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

                                    FORM 10-Q

(MARK ONE)

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                 FOR THE TRANSITION PERIOD FROM ______ TO ______

                         COMMISSION FILE NUMBER 0-13849

                           RAMSAY YOUTH SERVICES, INC.
             (Exact name of registrant as specified in its charter)


         DELAWARE                                     63-0857352
(STATE OR OTHER JURISDICTION             (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)


               COLUMBUS CENTER
        ONE ALHAMBRA PLAZA, SUITE 750
            CORAL GABLES, FLORIDA                                     33134
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                         (ZIP CODE)


        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (305) 569-6993

         Indicate by a 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 [ ].

         The number of shares of the Registrant's Common Stock issued as of May
3, 2002 follows:

         Common Stock, par value $0.01 per share - 9,272,145 shares


<PAGE>


                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES

                                    FORM 10-Q

                                      INDEX
<TABLE>
<CAPTION>

                                                                                                   PAGE
                                                                                                   ----
<S>                                                                                                <C>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited)......................................................       1

Condensed Consolidated Balance Sheets - March 31, 2002 and
         December 31, 2001.....................................................................       1

Condensed Consolidated Statements of Operations - Quarters
         Ended March 31, 2002 and 2001.........................................................       3

Condensed Consolidated Statements of Cash Flows - Quarters Ended
         March 31, 2002 and 2001...............................................................       4

Notes to Condensed Consolidated Financial Statements - March 31, 2002..........................       5

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations.............................................................       9

Item 3.  Quantitative and Qualitative Disclosures About Market Risk............................      15


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.....................................................................      15

Item 2.  Changes in Securities and Use of Proceeds.............................................      15

Item 3.  Defaults upon Senior Securities.......................................................      15

Item 4.  Submission of Matters to a Vote of Securities Holders.................................      15

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

SIGNATURES.....................................................................................      16

</TABLE>


<PAGE>




                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                           MARCH 31,         DECEMBER 31,
                                                                             2002              2001
                                                                         ------------         ------------

<S>                                                                      <C>                  <C>
ASSETS

Current assets
   Cash and cash equivalents ....................................        $    643,000         $    752,000
   Accounts receivable, less allowances for doubtful accounts of
     $2,356,000 and $1,934,000 at March 31, 2002 and December 31,
     2001, respectively .........................................          25,450,000           23,307,000
   Other current assets .........................................           6,284,000            6,091,000
                                                                         ------------         ------------
     Total current assets .......................................          32,377,000           30,150,000


Other assets
   Cash held in trust ...........................................           1,021,000            1,021,000
   Cost in excess of net asset value of purchased businesses, net           2,232,000            2,232,000
   Unamortized loan costs, net ..................................           1,026,000            1,077,000
                                                                         ------------         ------------
     Total other assets .........................................           4,279,000            4,330,000


Property and equipment
   Land .........................................................           4,642,000            4,659,000
   Buildings and improvements ...................................          37,968,000           37,829,000
   Equipment, furniture and fixtures ............................          12,995,000           12,580,000
                                                                         ------------         ------------
                                                                           55,605,000           55,068,000

   Less accumulated depreciation ................................         (21,102,000)         (20,537,000)
                                                                         ------------         ------------
                                                                           34,503,000           34,531,000
                                                                         ------------         ------------

                                                                         $ 71,159,000         $ 69,011,000
                                                                         ============         ============
</TABLE>


            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.



                                       1
<PAGE>


                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                         MARCH 31,           DECEMBER 31,
                                                                                           2002                 2001
                                                                                      -------------         -------------
<S>                                                                                   <C>                   <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
   Accounts payable ..........................................................        $   5,551,000         $   5,604,000
   Accrued and other liabilities .............................................            8,633,000             6,366,000
   Amounts due to third-party contractual agencies ...........................            1,574,000             1,709,000
   Current portion of long-term debt .........................................            2,971,000             3,372,000
                                                                                      -------------         -------------
     Total current liabilities ...............................................           18,729,000            17,051,000

Noncurrent liabilities
   Other accrued liabilities .................................................            4,116,000             4,129,000
   Long-term debt, less current portion ......................................           22,387,000            23,506,000
                                                                                      -------------         -------------
     Total liabilities .......................................................           45,232,000            44,686,000
                                                                                      -------------         -------------

Commitments and contingencies

Stockholders' equity
   Common stock $.01 par value--authorized 30,000,000 shares; issued 9,465,995
     shares at March 31, 2002 and 9,445,449
     shares at December 31, 2001 .............................................               95,000                94,000
   Additional paid-in capital ................................................          127,078,000           127,047,000
   Accumulated deficit .......................................................          (97,347,000)          (98,917,000)
   Treasury stock - 193,850 common shares at March 31, 2002 and
     December 31, 2001, at cost ..............................................           (3,899,000)           (3,899,000)
                                                                                      -------------         -------------
           Total stockholders' equity ........................................           25,927,000            24,325,000
                                                                                      -------------         -------------
                                                                                      $  71,159,000         $  69,011,000
                                                                                      =============         =============


</TABLE>

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.



