<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   FORM 10-Q


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

         For the quarterly period ended March 31, 1999

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


       For the transition period from _______________ to ________________

                         Commission file number 0-24872

                        Physician Reliance Network, Inc.
             -------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

                       Texas                                  75-2495107
  ---------------------------------------------------    ----------------------
   (State or Other Jurisdiction of Incorporation or        (I.R.S. Employer
                    Organization)                         Identification No.)

             5420 LBJ Freeway, Suite 900
                    Dallas, Texas                                75240
  ---------------------------------------------------    ----------------------
       (Address of Principal Executive Offices)                (Zip Code)


Registrant's Telephone Number, Including Area Code:   (972) 392-8700


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]  No [ ]

         As of May 14, 1999, approximately 51,895,921 shares of Common Stock
were issued and outstanding.




<PAGE>   2



                         PART I - FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------

         The condensed consolidated financial statements include the accounts of
Physician Reliance Network, Inc. and its subsidiaries (collectively, the
"Company") and have been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998, as filed with the Securities and Exchange Commission. In the opinion
of the Company, all adjustments necessary to present fairly the information in
the following consolidated financial statements of the Company, consisting only
of normal recurring accruals, have been included. Please be advised that the
results of operations for interim periods are not indicative of the results of
the full year.




                                       2
<PAGE>   3





                PHYSICIAN RELIANCE NETWORK INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
                                    UNAUDITED

<TABLE>
<CAPTION>
                                     ASSETS

                                                       March 31,     December 31,
                                                         1999            1998
                                                      -----------    -----------
<S>                                                   <C>            <C>        
Current assets:
         Cash and cash equivalents                    $     2,613    $     3,073
         Investment in common stock, net                    6,585          6,975
         Accounts receivable, net                         122,998        109,925
         Due from related parties                           5,766          8,827
         Other receivables                                  6,027          6,181
         Inventories                                       17,897         14,682
         Prepaid expenses and other                         1,103            737
         Income tax receivable                              2,369          2,369
         Deferred income tax                                  702            702
                                                      -----------    -----------
                  Total current assets                    166,060        153,471
                                                      -----------    -----------

Property and equipment:
         Land                                              15,725         15,717
         Buildings                                         68,549         67,123
         Furniture and equipment                          152,947        145,215
         Construction-in-progress                          10,313          6,081
                                                      -----------    -----------
                                                          247,534        234,136
         Less - Accumulated depreciation                  (72,324)       (66,682)
                                                      -----------    -----------
                  Net property and equipment              175,210        167,454
                                                      -----------    -----------

Investments                                                 8,133          7,654
Service agreements, net                                   136,776        128,541
Excess of purchase price over the fair value of net
         assets acquired, net                              10,021         10,058
Other assets, net                                           1,841          1,321
                                                      -----------    -----------
         Total assets                                 $   498,041    $   468,499
                                                      ===========    ===========

</TABLE>

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




                                       3
<PAGE>   4




                PHYSICIAN RELIANCE NETWORK, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                    UNAUDITED

<TABLE>
<CAPTION>
                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                       March 31,       December 31,
                                                                         1999             1998
                                                                     -------------    -------------
<S>                                                                  <C>              <C>          
Current liabilities:
         Accounts payable                                            $      24,877    $      32,522
         Accrued liabilities
                  Salaries and benefits                                      7,866            5,737
                  Other                                                      1,079            3,904
                                                                     -------------    -------------
                                                                             8,945            9,641

         Deferred revenue                                                      777            1,553
         Due to related party                                                4,934            4,807
         Current maturities of long-term debt                                7,093            7,718
         Income tax payable                                                  3,569             --   
                                                                     -------------    -------------
                  Total current liabilities                                 50,195           56,241

Long-term debt, net of current maturities                                   85,540           60,434
Subordinated convertible promissory notes                                      900              900
Construction and retainage payable                                             282              282
Deferred income taxes                                                       13,266           13,266
Minority interest                                                            2,082            1,965
                                                                     -------------    -------------
                  Total liabilities                                        152,265          133,088
                                                                     -------------    -------------

Commitments and contingencies                                                 --               --   

Stockholders' equity:
         Series A and B preferred stock, 10,000 shares
           authorized, no shares issued and outstanding                       --               --   
         Series One Junior preferred stock, 500 shares
           authorized, no shares issued and outstanding                       --               --   
         Common stock, no par value, $.01 stated value per
           share, 150,000 shares authorized, 51,800 and 51,549
           shares issued at March 31, 1999, and December 31,
            1998, respectively                                                 518              515
         Additional paid-in capital                                        258,302          256,293
         Common stock to be issued, 1,957 shares at March 31, 1999          19,243           18,499
           and 1,496 shares at December 31, 1998
         Accumulated other comprehensive income                               (120)             269
         Retained earnings                                                  67,833           59,835
                                                                     -------------    -------------
                  Total stockholders' equity                               345,776          335,411

                                                                     -------------    -------------
                  Total liabilities and stockholders' equity         $     498,041    $     468,499
                                                                     =============    =============
</TABLE>

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



                                       4
<PAGE>   5




                PHYSICIAN RELIANCE NETWORK INC. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                    UNAUDITED

<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                                       March 31,
                                                               -----------------------
                                                                  1999         1998
                                                               ----------   ----------
<S>                                                            <C>          <C>       
Revenues:

         Management fees from related parties                  $   76,095   $   66,732
         Other management fees                                     29,414       15,662
         Other revenues                                             8,765        8,119
                                                               ----------   ----------
                   Total revenues                                 114,274       90,513
                                                               ----------   ----------

Costs and expenses:

