total Managed Care Services revenue for
the years ended December 31, 1996, 1997 and 1998, respectively.
     Revenues  from individual customers, revenues between business segments and
revenues,  operating  profit  and  identifiable assets of foreign operations are
not significant.
     The  Company's  Statements  of  Operations on a segment basis for the years
ended December 31, 1996, 1997 and 1998 were as follows:




<TABLE>
<CAPTION>
                                                 1996               1997               1998
                                           ----------------   ----------------   ----------------
<S>                                        <C>                <C>                <C>
Revenue:
 Health Services .......................    $ 170,035,000      $ 207,676,000      $ 259,481,000
 Managed Care Services: ................
  Specialized cost containment .........       83,784,000        142,919,000        183,734,000
  Field case management ................      118,864,000        138,723,000        167,841,000
                                            -------------      -------------      -------------
  Total Managed Care Services ..........      202,648,000        281,642,000        351,575,000
                                            -------------      -------------      -------------
                                              372,683,000        489,318,000        611,056,000
Gross profit margins: ..................
 Health Services .......................       39,281,000         52,300,000         58,300,000
 Managed Care Services:
  Specialized cost containment .........       23,630,000         42,907,000         60,440,000
  Field case management ................       19,844,000         21,472,000         23,019,000
                                            -------------      -------------      -------------
  Total Managed Care Services ..........       43,474,000         64,379,000         83,459,000
                                            -------------      -------------      -------------
                                               82,755,000        116,679,000        141,759,000
Operating income (1):
 Health Services .......................       19,742,000         12,273,000         34,415,000
 Managed Care Services .................       25,452,000         20,042,000         20,785,000
                                            -------------      -------------      -------------
                                               45,194,000         32,315,000         55,200,000
Interest expense .......................        3,741,000         12,667,000         18,021,000
Interest income ........................         (859,000)        (2,297,000)        (4,659,000)
Other expense, net .....................          836,000            883,000             44,000
                                            -------------      -------------      -------------
 Income before income taxes.............       41,476,000         21,062,000         41,794,000
Provision for income taxes .............       13,437,000         11,062,000         19,308,000
                                            -------------      -------------      -------------
 Net income ............................    $  28,039,000      $  10,000,000      $  22,486,000
                                            =============      =============      =============
</TABLE>



--------
(1) Corporate-level  general  and  administrative  expenses  are reported in the
    Health  Services  and  Managed  Care  Services groups based on where general
    and  administrative  activities  are  budgeted.  The  Company  does not make
    allocations of corporate level general and administrative expenses.



                                      F-22
<PAGE>


     The  Company's  segment depreciation and amortization, capital expenditures
and  identifiable  assets  for  the years ended December 31, 1996, 1997 and 1998
are as follows:





<TABLE>
<CAPTION>
                                        1996             1997              1998
                                   --------------   --------------   ---------------
<S>                                <C>              <C>              <C>
Depreciation and amortization:
 Health Services ...............   $  6,827,000     $  9,242,000      $ 11,442,000
 Managed Care Services .........      3,321,000        7,376,000        11,552,000
                                   ------------     ------------      ------------
                                   $ 10,148,000     $ 16,618,000      $ 22,994,000
                                   ============     ============      ============
Capital expenditures:
 Health Services ...............   $ 19,296,000     $ 16,862,000      $ 19,235,000
 Managed Care Services .........      4,728,000        8,673,000        14,952,000
                                   ------------     ------------      ------------
                                   $ 24,024,000     $ 25,535,000      $ 34,187,000
                                   ============     ============      ============
Identifiable assets:
 Health Services ...............   $260,619,000     $261,521,000      $309,419,000
 Managed Care Services .........    107,281,000      221,012,000       347,375,000
                                   ------------     ------------      ------------
                                   $367,900,000     $482,533,000      $656,794,000
                                   ============     ============      ============
</TABLE>



(14) SUBSEQUENT EVENTS

     On  March  2,  1999, Concentra entered into a definitive agreement to merge
(the  "Merger")  with  Yankee Acquisition Corp. ("Yankee"), a corporation formed
by  Welsh,  Carson,  Anderson  &  Stowe  ("WCAS"),  a  14.9%  stockholder of the
Company.  Concentra's  Board  of  Directors unanimously approved the transaction
based  upon  the  recommendation  of  its  special  committee  of  the  Board of
Directors,   which  was  formed  on  October  29,  1998  to  evaluate  strategic
alternatives   in  response  to  several  unsolicited  expressions  of  interest
regarding  the  possible  acquisition  of  some  or  all of the Company's Common
Stock.  On  March  24,  1999,  Concentra  entered  into  an Amended and Restated
Agreement  and  Plan  of  Merger  with  Yankee (the "Amended Merger Agreement").
Pursuant  to  the Amended Merger Agreement, WCAS will acquire approximately 87%,
funds   managed   by   Ferrer  Freeman  Thompson  &  Co.  ("FFT")  will  acquire
approximately  7%  and  other  investors  will  acquire  approximately 6% of the
post-merger  shares  of  common  stock of the Company for $16.50 per share. As a
result  of  the Merger, each outstanding share of Concentra Common Stock will be
converted into the right to receive $16.50 in cash.