                                       2
<PAGE>


                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                                QUARTER ENDED MARCH 31,
                                                             ------------------------------
                                                                 2002               2001
                                                             -----------        -----------
<S>                                                          <C>                <C>
Revenues ............................................        $35,831,000        $31,789,000

Operating Expenses:
   Salaries, wages and benefits .....................         22,196,000         19,827,000
   Other operating expenses .........................          9,692,000          8,992,000
   Provision for doubtful accounts ..................            720,000            832,000
   Depreciation and amortization ....................            625,000            593,000
    Asset impairment charges ........................            125,000                 --
                                                             -----------        -----------
Total operating expenses ............................         33,358,000         30,244,000
                                                             -----------        -----------

Income from operations ..............................          2,473,000          1,545,000

Non-operating expenses:
   Interest and other financing charges, net ........            690,000            985,000
                                                             -----------        -----------
     Total non-operating expenses, net ..............            690,000            985,000

Income before income taxes ..........................          1,783,000            560,000

Provision for income taxes ..........................            214,000            176,000
                                                             -----------        -----------

Net income ..........................................        $ 1,569,000        $   384,000
                                                             ===========        ===========
Income attributable to common stockholders ..........        $ 1,569,000        $   384,000
                                                             ===========        ===========
Income per common share:
   Basic ............................................        $      0.17        $      0.04
                                                             ===========        ===========
   Diluted ..........................................        $      0.14        $      0.04
                                                             ===========        ===========

Weighted average number of common shares outstanding:
   Basic ............................................          9,264,000          8,929,000
                                                             ===========        ===========
   Diluted ..........................................         11,390,000          8,929,000
                                                             ===========        ===========

</TABLE>


            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.



                                       3
<PAGE>

                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>


                                                                         QUARTER ENDED MARCH 31,
                                                                      -------------------------------
                                                                          2002                2001
                                                                      -----------         -----------

<S>                                                                   <C>                 <C>
Cash flows from operating activities:
   Net income ................................................        $ 1,569,000         $   384,000
   Adjustments to reconcile net income to net cash provided by
     operating activities:
     Depreciation ............................................            625,000             546,000
     Amortization, including loan costs ......................            134,000             236,000
     Provision for doubtful accounts .........................            720,000             832,000
     Asset impairment charges ................................            125,000                  --
     Change in operating assets and liabilities:
       Accounts receivable ...................................         (2,863,000)         (2,008,000)
       Other current assets ..................................           (194,000)           (261,000)
       Accounts payable ......................................            (51,000)           (455,000)
       Accrued and other liabilities .........................          2,254,000           1,177,000
       Amounts due to third-party contractual agencies .......           (135,000)            198,000
                                                                      -----------         -----------
         Total adjustments ...................................            615,000             265,000
                                                                      -----------         -----------
           Net cash provided by operating activities .........          2,184,000             649,000
                                                                      -----------         -----------
Cash flows from investing activities:
   Net proceeds from the sale of assets ......................            155,000                  --
   Increase in net assets held for sale ......................                 --              (2,000)
   Expenditures for property and equipment ...................           (876,000)           (566,000)
   Increase in cash held in trust ............................                 --              30,000
                                                                      -----------         -----------
           Net cash used in investing activities .............           (721,000)           (538,000)
                                                                      -----------         -----------
Cash flows from financing activities:
   Loan costs ................................................            (53,000)             (2,000)
   Proceeds from issuance of debt and warrants ...............          1,500,000              89,000
   Payments on debt ..........................................         (3,050,000)           (676,000)
   Net proceeds from exercise of options and stock purchases .             44,000              14,000
   Registration costs ........................................            (13,000)                 --
                                                                      -----------         -----------
           Net cash used in financing activities .............         (1,572,000)           (575,000)
                                                                      -----------         -----------
Net decrease in cash and cash equivalents ....................           (109,000)           (464,000)
Cash and cash equivalents at beginning of period .............            752,000           1,539,000
                                                                      -----------         -----------
Cash and cash equivalents at end of period ...................        $   643,000         $ 1,075,000
                                                                      ===========         ===========


Cash paid during the period for:
   Interest ..................................................        $   595,000         $   813,000
                                                                      ===========         ===========
   Income taxes ..............................................        $    40,000         $   211,000
                                                                      ===========         ===========
</TABLE>

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.