         Salaries and benefits                                     24,802       21,987
         Pharmaceuticals and supplies                              47,614       31,805
         General and administrative                                15,950       15,030
         Provision for uncollectible accounts                       4,901        3,825
         Depreciation and amortization                              7,210        5,872
         Interest expense                                           1,101        1,229
                                                               ----------   ----------
                   Total costs and expenses                       101,578       79,748

                                                               ----------   ----------
Income before taxes                                                12,696       10,765
                                                               ----------   ----------

Provision for income taxes:
         Current                                                    3,633        2,956
         Deferred                                                   1,065        1,091
                                                               ----------   ----------
                   Total provision for income taxes                 4,698        4,047

                                                               ----------   ----------
Net income                                                     $    7,998   $    6,718
                                                               ==========   ==========

Net income per share
         Basic                                                 $     0.15   $     0.13
                                                               ==========   ==========
         Diluted                                               $     0.15   $     0.13
                                                               ==========   ==========

Average number of shares outstanding
         Basic                                                     53,717       50,734
                                                               ==========   ==========
         Diluted                                                   54,127       52,848
                                                               ==========   ==========

</TABLE>

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




                                       5
<PAGE>   6




                PHYSICIAN RELIANCE NETWORK INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                    UNAUDITED

<TABLE>
<CAPTION>
                                                                                      Three Months Ended
                                                                                           March 31,
                                                                                   ------------------------
                                                                                      1999          1998
                                                                                   ----------    ----------
<S>                                                                                <C>           <C>       
Cash flows from operating activities:
         Net income                                                                $    7,998    $    6,718
         Adjustments to reconcile net income to net cash (used in) provided by
              operating activities
                  Depreciation and amortization                                         7,210         5,872
                  Undistributed earnings of investments                                  (233)         --   
                  Deferred income tax, net                                               --           1,091
                  Deferred revenues                                                      (775)         (858)
                  Changes in operating assets and liabilities:
                       Increase in account receivable, net                            (13,073)       (9,068)
                       Decrease in other receivables                                      154         5,528
                       Increase in inventories and prepaid expenses and other          (3,581)       (2,379)
                       (Decrease) increase in accounts payable and accrued 
                         liabilities                                                   (4,772)        2,216
                       (Increase) decrease in due from related parties                  3,188        (1,727)
                                                                                   ----------    ----------
                            Net cash (used in) provided by operating activities        (3,884)        7,393
                                                                                   ----------    ----------

Cash flows from investing activities:
         Purchase of property and equipment                                           (13,427)       (5,391)
         Service agreements                                                            (5,737)       (6,984)
         Capital contributions to limited partnership                                    (129)         (461)
         Other                                                                           (578)         (181)
                                                                                   ----------    ----------
                  Net cash used in investing activities                               (19,871)      (13,017)
                                                                                   ----------    ----------

Cash flows from financing activities:
         Net proceeds from long-term borrowings under the Revolver                     24,000         6,133
         Payments on long-term borrowings                                              (2,719)       (1,568)
         Issuance of common stock                                                       2,014           779
                                                                                   ----------    ----------
                  Net cash provided by financing activities                            23,295         5,344
                                                                                   ----------    ----------

Net decrease in cash and cash equivalents                                                (460)         (280)
Cash and cash equivalents, beginning of period                                           3073         2,772
                                                                                   ----------    ----------

Cash and cash equivalents, end of period                                           $    2,613    $    2,492
                                                                                   ==========    ==========

Cash paid during the period:
         Interest, net of amount capitalized                                       $      808    $    1,538
         Income taxes                                                              $      763    $       63
</TABLE>


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



                                       6
<PAGE>   7




                PHYSICIAN RELIANCE NETWORK, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


1.  BASIS OF PRESENTATION:

         Physician Reliance Network, Inc. (the "Company") sole business is
providing comprehensive management services, facilities and equipment,
administrative and technical support, and ancillary services necessary for
physicians to establish and maintain a fully integrated network of outpatient
oncology care. The Company also provides management services, facilities and
equipment, administrative and technical support, and ancillary services to
physicians who provide diagnostic radiology services. The physicians affiliated
with the Company provide all aspects of care related to the diagnosis and
outpatient treatment of cancer, including comprehensive oncology services
(including primarily medical, radiation, and gynecological services), diagnostic
radiology services, retail pharmacy services and clinical research. The Company
transacts business directly and indirectly through its wholly owned
subsidiaries, TOPS Pharmacy Services, Inc., and PRN Research, Inc. For each of
the three months ended March 31, 1999 and 1998, oncology related services
contributed to substantially all of the Company's revenues and profitability and
represented a significant portion of the Company's assets and long-lived assets
(consisting primarily of property and equipment and service agreements).

         As of March 31, 1999, the Company had operations in Texas, Iowa,
Oregon, Washington, Missouri, Maryland, Arkansas, New York, Minnesota, Illinois,
Florida, New Mexico and Oklahoma and provided its services to 369 physicians.

         Effective December 11, 1998, the Company entered into an Agreement and
Plan of Merger, providing for the merger of a subsidiary of American Oncology
Resources, Inc.("AOR"), a Delaware corporation, with the Company. Upon
consummation of the merger, the Company will become a wholly-owned subsidiary of
AOR and the holders of the Company's common stock will receive 0.94 shares of
AOR common stock for each share of the Company's common stock held by them. The
merger will be accounted for as a pooling-of-interests and a tax free exchange.
A special meeting of the shareholders of the Company to approve the terms of the
merger agreement is scheduled for June 15, 1999. The effective date of the
merger will occur shortly after the shareholders meeting, upon satisfaction of
the conditions to the merger. AOR is a national cancer management company, which
provides comprehensive management services under long-term agreements to
oncology practices. AOR's affiliated physicians provide a broad range of medical
services to cancer patients, including medical oncology, gynecological oncology,
radiation oncology, stem cell transplantation, diagnostic radiology and clinical
research.