     In  connection  with the Merger, effective March 2, 1999, Concentra amended
its  Rights  Agreement.  The amendment provides, among other things, that Yankee
and  its  affiliates  will  not  be  deemed an Acquiring Person (as such term is
defined  in  the  Rights  Agreement)  and  that the Rights Agreement will expire
immediately prior to the effective time of the Merger.

     The transaction is valued at  approximately  $1,100,000,000,  including the
refinancing of $327,750,000 of the 6% and 4.5%  Convertible  Subordinated  Notes
which  contain  change in control  provisions  in the  related  indentures.  The
transaction  is  structured  to be accounted  for as a  recapitalization  and is
expected  to be  completed  in the third  quarter of 1999.  The  transaction  is
conditioned upon, among other things, approval of the shareholders of Concentra,
receipt of financing and certain regulatory approvals.

     To  finance  the acquisition of the Company, WCAS will invest approximately
$369,432,000  in equity financing, including the value of shares and convertible
notes   already   owned   by  WCAS,  and  up  to  $110,000,000  in  subordinated
indebtedness.  Additionally, FFT will invest approximately $30,600,000 and other
investors  will  invest  approximately  $23,000,000  in  equity.  WCAS  has also
received  commitments  from  various lenders to provide Yankee with $190,000,000
in  senior  subordinated  notes,  a  $375,000,000  term  loan and a $100,000,000
revolving  credit  facility  to  replace  the  Company's  existing Senior Credit
Facility.  Additionally, Concentra would also utilize excess cash on hand at the
time  of  the merger to help finance the purchase of the Concentra Common Stock.
Simultaneous  with the right to receive cash for shares, Yankee would merge with
Concentra with Concentra surviving.

     As  of  March 26, 1999, Concentra is aware of three lawsuits that have been
filed  by  alleged  stockholders  of Concentra relating to the Merger. All three
lawsuits  were filed in the Chancery Court for New Castle County, Delaware. Each
of  the  lawsuits  names  Concentra, its directors and Yankee as defendants. The
plaintiff  in  each  lawsuit  seeks  to represent a putative class of all public
holders  of  Concentra  common  stock.  The lawsuits allege, among other things,
that  the  directors of Concentra breached their fiduciary duties to Concentra's
stockholders  by  approving  the  Merger. The lawsuits seek, among other things,
preliminary  and  permanent  injunctive  relief  prohibiting consummation of the
Merger,  unspecified  damages,  attorneys'  fees  and  other  relief.  Concentra
expects  that  these  lawsuits  will  be  consolidated into a single action. The
Company intends to contest these lawsuits vigorously.



                                      F-23
<PAGE>

                         (15) SELECTED FINANCIAL DATA



<TABLE>
<CAPTION>
                                                 For the year ended December 31,
                                               -----------------------------------
                                                     1994              1995
                                               ---------------- ------------------
<S>                                            <C>              <C>
Statement of Operations Data:
Revenue ......................................  $ 223,499,000     $  305,355,000
Gross profit .................................     37,093,000         62,435,000
Non-recurring charges ........................              -            898,000
Operating income .............................     15,928,000         29,446,000
Income before taxes ..........................     10,088,000         24,246,000
Provision for income taxes (1) ...............      6,802,000          7,771,000
Net income before extraordinary
 items (1) ...................................  $   3,286,000         16,475,000
Pro forma net income before
 extraordinary items (2) .....................                    $   13,845,000
Basic earnings per share before
 extraordinary items .........................                             $0.48
Basic pro forma earnings per share
 before extraordinary items (2) ..............                             $0.41
Basic weighted average shares out-
 standing ....................................                        33,810,000
Diluted earnings per share before
 extraordinary items .........................                             $0.46
Diluted pro forma earnings per share
 before extraordinary items (2) ..............                             $0.39
Diluted weighted average shares
 outstanding .................................                        35,939,000
Balance Sheet:
Working capital ..............................  $  19,117,000     $   21,971,000
Total assets .................................    113,672,000        188,530,000
Total debt ...................................     83,785,000         34,639,000
Total stockholders' equity (deficit) .........     (5,820,000)       109,383,000