                                       4
<PAGE>


                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1.  BASIS OF PRESENTATION

         Ramsay Youth Services, Inc. (the "Company") is a provider and manager
of mental health, substance abuse and behavioral health programs and services in
residential and non-residential settings in Alabama, Florida, Hawaii, Missouri,
Michigan, Nevada, North Carolina, South Carolina, Texas, Utah and the
Commonwealth of Puerto Rico.

         The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation of the interim information are,
unless otherwise discussed in this report, of a normal recurring nature and have
been included. The Company's business is seasonal in nature and subject to
general economic conditions and other factors. Accordingly, operating results
for the quarter ended March 31, 2002 are not necessarily indicative of the
results that may be expected for the year. The balance sheet at December 31,
2001 has been derived from the audited financial statements at that date but
does not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Significant estimates include valuation
reserves for accounts receivable, estimates of revenue to be received from
government and other contract reimbursement programs, self-insurance reserves,
and estimates related to allocating purchase price to assets and liabilities for
prior or future acquisitions. For further information, refer to the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2001.

NOTE 2.  ASSET SALES AND CLOSED BUSINESSES

         As of December 31, 2000, the assets relating to the Company's facility
in Palm Bay, Florida were reflected as assets held for sale in the accompanying
balance sheets. On May 15, 2001, the Company sold the facility for $2,300,000.
Proceeds from the sale included a $500,000 cash payment at closing and a
$1,800,000, 8% promissory note, due and payable on June 30, 2003. During the
year ended December 31, 2001, the Company agreed to accept a discount of
$130,000 for the full payment of the promissory note and accrued interest. The
promissory note, included in other current assets, is expected to be repaid on
or before December 31, 2002.

NOTE 3.  LONG-TERM DEBT

         The Company's long-term debt is as follows:
<TABLE>
<CAPTION>

                                                                   MARCH 31,      DECEMBER 31,
                                                                      2002           2001
                                                                  -----------     -----------
<S>                                                               <C>             <C>
         Variable rate Term Loan, due October 30, 2003 ......     $ 8,915,000     $ 8,134,000
         Revolver, due October 30, 2003 .....................       5,256,000       7,503,000
         Acquisition Loan, due October 30, 2003 .............       1,771,000       1,849,000
         Subordinated Note (net of discount of $328,000), due
            January 24, 2007 ................................       4,672,000       4,660,000
         Subordinated Note (net of discount of $341,000), due
            January 24, 2007 ................................       4,659,000       4,640,000
         Other ..............................................          85,000          92,000
                                                                  -----------     -----------
                                                                   25,358,000      26,878,000
         Less current portion ...............................       2,971,000       3,372,000
                                                                  -----------     -----------
                                                                  $22,387,000     $23,506,000
                                                                  ===========     ===========
</TABLE>

                                       5
<PAGE>


                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


         The Company's amended senior credit facility (the "Senior Credit
Facility") consists of a term loan (the "Term Loan") payable in monthly
installments ranging from $83,000 to $302,000 with a final installment of
$3,600,000 due on October 30, 2003 and a revolving credit facility (the
"Revolver") for an amount up to the lesser of $15,000,000 or the borrowing base
of the Company's receivables (as defined in the agreement).

         During the twelve months ended December 31, 2001, the Company exceeded
the capital expenditure limitation in the Senior Credit Facility. On February
25, 2002, the Company's lender agreed to amend the Senior Credit Facility,
retroactive to December 31, 2001, to provide for among other items: (i) an
increase in the permitted capital expenditures, (ii) a $3.0 million increase in
the revolving credit loan commitment, and (iii) a $1.5 million additional
advance on the term loan. At March 31, 2002, the Company was in compliance with
all covenants stipulated in the Senior Credit Facility.

         On January 25, 2000 and June 19, 2000, the Company entered into
subordinated note and warrant purchase agreements with two unrelated financial
institutions for an aggregate principal amount of $5 million each (the
"Subordinated Notes"). The Subordinated Notes permit each of the financial
institutions to exercise, under certain conditions, up to 475,000 warrants which
are convertible into the Company's common stock. The aggregate value of the
warrants at the time of issuance was $844,000. On August 17, 2001, one of the
financial institutions exercised its warrant purchase agreement and converted
475,000 warrants into 294,597 shares of common stock utilizing the cashless
exercise provision outlined in the warrant agreement. Borrowings under the
Subordinated Notes bear interest at a rate of 12.5% per annum. The interest is
payable quarterly, and the principal balance and any unpaid interest is due
January 24, 2007.