         The Company provides services, facilities and equipment for physicians
under long-term service agreements (the "Service Agreements") with physician
groups (the "Affiliated Physician Groups"). Under the Service Agreements, the
Company is typically the sole and exclusive manager of all day-to-day business
functions of physicians employed by Affiliated Physician Groups, providing
facilities, equipment, supplies, support personnel, and management and financial
advisory services. Specifically, the Company, among other things, (i) prepares
annual financial statements; (ii) purchases inventories and supplies; (iii)
manages billing and collecting; (iv) supervises and maintains custody of files
and records; (v) performs clerical, accounting, and computer services functions;
(vi) advises on public relations and advertising; and (vii) assists in the
recruitment of physicians. The Service Agreements generally have 40 year initial
terms with automatic five-year extensions thereafter unless either party gives
notice to the other not to renew prior to the expiration of the term. The
Service Agreements are not terminable earlier by the Affiliated Physician
Groups, except in the event of the Company's bankruptcy or a material breach of
the Service Agreement.

         The Company pays certain Affiliated Physician Groups for entering into
a Service Agreement and such amounts are reflected in the accompanying
consolidated balance sheets. Effective July 1, 1998, the Company changed its
amortization period of current and future Service Agreements from 30 to 40 years
to 25 years on a prospective basis. This change was made to be consistent with
other companies in the Company's industry which have made this change and to
address opinions expressed by certain financial regulatory bodies. This change
did not have a material impact on the Company's 1999 results of operations.





                                       7
<PAGE>   8

         The Company has acquired certain businesses and paid amounts in excess
of the fair value of the net assets received. The amounts recorded for excess of
purchase price over the fair value of net assets acquired are being amortized on
a straight-line basis over 20 years and are reflected as excess of purchase
price over the fair value of net assets acquired in the accompanying
consolidated balance sheets.

         The consolidated financial statements include the accounts of PRN and
its subsidiaries for the periods presented. All significant intercompany
transactions have been eliminated. Certain prior period amounts have been
reclassified to conform to the current year presentation.

2. MEDICAL PRACTICE AFFILIATIONS:

         During the three months ended March 31, 1999 the Company affiliated
with one practice for total consideration of $8.9 million. During the three
months ended March 31, 1998 the Company affiliated with two practices for total
consideration of $14.4 million.

3. SUPPLEMENTAL CASH FLOW INFORMATION:

         Supplemental schedules of noncash investing and financing activities
are as follows:

         During the three months ended March 31, 1999, the Company acquired
$3,942 in assumed liabilities in exchange for notes payable of $3,200 and
commitments to issue common stock of $742 in connection with the execution of
Service Agreements.

         During the three months ended March 31, 1998, the Company acquired
assets in exchange for notes payable of $5,301 and commitments to issue $3,449
of common stock in connection with the execution of certain Service Agreements.

4. MANAGEMENT FEES:

         In accordance with the terms of each Service Agreement, the Company is
paid a management fee by the Affiliated Physician Groups. This management fee
has the following two components: (i) an amount equal to the direct expenses
associated with operating the Affiliated Physician Group and (ii) an amount
which is calculated based on the Service Agreement for each of the Affiliated
Physician Groups. The direct expenses include rent, depreciation, amortization,
provision for uncollectible accounts, pharmaceutical expenses, medical supply
expenses, and salaries and benefits of non-physician employees who support the
Affiliated Physician Groups. The Service Agreements, coupled with policies and
procedures currently in place, permit the Company to record accounts receivable
adjustments as direct expense in the period recognized. The direct expenses do
not include salaries and benefits of physicians. Approximately 92% of the
Service Agreements for the three months ended March 31, 1999 and 1998 provide
that the non-expense related portion of the management fee is a percentage,
ranging from 25% to 35%, of the earnings before interest and taxes of the
Affiliated Physician Group. The earnings of an Affiliated Physician Group is
determined by subtracting the direct expenses from the professional revenues and
research revenues earned by the Affiliated Physician Group. The remaining
Service Agreements for the three months ended March 31, 1999 provide for a fee
that is a percent of revenue of the Affiliated Physician Group or is a
predetermined, fixed amount. Each Affiliated Physician Group is responsible for
paying the salaries and benefits of its physician employees from the amount
retained by the Affiliated Physician Group after payment of the Company's
management fee.

         Medical Practice Revenues include amounts expected to be collected from
government-sponsored health care programs (principally Medicare and Medicaid).
Approximately 45% and 35% of Medical Practice Revenues represented services
rendered under such government-sponsored health care programs and discounted fee
for service payors, respectively, for the three months ended March 31, 1999 and
1998. Revenue under certain third-party payor agreements is subject to audit and
retroactive adjustments. No material claims, disputes, or other unsettled
matters exist to management's knowledge concerning third-party reimbursements.
The Affiliated Physician Groups have no significant capitation revenues.



                                       8
<PAGE>   9




         The following table summarizes the derivation of Management Fees for
the three months ended March 31, 1999, and 1998.

<TABLE>
<CAPTION>
                                                          1999                      1998
                                                      ------------               -----------
<S>                                                   <C>                        <C>         
          Medical Practice Revenues                   $    138,561               $   111,488 
          Amounts Retained by Physicians                   (33,052)                  (29,094)
                                                      ------------               -----------
               Management Fees                        $    105,509               $    82,394 
                                                      ============               ===========
</TABLE>

         The Company's most significant Service Agreement is with Texas
Oncology, P.A. ("TOPA"), and it accounted for approximately 70% and 65% of the
Company's total revenues for the three months ended March 31, 1999 and 1998,
respectively. Set forth below is selected, unaudited financial and statistical
information concerning TOPA for the three months ended March 31, 1999 and 1998.