<CAPTION>
                                                           For the year ended December 31,
                                               --------------------------------------------------------
                                                      1996               1997               1998
                                               ------------------ ------------------ ------------------
<S>                                            <C>                <C>                <C>
Statement of Operations Data:
Revenue ......................................   $372,683,000     $489,318,000     $611,056,000
Gross profit .................................     82,755,000      116,679,000      141,759,000
Non-recurring charges ........................        964,000       38,625,000       33,114,000
Operating income .............................     45,194,000       32,315,000       55,200,000
Income before taxes ..........................     41,476,000       21,062,000       41,794,000
Provision for income taxes (1) ...............     13,437,000       11,062,000       19,308,000
Net income before extraordinary
 items (1) ...................................     28,039,000       10,000,000     $ 22,486,000
Pro forma net income before
 extraordinary items (2) .....................   $ 25,309,000     $  7,189,000
Basic earnings per share before
 extraordinary items .........................          $0.69            $0.23            $0.48
Basic pro forma earnings per share
 before extraordinary items (2) ..............          $0.63            $0.17
Basic weighted average shares out-
 standing ....................................     40,411,000       42,774,000       46,451,000
Diluted earnings per share before
 extraordinary items .........................          $0.65            $0.22            $0.47
Diluted pro forma earnings per share
 before extraordinary items (2) ..............          $0.59            $0.16
Diluted weighted average shares
 outstanding .................................     43,344,000       46,895,000       47,827,000
Balance Sheet:
Working capital ..............................   $116,439,000     $ 36,754,000     $201,870,000
Total assets .................................    367,900,000      482,533,000      656,794,000
Total debt ...................................    142,229,000      206,600,000      327,925,000
Total stockholders' equity (deficit) .........    178,146,000      206,441,000      239,875,000
</TABLE>



--------
(1) Prior  to its recapitalization in March of 1994, CRA had elected to be taxed
    as  an  S  corporation.  In  connection  with  its recapitalization, CRA was
    required  to  change  from  an S to a C corporation. This change resulted in
    CRA  recording  an  incremental  tax  provision  of  $3,772,000 in the first
    quarter  of  1994.  The  Company's  pro forma net income for 1994 would have
    been  $3,466,000  higher  had  CRA  had  been  subject  to federal and state
    income  taxes  during  the  entire  period  based upon an effective tax rate
    indicative of the statutory rate in effect during the period.

(2) Pro  forma  net  income  and basic and diluted pro forma earnings per share,
    where  applicable,  for  the  years  ended December 31, 1994, 1995, 1996 and
    1997  have  been  calculated as if PPS had been subject to federal and state
    income  taxes  for  the  entire  period,  based  upon  an effective tax rate
    indicative  of  the  statutory rates in effect. Prior to its merger with the
    Company,  PPS  elected to be taxed as an S corporation, and accordingly, was
    not subject to federal and state income taxes in certain jurisdictions.

(16) SELECTED QUARTERLY OPERATING RESULTS (UNAUDITED)

     The  following  table  sets  forth  certain  unaudited quarterly results of
operations  for  each  of  the  eight  quarters  ended  December  31,  1998.  In
management's  opinion,  this unaudited information has been prepared on the same
basis   as   the  annual  financial  statements  and  includes  all  adjustments
(consisting   only  of  normal  recurring  adjustments)  necessary  for  a  fair
presentation  of  the  information  for  the  quarters  presented,  when read in
conjunction  with  the financial statements and notes thereto included elsewhere
in  this  document.  The  operating  results for any quarter are not necessarily
indicative of results for any subsequent quarter.

                                      F-24
<PAGE>



<TABLE>
<CAPTION>
                                                                             QUARTER ENDED
                                            -------------------------------------------------------------------------------
                                                 MARCH 31,            JUNE 30,           SEPTEMBER 30,       DECEMBER 31,
                                                   1998                 1998                 1998                1998
                                            ------------------   ------------------   ------------------   ----------------
<S>                                             <C>                <C>                <C>                <C>
Revenue .................................       $144,282,000       $157,501,000       $157,362,000       $151,911,000
Cost of services ........................        109,898,000        116,633,000        118,660,000        124,106,000
                                                ------------       ------------       ------------       -------------
 Gross profit ...........................         34,384,000         40,868,000         38,702,000         27,805,000
General and administrative expenses               10,645,000         11,228,000         11,851,000         11,602,000
Amortization ............................          2,015,000          2,036,000          2,051,000          2,017,000
Non-recurring charge ....................         12,600,000                  -                  -         20,514,000
                                                ------------       ------------       ------------       -------------
 Operating income (loss) ................          9,124,000         27,604,000         24,800,000         (6,328,000)
Other expense, net ......................          3,710,000          3,207,000          3,355,000          3,134,000
Provision (benefit) for income taxes.....          4,567,000         10,236,000          9,000,000         (4,495,000)
                                                ------------       ------------       ------------       -------------
Net income (loss) .......................           $847,000       $ 14,161,000       $ 12,445,000       $ (4,967,000)
                                                ============       ============       ============       =============
Basic earnings (loss) per share .........              $0.02              $0.30              $0.26             $(0.11)
Diluted earnings (loss) per share .......              $0.02              $0.30              $0.26             $(0.11)
</TABLE>