NOTE 4.  EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY

         The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>

                                                                                        QUARTER ENDED MARCH 31,
                                                                                       ---------------------------
                                                                                            2002           2001
                                                                                        -----------     ----------
                                                                                                (unaudited)
<S>                                                                                     <C>             <C>
         Numerator:
            Numerator for basic earnings per share -
              income attributable to common stockholders ..........................     $ 1,569,000     $  384,000
                                                                                        ===========     ==========

         Denominator:
            Denominator for basic earnings per share -
              weighted-average shares .............................................       9,264,000      8,929,000

            Effect of dilutive securities:
              Stock options and warrants ..........................................       2,126,000             --
                                                                                        -----------     ----------
            Dilutive potential common shares ......................................       2,126,000             --
                                                                                        -----------     ----------
              Denominator for diluted earnings per share -
                adjusted weighted-average shares and
                assumed conversions ...............................................      11,390,000      8,929,000
                                                                                        ===========     ==========

         Basic earnings per share .................................................     $      0.17     $     0.04
                                                                                        ===========     ==========

         Diluted earnings per share ...............................................     $      0.14     $     0.04
                                                                                        ===========     ==========
</TABLE>

         For the quarter ended March 31, 2002 and 2001, options and warrants
totalling 591,781 and 1,792,947 respectively, were excluded from the above
computation because their effect would be antidilutive.

                                       6
<PAGE>
                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 5.  SEGMENT INFORMATION

         The Company is a provider and manager of mental health, substance abuse
and behavioral health programs and services in residential and non-residential
settings in ten states and the Commonwealth of Puerto Rico. During the quarter
ended June 30, 2001, the Company refined its segment definitions to more
appropriately reflect its business operations and management responsibilities.
The primary change from the segment information originally presented as of March
31, 2001 consists of a change in the names of the segments and the
classification of certain items within the segments. Accordingly, the
corresponding information for earlier periods has been reclassified to reflect
the new reportable business segments, owned operations and management contract
operations.

OWNED OPERATIONS

         The Company offers its mental health and behavioral health programs and
services at its owned and leased facilities in residential and non-residential
settings.

         The residential setting provides a safe, secure and highly structured
environment for the evaluation and development of long-term intensive treatment
services. The programs focus on a cognitive behavioral model with family, group
and individual counseling, social and life skills development, and educational
and recreational programs. The primary focus of these services is to reshape
antisocial behaviors by stressing responsibility and achievement of performance
and treatment goals.

         The non-residential setting is designed to meet the special needs of
patients requiring a less structured environment than the residential setting,
but providing the necessary level of treatment, support and assistance to
transition back into society. The primary focus of this program is to provide
patients, with a clinically definable emotional, psychiatric or dependency
disorder, with therapeutic and intensive treatment services. Patients who are
assisted through this program have either transitioned out of a residential
treatment program, or do not require the intensive services of a residential
treatment program.

         Many of the Company's programs are complemented with specialized
educational services designed to modify behavior and assist individuals in
developing their academic, social, living and vocational skills necessary to
participate successfully in society.

MANAGEMENT CONTRACT OPERATIONS

         The Company's programs and services in its management contract
operations are similar in nature to the programs and services offered by the
Company at its owned operations; however, the programs and services are provided
at facilities owned by the contracting governmental agency. These programs and
services focus on solving the specialized needs of the respective agency by
providing effective treatment interventions, including counseling, social
interests, substance abuse education and treatment, mental health services,
cognitive and life skills development, accredited education and vocational
skills. The Company believes that a comprehensive approach, which develops the
social, educational, and vocational skills of the individual, creates
responsible, contributing, pro-social individuals. This comprehensive approach
is essential to achieving the program's objective of reducing recidivism and
integrating the youth into their communities as responsible and productive
individuals.

         The following table set forth, for each of the periods indicated,
certain information about segment results of operations and segment assets.
There are no inter-segment sales or transfers. Segment profit consists of
revenue less operating expenses, and does not include investment income and
other, interest and other financing charges, non-recurring items and income
taxes. Total assets are those assets used in the operations in each segment.
Corporate assets include cash and cash equivalents, property and equipment,
intangible assets and notes receivable. The accounting policies of the
reportable segments are the same as those described in the summary of
significant accounting policies.