<TABLE>
<CAPTION>
                                                          1999                      1998
                                                      ------------               -----------
<S>                                                   <C>                       <C>         
     Medical Practice Revenues                        $     87,880              $     83,498
     Management Fee Paid to the Company
          Reimbursement of Expenses                         58,412                    51,312
          Earnings Component                                10,314                    11,428
                                                      ------------               -----------
          Total Management Fee                              68,726                    62,740
                                                      ------------               -----------
     Amounts Retained by TOPA                         $     19,154              $     20,758
                                                      ============               ===========
     Physicians Employed by TOPA                               202                       225
     Cancer Centers Provided to TOPA                            27                        21
</TABLE>

     The number of physicians retained and employed by TOPA decreased in 1999
because a group of 34 radiologists withdrew from TOPA during 1998 and entered
into a new service agreement with the Company. The Company, TOPA and the
radiology group determined that it was in the best interests of all parties to
have a separate practice focusing on radiology. The Company is not aware of any
negative operating or financial trends related to TOPA.

5.       EARNINGS PER SHARE:

     The following is a reconciliation of the components of earnings per share
for the three months ended March 31, 1999 and 1998.

<TABLE>
<CAPTION>
                                                                                                               PER-SHARE
                                                                               INCOME            SHARES          AMOUNT
                                                                            ------------      ------------    ------------
<S>                                                                         <C>               <C>             <C>          
          Basic earnings per share, March 31, 1999
              Income available to common stockholders                       $      7,998            53,717    $       0.15 

          Effect of Dilutive Securities
              Stock options                                                           --               343              -- 
              Subordinated convertible promissory notes                                8                67              -- 
                                                                            ------------      ------------    ------------
          Diluted earnings per share, March 31, 1999                        $      8,006            54,127    $       0.15 
                                                                            ============      ============    ============
</TABLE>

<TABLE>
<CAPTION>
                                                                                                               PER-SHARE
                                                                               INCOME            SHARES          AMOUNT
                                                                            ------------      ------------    ------------
<S>                                                                         <C>               <C>             <C>          
          Basic earnings per share, March 31, 1998
              Income available to common stockholders                       $      6,718            50,734    $       0.13 

          Effect of Dilutive Securities
              Stock options                                                           --               469              -- 
              Subordinated convertible promissory notes                              135             1,645              -- 
                                                                            ------------      ------------    ------------
          Diluted earnings per share, March 31, 1998                        $      6,853            52,848    $       0.13 
                                                                            ============      ============    ============
</TABLE>






                                       9
<PAGE>   10

6. STOCK BASED COMPENSATION:

         Effective December 31, 1996, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 123, "Accounting for Stock Based Compensation;"
however, the Company continues to account for stock based compensation under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," as allowed by SFAS No. 123. Had compensation cost for the Company's
stock option plans been determined consistent with SFAS No. 123, the Company's
net income and earnings per share would have been reduced to the following pro
forma amounts:

<TABLE>
<CAPTION>
                                                 Three Months Ended
                                                      March 31,
                                            ------------------------------
                                                1999              1998
                                            ------------      ------------
<S>                                         <C>               <C>         
         Net income:
                  As reported               $      7,998      $      6,718
                  Pro forma                 $      7,229      $      6,220
</TABLE>

         Proforma basic earnings per share and diluted earnings per share would
have been as follows:

<TABLE>
<CAPTION>
                                                  Three Months Ended
                                                      March 31,
                                              ---------------------------
                                                  1999           1998
                                              -------------    ----------
<S>                                           <C>              <C>       
         Basic earnings per share             $        0.14    $     0.12
         Diluted earnings per share           $        0.13    $     0.12
</TABLE>





                                       10
<PAGE>   11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
--------------------------------------------------------------------------------


         The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto included in its Annual
Report on Form 10-K for the year ended December 31, 1998, and with the Condensed
Consolidated Financial Statements included in this Form 10-Q.

OVERVIEW

         The Company provides the management services, facilities and equipment,
administrative and technical support, and other services necessary to establish
and maintain a fully integrated network of outpatient oncology care. The Company
also provides management services, facilities and equipment, administrative and
technical support, and ancillary services to physicians who provide diagnostic
radiology services. The Company earns management fee revenues under long-termed
service agreements (the "Service Agreements") with the physician groups (the
"Affiliated Physician Groups"). Under the Service Agreements, the Company
receives a management fee ("Management Fee") for services rendered, and the
method of determining the Management Fee earned by the Company varies by each
Service Agreement. Substantially all of the Company's Management Fees have been
derived from Affiliated Physician Groups who specialize in the treatment of
cancer.

         As of December 11, 1998, the Company entered into an Agreement and Plan
of Merger providing for the merger of a subsidiary of American Oncology
Resources, Inc.. ("AOR"), a Delaware corporation, with the Company. Upon
consummation of the merger, the Company will become a wholly owned subsidiary of
AOR and the holders of the Company's common stock will receive 0.94 shares of
AOR common stock for each share of the Company's common stock held by them. The
merger will be accounted for as a pooling of interests and a tax free exchange.
A special meeting of the shareholders of the Company to approve the terms of the
merger agreement is scheduled for June 15, 1999. The effective date of the
merger will occur shortly after the shareholders meeting, upon satisfaction of
the conditions to the merger. AOR is a national cancer management company, which
provides comprehensive management services under long-term agreements to
oncology practices. AOR's affiliated physicians provide a broad range of medical
services to cancer patients, including medical oncology, gynecological oncology,
radiation oncology, stem cell transplantation, diagnostic radiology and clinical
research.