<TABLE>
<CAPTION>
                                                                               QUARTER ENDED
                                              --------------------------------------------------------------------------------
                                                   MARCH 31,            JUNE 30,          SEPTEMBER 30,        DECEMBER 31,
                                                     1997                 1997                 1997                1997
                                              ------------------   ------------------   -----------------   ------------------
<S>                                           <C>                  <C>                  <C>                 <C>
Revenue ...................................     $106,307,000         $19,633,000          $129,890,000         $133,488,000
Cost of services ..........................       82,640,000          90,736,000            96,024,000          103,239,000
                                                ------------         -----------          ------------         ------------
 Gross profit .............................       23,667,000          28,897,000            33,866,000           30,249,000
General and administrative expenses                9,025,000           9,948,000            10,251,000           10,607,000
Amortization ..............................        1,235,000           1,160,000             1,560,000            1,953,000
Non-recurring charge ......................                -                   -            38,625,000                    -
                                                ------------         -----------          ------------         ------------
 Operating income (loss) ..................       13,407,000          17,789,000           (16,570,000)          17,689,000
Other expense, net ........................        1,598,000           2,272,000             3,200,000            4,183,000
Provision for income taxes ................        4,106,000           5,395,000            (3,342,000)           4,903,000
                                                ------------         -----------          ------------         ------------
Net income (loss) .........................     $  7,703,000         $10,122,000          $(16,428,000)        $  8,603,000
                                                ============         ===========          ============         ============
Pro forma net income (loss) (1) ...........     $  7,080,000         $ 9,440,000          $(17,548,000)        $  8,217,000
                                                ============         ===========          ============         ============
Basic earnings (loss) per share ...........            $0.18               $0.24                $(0.38)               $0.20
Basic pro forma earnings (loss) per
 share (1) ................................            $0.17               $0.22                $(0.41)               $0.19
Diluted earnings (loss) per share .........            $0.17               $0.22                $(0.38)               $0.18
Diluted pro forma earnings (loss) per
 share (1) ................................            $0.15               $0.21                $(0.41)               $0.17
</TABLE>



--------
(1) Pro  forma net income (loss) and basic and diluted pro forma earnings (loss)
    per  share  for  the  four  quarters  ended  December  31,  1997  have  been
    calculated  as  if  PPS  had  been subject to federal and state income taxes
    for  the  entire  period, based upon an effective tax rate indicative of the
    statutory  rates  in  effect.  Prior  to  its  merger  with the Company, PPS
    elected  to  be  taxed as an S corporation, and accordingly, was not subject
    to federal and state income taxes in certain jurisdictions.



                                      F-25
<PAGE>


                                                        Supplemental Schedule II


                          CONCENTRA MANAGED CARE, INC.
                       Valuation and Qualifying Accounts
             For the Years Ended December 31, 1996, 1997 and 1998




<TABLE>
<CAPTION>
                            BEGINNING        CHARGED                        NET DEDUCTIONS        ENDING
                             BALANCE        TO INCOME      ACQUISITIONS      FROM RESERVES       BALANCE
                          -------------   -------------   --------------   ----------------   -------------
<S>                       <C>             <C>             <C>              <C>                <C>
Allowance for Doubtful
  Accounts
                  1996     $ 6,917,000     $ 5,298,000      $4,289,000        $ 6,526,000      $ 9,978,000
                  1997       9,978,000       8,890,000       7,797,000          9,942,000       16,723,000
                  1998      16,723,000      12,869,000       1,968,000         14,350,000       17,210,000
Contractual Allowance
                  1996     $   660,000     $ 3,680,000      $  800,000        $ 3,427,000      $ 1,653,000
                  1997       1,653,000      14,718,000               -         12,743,000        3,628,000
                  1998       3,628,000      16,095,000               -         15,073,000        4,650,000
</TABLE>



--------
Non-recurring Charges(1)






<TABLE>
<CAPTION>
                           BEGINNING       CHARGED                              ENDING
                            BALANCE       TO INCOME           USAGE            BALANCE
                         ------------   -------------   ----------------    -------------
                  <S>      <C>             <C>              <C>                <C>
                  1996     $       -       $   964,000      $    (964,000)    $        -
                  1997             -        38,625,000        (31,098,000)      7,527,000
                  1998      7,527,000       33,114,000        (29,701,000)     10,940,000
</TABLE>



     (1) Non-recurring charge breakout by major category:



<TABLE>
<CAPTION>
                                      PROFESSIONAL         FACILITY          PERSONNEL
                                          FEES          CONSOLIDATION         RELATED             OTHER               TOTAL
                                    ----------------   ---------------   ----------------   -----------------   ----------------
<S>                                 <C>                 <C>                <C>                 <C>                  <C>
Balance 12/31/96 ................     $         -       $         -       $          -        $          -       $          -
 Provision-Q3 97 Charge .........      11,569,000         5,945,000         16,216,000           4,895,000         38,625,000
 Usage-Q3 97 Charge .............      (9,155,000)       (5,476,000)       (11,803,000)         (4,664,000)       (31,098,000)
                                      -----------       -----------       ------------        ------------       ------------
Balance 12/31/97 ................     $ 2,414,000       $   469,000       $  4,413,000        $    231,000       $  7,527,000
1988 Provision:
 Q3 97 Charge ...................     $         -       $         -       $          -        $          -       $          -
 Q1 98 Charge ...................       5,200,000         2,100,000          2,400,000           2,900,000         12,600,000
 Q4 98 Charge ...................               -         5,836,000          3,817,000          10,861,000         20,514,000
                                      -----------       -----------       ------------        ------------       ------------
Total 1998 Provision ............     $ 5,200,000       $ 7,936,000       $  6,217,000        $ 13,761,000       $ 33,114,000
1988 Usage:
 Q3 97 Charge ...................     $(2,414,000)      $  (469,000)      $ (4,413,000)       $   (231,000)      $ (7,527,000)
 Q1 98 Charge ...................      (5,136,000)         (746,000)        (2,355,000)         (2,891,000)       (11,128,000)
 Q4 98 Charge ...................               -        (1,140,000)        (2,490,000)         (7,416,000)       (11,016,000)
                                      -----------       -----------       ------------        ------------       ------------
Total 1998 Usage ................     $(7,550,000)      $(2,355,000)      $ (9,258,000)       $(10,538,000)      $(29,701,000)
                                      -----------       -----------       ------------        ------------       ------------
Balance 12/31/98 ................     $    64,000       $ 6,050,000       $  1,372,000        $  3,454,000       $ 10,940,000
                                      ===========       ===========       ============        ============       ============
</TABLE>



                                      S-1
<PAGE>


              REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE



To the Stockholders and Board of
Directors of Concentra Managed Care, Inc.


We  have  audited  in accordance with generally accepted auditing standards, the
financial  statements of Concentra Managed Care, Inc. and have issued our report
thereon  dated  June  9,  1999. Our audit was made for the purpose of forming an
opinion  on the basic financial statements taken as a whole. The schedule listed
in  the  index of the financial statement schedules is presented for the purpose
of  complying  with  the  Securities  and Exchange Commission's rules and is not
part  of the basic financial statements. This schedule has been subjected to the
auditing  procedures applied in the audit of the basic financial statements and,
in  our  opinion,  fairly  states  in  all  material respects the financial data
required  to  be set forth therein in relation to the basic financial statements
taken as a whole.