                                       7
<PAGE>
                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


<TABLE>
<CAPTION>

                                                              QUARTER ENDED MARCH 31,
                                                          -------------------------------
                                                                2002              2001
                                                           ------------      ------------
<S>                                                        <C>               <C>
         SEGMENT REVENUE
            Owned operations .........................     $ 28,925,000      $ 25,323,000
            Management contracts .....................        6,906,000         6,466,000
                                                           ------------      ------------
         Total consolidated revenues .................     $ 35,831,000      $ 31,789,000
                                                           ============      ============

         SEGMENT DEPRECIATION AND AMORTIZATION
           Owned operations ..........................     $    565,000      $    528,000
           Management contracts ......................           32,000            28,000
                                                           ------------      ------------
                                                                597,000           556,000

         Reconciling items
            Corporate depreciation and amortization ..           28,000            37,000
                                                           ------------      ------------
         Total consolidated depreciation and
           amortization ..............................     $    625,000      $    593,000
                                                           ============      ============

         Segment profit
           Owned operations ..........................     $  3,308,000      $  2,587,000
           Management contracts ......................          585,000           559,000
                                                           ------------      ------------
                                                              3,893,000         3,146,000

         Reconciling items
            Corporate expenses .......................       (1,295,000)       (1,601,000)
            Asset impairment charges .................         (125,000)               --
            Interest and other financing charges .....         (690,000)         (985,000)
                                                           ------------      ------------
         Total consolidated income before income taxes     $  1,783,000      $    560,000
                                                           ============      ============

         Segment capital expenses
           Owned operations ..........................     $    718,000      $    451,000
           Management contracts ......................          107,000            85,000
                                                           ------------      ------------
                                                                825,000           536,000

         Reconciling items
            Corporate assets .........................           51,000            28,000
            Assets held for sale .....................               --             2,000
                                                           ------------      ------------
         Total consolidated capital expenditures .....     $    876,000      $    566,000
                                                           ============      ============

</TABLE>
<TABLE>
<CAPTION>

                                                                    YEAR ENDED
                                                         ------------------------------------
                                                          March 31, 2002   December 31, 2001
                                                         ---------------  -------------------

         SEGMENT ASSETS
<S>                                                        <C>               <C>
           Owned operations ..........................     $ 61,976,000      $ 57,893,000
            Management contracts .....................        6,837,000         6,729,000
                                                           ------------      ------------
         Total segment assets ........................       68,813,000        64,622,000

         Reconciling items
            Corporate assets .........................        2,346,000         4,389,000
                                                           ------------      ------------
         Total consolidated assets ...................     $ 71,159,000      $ 69,011,000
                                                           ============      ============

</TABLE>




NOTE 6.  ACCOUNTS RECEIVABLE

         The Company has experienced delays in the collection of receivables
from its contracts in Puerto Rico. As of March 31, 2002, the Company had
approximately $4.3 million in outstanding receivables due from its contracts in
Puerto Rico, of which approximately $1.6 million was over 120 days past due.
Reserves against outstanding Puerto Rico receivables were $1.2 million as of
March 31, 2002. As of May 3, 2002 the Company had collected approximately $0.7
million of the March 31, 2002 outstanding receivable balance, all of which
related to receivables under 120 days past due. The Company and its advisors are
in active discussions with the Government of Puerto Rico with respect to the
payment of the outstanding receivables. The Company believes that it has fully
performed its obligations under the Puerto Rico contracts and is entitled to
receive payment of these receivables in full. Although the Company has been



                                       8
<PAGE>
                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


advised by its legal counsel that the net receivables due on the Puerto Rico
contracts are collectable, there can be no assurances that future transactions
or events will not result in the need for additional reserves for these accounts
receivable. If the Company were to record additional reserves, it would
adversely affect earnings in the period in which the reserves are recorded.

NOTE 7.  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement No. 141, ACCOUNTING FOR BUSINESS COMBINATIONS, and Statement No. 142,
GOODWILL AND OTHER INTANGIBLE ASSETS. These statements modify accounting for
business combinations after June 30, 2001 and will affect the Company's
treatment of goodwill and other intangible assets at the start of fiscal year
2002. The statements require that goodwill existing at the date of adoption be
reviewed for possible impairment and that impairment tests be periodically
repeated, with impaired assets written-down to fair value. Additionally,
existing goodwill and intangible assets must be assessed and classified
consistent with the statements' criteria. Intangible assets with estimated
useful lives will continue to be amortized over those periods. Amortization of
goodwill and intangible assets with indeterminate lives will cease. Under this
Statement, initial testing of goodwill must be conducted within six month of
adoption and completed by the end of 2002. The Company has adopted this
Statement but has not yet completed the testing of goodwill and accordingly,
cannot estimate the full impact of this Statement on the Company's results of
operations. The Company recorded amortization of goodwill expense of $52,000 for
the quarter ended March 31, 2001.

         In July 2001, the FASB issued Statement No. 143, ACCOUNTING FOR ASSET
RETIREMENT OBLIGATIONS. This Statement requires that an asset retirement cost
should be capitalized as part of the cost of the related long-lived asset and
subsequently allocated to expense using a systematic and rational method. This
Statement is required to be adopted in fiscal years beginning after June 15,
2002. The Company does not anticipate a significant impact to the results of
operations from the adoption of this Statement.