         The Company's most significant service agreement is with TOPA (the
"Texas Service Agreement"). The Management Fee under the Texas Service Agreement
is equal to 35% of the earnings (professional and research revenues earned by
the Affiliated Physician Group less direct expenses) of that practice before
interest and taxes ("Earnings") plus direct expenses of the related practice
locations. Direct expenses include rent, depreciation, amortization, provision
for uncollectible accounts, salaries and benefits of non-physician employees,
medical supply expense and pharmaceuticals. The direct expenses do not include
salaries and benefits of physicians. Accounts receivable adjustments are
recorded as direct expenses in the period recognized. Approximately 92% of the
Company's Management Fees earned for each of the three months ended March 31,
1999, and 1998, respectively, were derived from Service Agreements in which the
Management Fee is calculated based on Earnings, and approximately 8%,
respectively, were derived from Service Agreements in which the Management Fee
is calculated based on a percentage of the medical practice revenues of the
Affiliated Physician Groups or a predetermined, fixed amount.

         The following table summarizes the derivation of Management Fees for
the three months ended March 31, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
                                                            1999              1998
                                                       --------------    --------------
<S>                                                    <C>               <C>
Medical Practice Revenues............................  $      138,561    $      111,488

Amounts Retained by Physicians.......................         (33,052)          (29,094)
                                                       --------------    --------------
  Management Fees....................................  $      105,509    $       82,394
                                                       ==============    ==============
</TABLE>




                                       11
<PAGE>   12





         The Company's most significant Service Agreement is with Texas
Oncology, P.A. ("TOPA"), and it accounted for approximately 65% and 70% of the
Company's total revenues for the three months ended March 31, 1999, and 1998,
respectively. Set forth below is selected, unaudited financial and statistical
information concerning TOPA for the three months ended March 31, 1999 and 1998.

<TABLE>
<CAPTION>
                                                             1999                   1998
                                                        ----------------       ---------------
<S>                                                     <C>                    <C>            
     Medical Practice Revenues                          $         87,880       $        83,498
     Management Fee Paid to the Company
          Reimbursement of Expenses                               58,412                51,312
          Earnings Component                                      10,314                11,428
                                                        ----------------       ---------------
          Total Management Fee                                    68,726                62,740
                                                        ----------------       ---------------
     Amounts Retained by TOPA                           $         19,154       $        20,758
                                                        ================       ===============
     Physicians Employed by TOPA                                     202                   225
     Cancer Centers Provided to TOPA                                  27                    21
</TABLE>

         The Company does not enter into nominee shareholder arrangements with
the Affiliated Physician Groups, nor does it have a "controlling financial
interest" in the Affiliated Physician Groups as defined by EITF 97-2,
"Application of FASB Statement No. 94 and APB No. 16 to Physician Practice
Management Entities and Certain Other Entities under Contractual Management
Arrangement". For these reasons, the Company does not consolidate the financial
statements of the Affiliated Physician Groups.

         The number of physicians retained and employed by TOPA decreased in
1999 because a group of 34 radiologists withdrew from TOPA during 1998 and
entered into a new service agreement with the Company. The Company, TOPA and the
radiology group determined that it was in the best interests of all parties to
have a separate practice focusing on radiology. The Company is not aware of any
negative operating or financial trends related to TOPA.

         The following table sets forth the percentages of the Company's total
revenue represented by certain items reflected in the Company's income
statement. The information that follows should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto included elsewhere
herein.

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED MARCH 31,
                                                   -----------------------------
                                                       1999               1998
                                                   -----------         ---------
<S>                                                <C>                 <C>  
Management fees                                           92.3%             91.0%
Other revenues                                             7.7               9.0
                                                   -----------         ---------
    Total revenues                                       100.0             100.0
Salaries and benefits                                     21.7              24.3
Pharmaceutical and supplies                               41.6              35.1
General and administrative                                14.0              16.6
Provision for uncollectible accounts                       4.3               4.2
Depreciation and amortization                              6.3               6.5
                                                   -----------         ---------
  Income before interest expense and taxes                12.1              13.3
Interest expense                                           1.0               1.4
                                                   -----------         ---------
  Income before income taxes                              11.1              11.9
Income tax provision                                       4.1               4.5
                                                   -----------         ---------
    Net income                                             7.0%              7.4%
                                                   ===========         =========
</TABLE>





                                       12
<PAGE>   13





THREE MONTHS ENDED MARCH 31, 1999, COMPARED TO THREE MONTHS ENDED MARCH 31, 1998

         MANAGEMENT FEES. Management Fees were $105,509,000 for the three months
ended March 31, 1999, compared to $82,394,000 for the three months ended March
31, 1998, representing an increase of $23,115,000, or 28.1%. The growth in
Management Fees is attributable to a $27,073,000 increase in Medical Practice
Revenues offset by an increase in Amounts Retained by Physicians of $3,958,000.
The largest component of the increase in Medical Practice Revenues is pharmacy
revenue, which directly correlates with the 49.7% increase in pharmaceutical and
supplies expense in 1999 compared to 1998. The increase in pharmacy revenue is
due to new higher priced pharmaceutical agents, new treatment modalities that
require a greater use of pharmaceutical agents, growth in patient volume in
existing practices, and new physicians. The growth in Medical Practice Revenues
during the three months ended March 31, 1999 is also attributable to an increase
in the number of physicians by 32 from 337 to 369; and expansion of services
provided at existing locations. 

         Amounts Retained by Physicians were 23.9% of Medical Practice Revenues
for the three months ended March 31, 1999, compared to 26.1% of Medical Practice
Revenues for the comparable period in 1998. The percentage decreased in Amounts
Retained by Physicians is due to lower operating margins for the three months
ended March 31, 1999 compared to 1998. Since 92% of the Company's management fee
is based on earnings, lower operating margins reduced the Company's total
management fee and Amounts Retained by Physicians. The lower operating margins
are due to higher pharmaceutical costs.