/s/ ARTHUR ANDERSEN LLP



ARTHUR ANDERSEN LLP

Boston, Massachusetts
July 9, 1999


                                      S-2
<PAGE>

                               INDEX TO EXHIBITS



<TABLE>
<CAPTION>
 Exhibit
 Number                                                   Description
-------- -------------------------------------------------------------------------------------------------------------
<S>      <C>
2.1      Agreement and Plan of Merger dated February 24, 1998 among the Registrant and Preferred Payment Sys-
         tems, Inc. (incorporated by reference to Exhibit 2.2 to the Registrant's Annual Report on Form 10-K (File
         No. 000-22751) filed with the SEC on March 31, 1998)
2.2      Agreement and Plan of Merger dated March 2, 1999 between Yankee Acquisition Corp. and the Registrant
         (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K (File No. 000-
         22751) filed with the SEC on March 3, 1999)
2.3      Amended and Restated Agreement and Plan of Merger dated March 24, 1999 between Yankee Acquisition
         Corp. and the Registrant (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on
         Form 8-K (File No. 000-22751) filed with the SEC on March 29, 1999)
3.1      Amended and Restated Certificate of Incorporation dated August 27, 1997 (incorporated by reference to
         Exhibit 3.1 to the Registrant's Annual Report on Form 10-K (File No. 000-22751) filed with the SEC on
         March 31, 1998)
3.2      Bylaws of Registrant (incorporated by reference to Exhibit 3.3 to the Registrant's Registration Statement on
         Form S-4 (File No. 333-27105) filed with the SEC on July 31, 1997)
4.1      Form of Certificate of Common Stock, par value $.01 per share, of the Registrant (incorporated by refer-
         ence to Exhibit 4.1 to the Registrant's Registration Statement on Form S-4 (File No. 333-27105) filed with
         the SEC on July 31, 1997)
4.2      Indenture dated December 24, 1996 between OccuSystems and United States Trust Company of New York,
         as Trustee, (the "OccuSystems Indenture") relating to the 6% Convertible Subordinated Notes due 2001
         (incorporated by reference to Exhibit 4.1 to OccuSystems' Registration Statement on Form S-3 (File No.
         333-20933) as filed with the SEC on January 31, 1997)
4.3      First Supplemental Indenture dated August 29, 1997 between OccuSystems, the Registrant and United States
         Trust Company of New York, as Trust, relating to the 6% Convertible Subordinated Notes due 2001 (incor-
         porated by reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-K (File No. 00-22751)
         filed with the SEC on March 31, 1998)
4.4      Indenture dated as of March 16, 1998 between the Registrant and Chase Bank of Texas, N.A., as Trustee,
         (the "Concentra Indenture") relating to the 4.5% Convertible Subordinated Notes due 2003 (incorporated by
         reference to the Registrant's Current Report on Form 8-K (File No. 000-22751) filed with the SEC on
         March 30, 1998)
4.5      Form of 6% Convertible Subordinated Note due 2001, establishing the terms of the 6% Convertible Subor-
         dinated Notes due 2001 pursuant to the OccuSystems Indenture (incorporated by reference to Exhibit A to
         the OccuSystems Indenture which Indenture is incorporated by reference to Exhibit 4.1 to OccuSystems'
         Registration Statement on Form S-3 (File No. 333-20933) as filed with the SEC on January 31, 1997)
4.6      Form of 4.5% Convertible Subordinated Notes due 2003, establishing the terms of the 4.5% Convertible
         Subordinated Notes due 2003 pursuant to the Concentra Indenture (incorporated by reference to the Regis-
         trant's Current Report on Form 8-K (File No. 000-22751) filed with the SEC on March 30, 1998)
4.7      Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by reference to
         Exhibit 4.6 to the Registrant's Annual Report on Form 10-K (File No. 000-22751) filed with the SEC on
         March 31, 1998)
4.8      Form of Right Certificate (included as Exhibit B to the Rights Agreement filed as Exhibit 10.2 hereto). Pur-
         suant to the Rights Agreement, printed Right Certificates will not be delivered until as soon as practicable
         after the Distribution Date (as defined in the Rights Agreement)
4.9      Registration Rights Agreement dated as of March 11, 1998, among the Registrant, BT Alex. Brown Incor-
         porated, BancAmerica Robertson Stephens, Donaldson, Lufkin & Jenrette Securities Corporation and Piper
         Jaffray Inc. (incorporated by reference to the Registrant's Current Report on Form 8-K (File No. 000-22751)
         filed with the SEC on March 30, 1998)
</TABLE>