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

         The Company receives revenues primarily from the delivery of mental
health, substance abuse and behavioral health programs and services in
residential and non-residential settings. The Company receives revenues based on
per diem rates, fixed fee contracts or flat or cost-based rate contracts. In
addition, the Company also receives revenues from management contracts with
other entities. Revenues under the Company's programs are recognized as services
are rendered. Revenues of the Company's programs and services are affected by
changes in the rates the Company charges, changes in reimbursement rates by
third-party payors, the volume of individuals treated and changes in the mix of
payors.

         Salaries, wages and benefits include facility and program payrolls and
related taxes, as well as employee benefits, including insurance and workers'
compensation coverage. Employee compensation and benefits also includes general
and administrative payroll and related benefit costs, including salaries and
supplemental compensation of officers.

         Other operating expenses include all expenses not otherwise presented
separately in the Company's statements of operations. Significant components of
these expenses at the operating level include items such as food, utilities,
supplies, rent and insurance. Significant components of these expenses at the
administrative level include legal, accounting, investor relations, marketing,
consulting and travel expense.

         The Company's quarterly results may fluctuate significantly as a result
of a variety of factors, including the timing of the opening of new programs.
When the Company opens a new program, the program may be unprofitable until the



                                       9
<PAGE>
                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


program's population, and net revenues contributed by the program, approach
intended levels, primarily because the Company staffs its programs in
anticipation of achieving such levels. The Company's quarterly results may also
be impacted by seasonality, as revenues generated by the Company's treatment
services are generally seasonal in nature.

         IN CONNECTION WITH THE "SAFE-HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995, THE COMPANY NOTES THAT THIS QUARTERLY
REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS ABOUT THE COMPANY. THE
COMPANY IS HEREBY SETTING FORTH CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT
FACTORS THAT MAY CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE SET FORTH IN ANY FORWARD-LOOKING STATEMENTS OR INFORMATION MADE BY OR ON
BEHALF OF OR CONCERNING THE COMPANY. THESE FACTORS ARE SET FORTH IN THE
COMPANY'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001, AND INCLUDE (I)
ACCELERATING CHANGES OCCURRING IN THE BEHAVIORAL HEALTHCARE AND AT-RISK YOUTH
INDUSTRY, INCLUDING COMPETITION FROM CONSOLIDATING AND INTEGRATED PROVIDER
SYSTEMS AND LIMITATIONS ON REIMBURSEMENT RATES, (II) FEDERAL AND STATE
GOVERNMENTAL BUDGETARY CONSTRAINTS WHICH COULD HAVE THE EFFECT OF LIMITING THE
AMOUNT OF FUNDS AVAILABLE TO SUPPORT GOVERNMENTAL PROGRAMS, (III) STATUTORY,
REGULATORY AND ADMINISTRATIVE CHANGES OR INTERPRETATIONS OF EXISTING STATUTORY
AND REGULATORY PROVISIONS AFFECTING THE CONDUCT OF THE COMPANY'S BUSINESS AND
AFFECTING CURRENT AND PRIOR REIMBURSEMENT FOR THE COMPANY'S SERVICES AND (IV)
UNCERTAINTIES REGARDING ISSUES IN THE PUERTO RICO MARKET SERVICED BY THE
COMPANY. THERE CAN BE NO ASSURANCE THAT ANY ANTICIPATED FUTURE RESULTS WILL BE
ACHIEVED. AS A RESULT OF THE FACTORS IDENTIFIED ABOVE AND INCLUDING ANY OTHER
FACTORS, THE COMPANY'S ACTUAL RESULTS OR FINANCIAL OR OTHER CONDITION COULD VARY
SIGNIFICANTLY FROM THE PERFORMANCE OR EXPECTATION SET FORTH IN ANY
FORWARD-LOOKING STATEMENTS OR INFORMATION. THE COMPANY UNDERTAKES NO OBLIGATIONS
TO UPDATE THESE FORWARD-LOOKING STATEMENTS.



                                       10
<PAGE>


                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES

                              RESULTS OF OPERATIONS

QUARTER ENDED MARCH 31, 2002 COMPARED TO QUARTER ENDED MARCH 31, 2001

OWNED OPERATIONS SEGMENT

         The following tables state for the periods indicated the results of our
owned operations in dollar and percentage of revenue terms (dollars in
thousands):

<TABLE>
<CAPTION>

                                                            QUARTER ENDED MARCH 31,
                                                --------------------------------------------
                                                        2002                   2001
                                                -------------------      -------------------
<S>                                             <C>           <C>        <C>           <C>
         Revenues .........................     $28,925       100.0%     $25,323       100.0%