         Management Fees derived from payors who have contracted with the
Affiliated Physician Groups to provide services on a discounted fee-for-service
basis accounted for approximately 45% of the Affiliated Physician Groups'
business during the three months ended March 31, 1999. Approximately 35% of the
Medical Practice Revenues generated by the Affiliated Physician Groups for the
three months ended March 31, 1999, were from government agencies, primarily
Medicare and Medicaid.

         The Company anticipates that future Medical Practice Revenue increases
will continue to come from the impact of new higher priced pharmaceutical
agents, the expansion of services, and the addition of new physicians.

         OTHER REVENUES. Other revenues for the three months ended March 31,
1999, were $8,765,000 compared to $8,119,000 for the three months ended March
31, 1998, representing an increase of $646,000, or 8.0%. Other revenues are
primarily derived from retail pharmacy operations located in certain of the
Company's cancer centers and larger physician offices, research activities
performed by the Company's affiliated physicians that are sponsored by
pharmaceutical companies, the Company's equity interest in Ilex, and interest
income. The increase in other revenues was primarily attributable to a
$1,003,000 increase in research revenues and a $473,000 increase in retail
pharmacy revenue.

         SALARIES AND BENEFITS. Salaries and benefits for the three months ended
March 31, 1999, were $24,802,000 compared to $21,987,000 for the three months
ended March 31, 1998, representing an increase of $2,815,000, or 12.8%. Salaries
and benefits include costs of non-physician clinical employees of Affiliated
Physician Groups paid by the Company pursuant to the terms of the Service
Agreements. The dollar increase in salaries and benefits was attributable to the
addition of clinical and nonclinical personnel required to support the increase
in the number of Affiliated Physician Groups managed by the Company. The
percentage of salaries and benefits to total revenues was 21.7% for the three
months ended March 31, 1999, compared to 24.3% for the comparable period in
1998. This decrease is attributable and an increase in Medical Practice Revenues
and Other Revenues which were greater than the incremental increase in salary
and benefits.

         PHARMACEUTICALS AND SUPPLIES. Pharmaceuticals and supplies for the
three months ended March 31, 1999, were $47,614,000 compared to $31,805,000 for
the three months ended March 31, 1998, representing an increase of $15,809,000,
or 49.7%. The percentage of pharmaceuticals and supplies to total revenues was
41.6% for the three months ended March 31, 1999, compared to 35.1% for the three
months ended March 31, 1998. Both the dollar and percentage increases in
pharmaceuticals and supplies are primarily attributable to (i) an increase in
infusion services 




                                       13
<PAGE>   14

generated by the Affiliated Physician Groups, both through the increased number
of physicians employed by the Affiliated Physician Groups and the enhancement of
services provided in physician offices, cancer centers, and retail pharmacies
and (ii) an increase in the use of higher cost pharmaceuticals. Management
expects that third-party payors will continue to negotiate the reimbursement
rate for medical services, pharmaceuticals (including chemotherapy drugs) and
other supplies, with the goal of lowering reimbursement and utilization rates,
and that such lower reimbursement and utilization rates as well as shifts in
revenue mix may continue to adversely impact the Company's margins with respect
to such items.

         GENERAL AND ADMINISTRATIVE. General and administrative expenses for the
three months ended March 31, 1999, were $15,950,000 compared to $15,030,000 for
the three months ended March 31, 1998, representing an increase of $920,000, or
6.1%. The percentage of general and administrative expenses to total revenues
was 14.0% for the three months ended March 31, 1999, compared with 16.6% for the
three months ended March 31, 1998.

         PROVISION FOR UNCOLLECTIBLE ACCOUNTS. The provision for uncollectible
accounts for the three months ended March 31, 1999, was $4,901,000 compared to
$3,825,000 for the three months ended March 31, 1998, representing an increase
of $1,076,000. The percentage of the provision for uncollectible accounts to
total revenues was 4.3% for the three months ended March 31, 1999, compared to
4.2% for the three months ended March 31, 1998. The Company believes that the
provision for uncollectible accounts accurately reflects the collectibility of
accounts receivable outstanding at March 31, 1999.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
three months ended March 31, 1999, was $7,210,000 compared to $5,872,000 for the
three months ended March 31, 1998, representing an increase of $1,338,000, or
22.8%. Depreciation increased as a result of the additional office and cancer
center locations that were opened or acquired by the Company since 1998.
Amortization increased as a result of the change (effective July 1, 1998) in the
amortization period of the Service Agreements to 25 years on a prospective basis
and as a result of the increase in costs incurred by the Company for physician
groups entering into new Service Agreements.

         INTEREST EXPENSE. Interest expense for the three months ended March 31,
1999, was $1,101,000 compared to $1,229,000 for the three months ended March 31,
1998, representing a decrease of $128,000, or 10.4%. The decrease in interest
expense is attributable lower interest rates and to an increase in the amount of
capitalized interest recorded related to the construction of new cancer centers.

         INCOME TAXES. The income tax provision for the three months ended March
31, 1999, was $4,698,000 compared to $4,047,000 for the three months ended March
31, 1998, representing a increase of $651,000. Income taxes were provided on the
taxable income of the Company for federal and state reporting purposes using an
effective rate of approximately 37.0% in 1999 and 37.6% in 1998.



                                       14
<PAGE>   15


LIQUIDITY AND CAPITAL RESOURCES

         The Company has historically generated its cash flows from operations,
bank financing, and the sale of securities. The Company's primary cash
requirements are for construction of cancer centers, acquisition of equipment
for cancer centers and medical offices, financing receivables, and acquiring
assets from and entering into Service Agreements with Affiliated Physician
Groups.