<PAGE>


<TABLE>
<CAPTION>
 Exhibit
Number                                                      Description
-------- -----------------------------------------------------------------------------------------------------------------
<S>      <C>
 4.10    Registration Rights Agreement dated as of March 8, 1994, among Comprehensive Rehabilitation Associates,
         Inc., J.H. Whitney & Co., Whitney 1990 Equity Fund, L.P., Whitney Subordinated Debt Fund, L.P., First
         Union Corporation, Lois E. Silverman and Donald J. Larson (incorporated by reference to Exhibit 10.7 to
         CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
10.1     Amended and Restated Credit Agreement dated as of February 20, 1998, between the Registrant, as Bor-
         rower, and First Union National Bank, as Administrative Agent, Fleet National Bank, as Documentation
         Agent, and the banks and financial institutions listed as signatories thereto, as amended by that certain letter
         agreement dated as of March 9, 1998, and as further amended by that certain letter agreement dated as of
         March 12, 1998 (incorporated by reference to Exhibit 10.1 to the Registrant's Annual Report on Form 10-K
         (File No. 000-22751) filed with the SEC on March 31, 1998)
10.2     Purchase Agreement dated as of March 11, 1998, among the Registrant, BT Alex. Brown Incorporated,
         BancAmerica Robertson Stephens, Donaldson, Lufkin & Jenrette Securities Corporation and Piper Jaffray,
         Inc. (incorporated by reference to the Registrant's Current Form on Form 8-K (File No. 000-22751) filed
         with the SEC on March 30, 1998)
10.3     Rights Agreement dated September 29, 1997 between the Registrant and ChaseMellon Shareholder Ser-
         vices, L.L.C. (incorporated by reference to Exhibit 1 to the Registrant's Registration Statement on Form 8-A
         filed with the SEC on October 1, 1998)
10.4     Concentra Managed Care, Inc. 1997 Long-Term Incentive Plan (incorporated by reference to Appendix G
         to the Joint Proxy Statement/Prospectus forming a part of the Registrant's Registration Statement on Form
         S-4 (File No. 333-27105) filed with the SEC on July 31, 1997)
10.5     Concentra Managed Care, Inc. 1997 Employee Stock Purchase Plan (incorporated by reference to Appendix
         H to the Joint Proxy Statement/Prospectus forming a part of the Registrant's Registration Statement on Form
         S-4 (File No. 333-27105) filed with the SEC on July 31, 1997)
10.6     CRA Managed Care, Inc. 1995 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.25
         to CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
10.7     CRA Managed Care, Inc. 1994 Non-Qualified Stock Option Plan for Non-Employee Directors (incorporated
         by reference to Exhibit 10.3 to CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with
         the SEC on March 17, 1995)
10.8     CRA Managed Care, Inc. 1994 Non-Qualified Time Acceleration Restricted Stock Option Plan (incorporated
         by reference to Exhibit 10.5 to CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with
         the SEC on March 17, 1995)
10.9     OccuSystems, Inc. 1995 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.10 to OccuSys-
         tems' Registration Statement on Form S-1 (File No. 33-79734) filed with the SEC on May 8, 1995)
10.10    First Amended and Restated OccuSystems, Inc. and its Subsidiaries and Affiliates Stock Option and
         Restricted Stock Purchase Plan dated April 28, 1992 (incorporated by reference to Exhibit 10.11 to Occu-
         Systems' Registration Statement on Form S-1 (File No. 33-79734) filed with the SEC on May 8, 1995)
10.11    Employment Agreement dated April 21, 1997, between the Registrant and Joseph F. Pesce (incorporated by
         reference to Exhibit 10.9 to the Registrant's Registration Statement on Form S-4 (File No. 333-27105) filed
         with the SEC on July 31, 1997)
10.12    Employment Agreement dated April 21, 1997, between the Registrant and Richard A. Parr II (incorporated
         by reference to Exhibit 10.11 to the Registrant's Registration Statement on Form S-4 (File No. 333-27105)
         filed with the SEC on July 31, 1997)
10.13    Employment Agreement dated April 21, 1997, between the Registrant and W. Tom Fogarty (incorporated
         by reference to Exhibit 10.13 to the Registrant's Registration Statement on Form S-4 (File No. 333-27105)
         filed with the SEC on July 31, 1997)
10.14    Employment Agreement dated April 21, 1997, between the Registrant and James M. Greenwood (incorpo-
         rated by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form S-4 (File No. 333-
         27105) filed with the SEC on July 31, 1997)
</TABLE>

<PAGE>


<TABLE>
<CAPTION>
  Exhibit
Number                                                      Description
---------- -------------------------------------------------------------------------------------------------------------
<S>        <C>
10.15      Indemnification Agreement dated September 17, 1997, between the Registrant and Daniel J. Thomas (iden-
           tical agreements were executed between the Registrant and each of the following: Joseph F. Pesce, Richard
           A. Parr II, James M. Greenwood, W. Tom Fogarty, Kenneth Loffredo, Mitchell T. Rabkin, George H. Con-
           rades, Robert A. Ortenzio, Lois E. Silverman, Paul B. Queally, John K. Carlyle) (incorporated by reference
           to Exhibit 10.17 to the Registrant's Annual Report on Form 10-K (File No. 000-22751) filed with the SEC
           on March 31, 1998)
10.16      Agreement of Acceptance dated as of July 29, 1997, among the Registrant, Donald J. Larson and Lois E.
           Silverman (incorporated by reference to Exhibit 10.19 to the Registrant's Registration Statement on Form
           S-4 (File No. 333-27105) filed with the SEC on July 31, 1997)
10.17      Software License Agreement dated February 10, 1995 between CRA and CompReview, Inc. (confidential
           treatment granted) (incorporated by reference to CRA's Registration Statement on Form S-1 (File No.
           33-90426) filed with the SEC on March 17, 1995)
10.18      Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
           located at 168 U.S. Route 1, Falmouth, ME 04105 (incorporated by reference to Exhibit 10.10 to CRA's
           Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
10.19      Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
           located at 46 Austin Street, Newtonville, MA 02160 (incorporated by reference to Exhibit 10.11 to CRA's
           Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
10.20      Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
           located at 312 Union Wharf, Boston, MA 02109 (incorporated by reference to Exhibit 10.17 to CRA's Reg-
           istration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
10.21      Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
           located at 565 Turnpike Street, North Andover, MA 01845 (incorporated by reference to Exhibit 10.18 to
           CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
10.22      Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
           located at 15A Riverway Place, Bedford, NH 03110 (incorporated by reference to Exhibit 10.19 to CRA's
           Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
10.23      Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
           located at 509 Stillwells Corner Road, Freehold, NJ 07728 (incorporated by reference to Exhibit 10.20 to
           CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
10.24      Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
           located at 732 Thimble Shoals Blvd., Newport News, VA 23606 (incorporated by reference to Exhibit 10.21
           to CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17, 1995)
10.25      Lease Agreement dated January 1, 1994 between the Registrant and Colonial Realty Trust for office space
           located at 10132 Colvin Run Road, Suite A, Great Falls, VA 22066 (incorporated by reference to Exhibit
           10.22 to CRA's Registration Statement on Form S-1 (File No. 33-90426) filed with the SEC on March 17,
                    1995)
10.26      Occupational Medicine Center Management and Consulting Agreement dated December 31, 1993, between
           Concentra Health Services, Inc. (formerly OccuCenters, Inc.) ("CHS") and Occupational Health Centers of
           Southwest, P.A., a Texas professional association (incorporated by reference to Exhibit 10.6 to OccuSys-
           tems' Annual Report on Form 10-K (File No. 0-24440) filed with the SEC on March 29, 1996)
10.27      Occupational Medicine Center Management and Consulting Agreement dated December 31, 1993, between
           CHS and Occupational Health Centers of Southwest, P.A., a Arizona professional association (incorporated
           by reference to Exhibit 10.7 to OccuSystems' Annual Report on Form 10-K (File No. 0-24440) filed with
           the SEC on March 29, 1996)
10.28      Occupational Medicine Center Management and Consulting Agreement dated December 31, 1993, between
           CHS and Occupational Health Centers of New Jersey, a New Jersey professional association (incorporated
           by reference to Exhibit 10.8 to OccuSystems' Registration Statement on Form S-1 (File No. 33-01660) filed
           with the SEC on March 28, 1996)
</TABLE>