         Expenses:
            Salaries, wages and benefits ..      16,931        58.5%      14,738        58.2%
            Other operating expenses ......       7,609        26.3%       6,757        26.7%
            Provision for doubtful accounts         512         1.8%         713         2.8%
            Depreciation and amortization .         565         2.0%         528         2.1%
                                                -------     -------      -------     -------
              Total operating expenses ....      25,617        88.6%      22,736        89.8%
                                                -------     -------      -------     -------
         Income from operations ...........     $ 3,308        11.4%     $ 2,587        10.2%
                                                =======     =======      =======     =======
</TABLE>

         Revenues increased by 14.2%, or $3.6 million, to $28.9 million in 2002
compared to $25.3 million in 2001. Approximately $3.2 million of the increase in
revenues is due to facility expansions and new programs which increased resident
days at the Company's owned operations facilities by 16.8% from 86,110 days in
2002 to 73,713 days in 2001. The remaining increase in revenues of $.04 million
is primarily a result of new behavioral and mental health services rendered by
the Company at its facilities.

         Salaries, wages and benefits were $16.9 million, or 58.5% of revenues
in 2002, compared to $14.7 million, or 58.2% of revenues in 2001. Salaries,
wages and benefits did not fluctuate significantly as a percentage of revenue
when compared to the same period in the prior year.

         Other operating expenses were $7.6 million or 26.3% of revenues in
2002, compared to $6.8 million, or 26.7% of revenues in 2001. Other operating
expenses did not fluctuate significantly as a percentage of revenue when
compared to the same period in the prior year.

         The provision for doubtful accounts was $0.5 million or 1.8% of
revenues in 2002, compared to $0.7 million, or 2.8% of revenues in 2001. The
decrease of provision for doubtful accounts as a percentage of revenues is due
to the recording of reserves in 2001 related to financial difficulties
experienced by one of the Company's former referral sources to its Nevada,
Missouri facility.

         Depreciation and amortization was $0.6 million or 2.0% of revenues for
the quarter ended March 31, 2002, compared to $0.5 million, or 2.1% of revenues
for the quarter ended March 31, 2001. Depreciation and amortization did not
fluctuate significantly as a percentage of revenue when compared to same period
in the prior year.



                                       11
<PAGE>



                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES


MANAGEMENT CONTRACT SEGMENT

         The following tables state for the periods indicated the results of our
management contract operations in dollar and percentage of revenue terms
(dollars in thousands):
<TABLE>
<CAPTION>

                                                            QUARTER ENDED MARCH 31,
                                               ---------------------------------------------------
                                                         2002                      2001
                                               ------------------------- -------------------------

<S>                                                <C>         <C>           <C>         <C>
Revenues..................................         $6,906      100.0%        $6,466      100.0%

Expenses:
   Salaries, wages and benefits...........          4,664       67.5%         4,309       66.7%
   Other operating expenses...............          1,417       20.5%         1,451       22.5%
   Provision for doubtful accounts........            208        3.0%           119        1.8%
   Depreciation and amortization..........             32        0.5%            28        0.4%
                                               ------------ ------------ ------------ ------------
     Total operating expenses.............          6,321       91.5%         5,907       91.4%
                                               ------------ ------------ ------------ ------------
Income from operations....................           $585        8.5%          $559        8.6%
                                               ============ ============ ============ ============
</TABLE>

         Revenues increased by 6.8%, or $0.4 million, to $6.9 million in 2002
compared to $6.5 million in 2001. The increase in revenues is primarily due to
three new contracts in Florida which increased revenues by $1.1 million, offset
by the termination of one contract in the Puerto Rico market which decreased
revenues by $0.7 million.

         Salaries, wages and benefits were $4.7 million or 67.5% of revenue in
2002 compared to $4.3 million or 66.7% of revenue in 2001. The increase in
salary, wages and benefits as a percentage of revenue is primarily a result of
training and related employee expenses associated with the new Florida programs.

         Other operating expenses were $1.4 million or 20.5% of revenue in 2002
to $1.5 million or 22.5% of revenue in 2001. The decrease in other operating
expenses as a percentage of revenue is due to the increase in revenues provided
by the previously mentioned new contracts in the Florida market.

         Fluctuations in the provision for doubtful accounts relate primarily to
the Company's management contracts in Puerto Rico. During the quarter ended
March 31, 2002, the Company recorded $0.2 million in the provision for doubtful
accounts relating to its Puerto Rico contracts.

         Depreciation and amortization was 0.5% of revenue in 2002 compared to
0.4% of revenue in 2001. Depreciation and amortization did not fluctuate
significantly as a percentage of revenue when compared to same period in the
prior year.