         Net cash used by operations for the three months ended March 31, 1999,
was $3,884,000. Net cash provided by operations for the three months ended March
31, 1998 were $7,393,000. The decrease in net cash provided by operations for
the three months ended March 31, 1999 compared to the three months ended March
31, 1998 was primarily due to a decrease in accounts payable and an increase in
accounts receivable, as compared to the changes in the respective accounts for
the three months ended March 31, 1998. The Company has advanced to its
Affiliated Physician Groups amounts needed for working capital purposes
primarily to assist with the development of new markets. The advances decreased
approximately $6,979,000 to $5,766,000 at March 31, 1999, as compared to
$12,745,000 at March 31, 1998. These advances bear interest at a market rate
(7.75% at March 31, 1999), are not collateralized, and are repaid in accordance
with the terms of the instrument evidencing the advance. The advance to TOPA is
evidenced by a promissory note that provides for payment of the note on demand
by the Company but in no event later than December 31, 1999. The advances to
other Affiliated Physician Groups generally require repayment of advances in 12
equal, monthly installments commencing one year after the advance was made.
Because the advances from the Company to Affiliated Physician Groups are
unsecured, the Company is an unsecured creditor if an Affiliated Physician Group
is unable to repay an advance. The Company does not believe that there is a
material credit risk associated with any of the advances to an Affiliated
Physician Group.

         Net cash used in investing activities for the three months ended March
31, 1999 and 1998, was $19,871,000 and $13,017,000, respectively. For the three
months ended March 31, 1999 and 1998, the Company paid approximately $5,737,000
and $6,984,000, respectively, to Affiliated Physician Groups in connection with
entering into Service Agreements. Purchases of property and equipment during the
three months ended March 31, 1999 and 1998, were $13,427,000 and $5,391,000 and
consisted of the construction and equipping of cancer centers. These
expenditures were funded through cash flow provided by operations, issuance of
common stock and through borrowings under the Company's Revolving Credit
Facility ("Revolver").

         Net cash flows from financing activities for the three months ended
March 31, 1999 and 1998, were $23,295,000 and $5,344,000, respectively. At March
31, 1999, borrowings under the Revolver were $76,000,000, which were used to
finance the Company's ongoing construction and development activities, the
acquisition of equipment, payments in connection with Service Agreement
transactions, and for working capital purposes.

         The Revolver provides for maximum borrowings of $140,000,000. The
Company has the option of financing borrowings under the Revolver at either a
LIBOR-based rate (LIBOR plus .70% at March 31, 1999) or at Bank One Texas,
N.A.'s prime rate (7.75% at March 31, 1999). The Revolver contains covenants
that, among other things, require the Company to maintain certain financial
ratios and impose restrictions on the Company's ability to pay cash dividends,
sell assets, and redeem or repurchase the Company's securities. At March 31,
1999, $76,000,000 was outstanding under the Revolver, and $64,000,000 was
available for borrowing.

         The Company expects that its principal use of funds in the foreseeable
future will be for the construction of cancer centers and the acquisition of
related equipment; the acquisition of medical practice assets; payments to
Affiliated Physician Groups as consideration for entering into Service
Agreements; repayment of notes issued in connection with the Service Agreement
transactions; debt repayments under the Revolver; and working capital. At March
31, 1999, the Company had construction commitments of $5,900,000, which are
primarily for the construction of new cancer centers. The Company does not have
any material funding commitments under existing Service Agreements.

         The Company's primary working capital requirement is to fund the growth
of revenues, which results in an increase in accounts receivable. Under the
terms of its Service Agreements, the Company purchases the accounts




                                       15
<PAGE>   16

receivable outstanding at the end of each month from the Affiliated Physician
Groups, net of estimated allowances. An estimated allowance is provided on the
accounts receivable based on historical collection rates. These allowances are
reviewed periodically and increased or decreased based on the estimated payment
rates. Any adjustment to the allowance based on payment patterns and/or bad
debts affects the future operations of the Affiliated Physician Groups and the
resulting management fee from the Affiliated Physician Groups. Therefore,
accounts receivable are a function of medical practice revenues (gross billings
less estimated contractual and other adjustments) rather than the management fee
earned by the Company.

         The Company believes that the unused borrowing capacity under the
Revolver will be sufficient to meet its capital needs; and, therefore, the
Company does not anticipate raising capital through offerings of common stock to
the public in the near-term. The Company believes it has adequate access to
other forms of financing at reasonable terms to meet the capital requirements of
its construction and network development programs through 1999, including but
not limited to increasing the amount available for borrowing under the Revolver.
However, no assurance exists that such additional financing will be available in
the future or that, if available, it will be available on terms acceptable to
the Company. In addition, the Company will continue to construct facilities
under build-to-suit arrangements pursuant to long-term operating leases if the
implicit cost of construction is equal to or less than the cost for the Company
to construct its own facilities. The Company retains no financial or residual
interest in the leased facilities and has no obligation to advance funds for
development of leased facilities.

YEAR 2000 ISSUE

         The Year 2000 issue creates a significant challenge for the Company,
its employees, business partners and suppliers, involving the healthcare
industry and all its computer users. The challenge is to ensure that patient
care and business operations are not compromised as the Company enters the new
millennium. The issue is the anticipated possibility of failure of automated
devices that are used for storing and utilizing date-related information.
Specifically, the potential problem exists because of the widespread practice of
using two digits, not four, to represent the year in databases, applications,
embedded chips, hardware, etc. Logic using two-digit years can yield
inappropriate results if used in calculations that span centuries.