<PAGE>



<TABLE>
<CAPTION>
  Exhibit
Number                                                      Description
---------- -------------------------------------------------------------------------------------------------------------
<S>        <C>
 10.29     Warrant Agreement dated January 3, 1995 between OccuSystems and Creditanstalt- Bankverein (incorpora-
           tion by reference to Exhibit 10.13 to OccuSystems' Registration Statement on Form S-1 (File No. 33-01660)
           filed with the SEC on March 28, 1996)
 10.30     Voting Agreement dated May 15, 1997, by and between Lois E. Silverman and Donald J. Larson (incorpo-
           rated by reference to Exhibit 10.34 to the Registrant's Annual Report on Form 10-K (File No. 000-22751)
           filed with the SEC on March 31, 1998)
 10.31     Amendment No. 1 to Rights Agreement dated March 2, 1999 between the Registrant and ChaseMellon
           Shareholder Services, L.L.C. (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on
           Form 8-K (File No. 000-22751) filed with the SEC on March 31, 1998)
+10.32     Amendment No. 1 to Employment Agreement dated January 12, 1999 between the Registrant and Joseph F.
           Pesce
+10.33     Amendment No. 1 to Employment Agreement dated January 12, 1999 between the Registrant and Richard
           A. Parr II
+10.34     Employment Agreement dated January 12, 1999 between the Registrant and Daniel J. Thomas
+10.35     Amendment No. 1 to Employment Agreement dated January 12, 1999 between the Registrant and W. Tho-
           mas Fogarty
+10.36     Amendment No. 1 to Employment Agreement dated January 12, 1999 between the Registrant and James
           M. Greenwood
 10.37     Employment Agreement dated September 17, 1997, between the Registrant and Kenneth Loffredo (incorpo-
           rated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q (File No. 000-22751)
           filed with the SEC on November 13, 1998)
+10.38     Amendment No. 1 to Employment Agreement dated January 12, 1999 between the Registrant and Kenneth
           Loffredo
 10.39     Employment Agreement dated January 12, 1998 between the Registrant and Richard D. Rehm, M.D.
           (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q (File No.
           000-22751) filed with the SEC on August 13, 1998)
 10.40     Employment Agreement dated February 10, 1998 between the Registrant and Stephen Read (incorporated
           by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q (File No. 000-22751) filed
           with the SEC on August 13, 1998)
 10.41     Indemnification Agreement dated May 13, 1998 between the Registrant and Hon. Willis D. Gradison, Jr.
           (identical agreements executed between the Registrant and Stephen Read (dated December 16, 1997), Rich-
           ard D. Rehm, M.D. (dated May 13, 1998), Eliseo Ruiz III (dated May 11, 1998), Scott Henault (dated Sep-
           tember 17, 1997), Darla Walls (dated December 16, 1997), Jeffrey R. Luber (dated December 16, 1997) and
           Martha Kuppens (dated December 16, 1997)) (incorporated by reference to Exhibit 10.3 to the Registrant's
           Quarterly Report on Form 10-Q (File No. 000-22751) filed with the SEC on August 13, 1998
+21.1      List of Subsidiaries
+23.1      Consent of Arthur Andersen LLP
+27.1      Financial Data Schedule for the year ended December 31, 1998
+27.2      Financial Data Schedule for the year ended December 31, 1997
</TABLE>


--------
+ Filed herewith.