Program

         The Company has divided its Year 2000 program into seven phases:
awareness, assessment, detailed analysis and planning, conversion process,
testing and validation, implementation and post implementation. The Company is
assessing its information technology software and hardware, medical equipment
and third party suppliers. The Company will also have contingency plans to
address any potential disruption of services.



Information Systems

         The Company is dependent upon its computer systems to bill patients for
services rendered by the Affiliated Physician Groups and to accumulate and
report the related revenues and expenses of Affiliated Physician Groups. The
Company's principal patient accounting system is not currently capable of
processing Year 2000 transactions; however, the vendor has delivered an upgrade
to the software making the system operational for the Year 2000. The upgrade has
been tested and should be installed by the end of the second quarter of 1999.
The Company does not believe that the cost to make the current practice
management systems and other ancillary computer systems operational for the Year
2000 will be material. The Company is also currently installing at each
Affiliated Physician Group a new practice management system that is Year 2000
compatible, and the installation is expected to be fully installed and
operational before January 2000. In addition, the Company has installed a new
general ledger and accounts payable system that is Year 2000 compatible.



                                       16
<PAGE>   17





Medical Equipment

         The Company has reviewed the Year 2000 readiness of the linear
accelerators and associated equipment used in cancer centers. The suppliers of
the medical equipment have certified that, with minor upgrades, these systems
will be Year 2000 compliant. These systems will be upgraded during the first and
second quarters of 1999. The Company is in the process of evaluating the Year
2000 compliance of other clinical equipment at this time and expects to complete
this process by mid-1999.

Costs

         The total cost of the new practice management system, exclusive of
internal costs, is anticipated to be between $4,000,000 and $5,000,000. The
Company does not anticipate any other material costs will be incurred in
connection with the Company's Year 2000 program.


FORWARD-LOOKING STATEMENTS/RISK FACTORS

         This Form 10-K contains certain forward-looking statements regarding
the anticipated financial and operating results of the Company. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. In connection with the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995, the Company is including the following cautionary statements identifying
important factors that could cause the Company's actual results to differ
materially from those projected in forward-looking statements made by, or on
behalf of, the Company. These factors, many of which are beyond the Company's
control, include the Company's dependence on fees and revenues generated by
physicians employed by the Affiliated Physician Groups, particularly TOPA; the
Company's ability to identify expansion opportunities; the Company's ability to
achieve operating efficiencies associated with integrating physician practices
and expanding the services offered by its Affiliated Physician Groups,
particularly TOPA; the Company's ability to obtain suitable financing to support
its expansion objectives; the Company's ability to effectively collect accounts
receivable; increases in the costs of pharmaceuticals; changes in governmental
regulation regarding the relationships between the Company and the Affiliated
Physician Groups; changes in payment for medical services, including Medicare
and Medicaid programs; the Company's ability to provide services on a
risk-sharing or capitated basis; competitive pressures affecting physician
practice management companies and physician groups with whom the Company
contracts; potential exposure to professional and product liability claims; and
risks associated with the proposed merger between the Company and AOR. The
Company undertakes no obligation to publicly release any revisions to any
forward-looking statements contained herein to reflect events or circumstances
occurring after the date hereof or to reflect the occurrence of unanticipated
events.




                                       17
<PAGE>   18





                           PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.
--------------------------------------------------------------------------------

         Inapplicable.


ITEM 2.  CHANGES IN SECURITIES.
--------------------------------------------------------------------------------

         Inapplicable.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
--------------------------------------------------------------------------------

         Inapplicable.


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

         Inapplicable.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.
--------------------------------------------------------------------------------

         (a) Exhibits. See index to Exhibits following signatures.

         (b) The Company filed no reports on Form 8-K for the three months ended
March 31, 1999.




                                       18
<PAGE>   19




                                   SIGNATURES


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


                                            PHYSICIAN RELIANCE NETWORK, INC.


Date:  May 17, 1999                    By:  /s/ John T. Casey                  
                                            -----------------------------------
                                            John T. Casey, Chairman and
                                            Chief Executive Officer


                                      By:   /s/ Michael N. Murdock             
                                            -----------------------------------
                                            Michael N. Murdock, Executive Vice
                                            President and Chief Financial 
                                            Officer






<PAGE>   20


                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>

   EXHIBIT 
   NO.                  DESCRIPTION
   ---------            -----------
<S>                     <C>
        3.1             --       Articles of Incorporation of Registrant. (1)

        3.2             --       Bylaws of the Registrant. (2)

        4.1             --       See Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation
                                 and Bylaws defining rights of the holders of the Common Stock of the
                                 Registrant.

        4.2             --       Form of Stock Certificate for the Common Stock of the Registrant. (2)

        4.3             --       Rights Agreement, dated as of June 2, 1997, between Physician Reliance
                                 Network, Inc. and Harris Trust and Savings Bank, as Rights Agent, which
                                 includes as exhibits the Form of Rights Certificate and the Summary of
                                 Rights Agreements. (3)

        4.4                      Amendment No. 1 to the Rights Agreement, dated as of December 11, 1998
                                 between the Registrant and Harris Trust and Savings Bank, as Rights
                                 Agent. (4)

        27.1            --       Financial Data Schedule, Three Months Ended March 31, 1999
</TABLE>


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

         (1)    Incorporated by reference to the Registrant's Quarterly Report
                on Form 10-Q for the quarter ended June 30, 1996.

         (2)    Incorporated by reference to the Registrant's Registration
                Statement on Form S-1 (Registration No. 33-84436).

         (3)    Incorporated by reference to the Registrant's Current Report on
                Form 8-K, dated June 5, 1997.

         (4)    Incorporated by reference to the Registrant's Registration
                Statement on Form 8-A/A dated December 23, 1998.