                                       12
<PAGE>

                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES


CORPORATE AND OTHER

         The following tables state for the periods indicated total revenues and
corporate office expenses in dollar and percentage of revenue terms (dollars in
thousands):

<TABLE>
<CAPTION>

                                                            QUARTER ENDED MARCH 31,
                                               ---------------------------------------------------
                                                         2002                      2001
                                               ------------------------- -------------------------
<S>                                               <C>            <C>        <C>            <C>
Revenues:
   Owned operations.......................        $28,925                   $25,323
   Management contracts...................          6,906                     6,466
                                               ------------              ------------
     Total revenues.......................        $35,831        100.0%     $31,789        100.0%

Expenses:
   Salaries, wages and benefits...........            601          1.7%         780          2.5%
   Other operating expenses...............            666          1.9%         784          2.5%
   Depreciation and amortization..........             28          0.1%          37          0.1%
   Interest and other financing charges...            690          1.9%         985          3.1%
    Asset impairment charges..............            125          0.3%          --          0.0%
   Provision for income taxes.............            214          0.6%         176          0.6%
</TABLE>

         Corporate office salaries, wages and benefits were $0.6 million or 1.7%
of total consolidated revenues in 2002, compared to $0.8 million or 2.5% of
total consolidated revenues in 2001. The decrease as a percentage of total
consolidated revenues is primarily due to the increase in total consolidated
revenues of $4.0 million during the quarter and the elimination of five
corporate positions during 2001.

         Corporate office other operating expenses were $0.7 million or 1.9% of
total consolidated revenues in 2002, compared to $0.8 million or 2.5% of total
consolidated revenues in 2001. The decrease as a percentage of total
consolidated revenues is primarily due to the increase in total consolidated
revenues of $4.0 million during the quarter.

         Corporate office depreciation and amortization was $0.03 million or
0.1% of total consolidated revenues in 2002, compared to $0.04 million or 0.1%
of total consolidated revenues in 2001. Depreciation and amortization did not
fluctuate significantly as a percentage of total consolidated revenues between
periods.

         Interest and other financing charges decreased from $0.7 million or
1.9% of total consolidated revenues in 2002 to $1.0 million or 3.1% of total
consolidated revenues in 2001. The decrease in interest and other financing
charges is primarily attributable to a decrease in the variable interest rate
charged on the Company's Senior Credit Facility.

         For both periods presented, the provision for income taxes was recorded
at an effective tax rate significantly less than the statutory tax rate due to
the Company's significant net operating loss carryovers.

                          CRITICAL ACCOUNTING POLICIES

         A discussion of the Company's critical accounting policies is contained
in the Company's Form 10-K for December 31, 2001.

                         LIQUIDITY AND CAPITAL RESOURCES

         At March 31, 2002 and December 31, 2001, the Company had $13.6 million
and $13.1 million, respectively, in working capital and $0.6 million and $0.8
million, respectively, in cash and cash equivalents. The Company's principal



                                       13
<PAGE>
                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES


sources of liquidity as of March 31, 2002 and December 31, 2001 consisted
primarily of the aforementioned cash and cash equivalents and accounts
receivable of $25.5 million and $23.3 million, respectively.

         Net cash provided by operating activities increased from $0.6 million
during the quarter ended March 31, 2001 to $2.2 million during the quarter ended
March 31, 2002. The increase in cash provided by operating activities was
primarily attributable to the $1.2 million increase in net income.

         Cash used in investing activities was approximately $0.7 million for
the quarter ended March 31, 2002. Investing activities during the quarter ended
March 31, 2002 consisted primarily of $0.9 million in capital expenditures,
offset by approximately $.2 million in proceeds from the sale of certain assets.

         Net cash used in financing activities was approximately $1.6 million
for the quarter ended March 31, 2002. Financing activities during the quarter
ended March 31, 2002 consisted primarily a $1.5 million additional term loan
advance from the Company's Senior creditors offset by approximately $3.1 million
in principal repayments on the term loan and reductions in the revolving credit
facility.

         The Company has experienced delays in the collection of receivables
from its contracts in Puerto Rico. As of March 31, 2002, the Company had
approximately $4.3 million in outstanding receivables due from its contracts in
Puerto Rico, of which approximately $1.6 million was over 120 days past due.
Reserves against outstanding Puerto Rico receivables were $1.2 million as of
March 31, 2002. As of May 3, 2002 the Company had collected approximately $0.7
million of the March 31, 2002 outstanding receivable balance, all of which
related to receivables under 120 days past due. The Company and its advisors are
in active discussions with the Government of Puerto Rico with respect to the
payment of the outstanding receivables. The Company believes that it has fully
performed its obligations under the Puerto Rico contracts and is entitled to
receive payment of these receivables in full. Although the Company has been
advised by its legal counsel that the net receivables due on the Puerto Rico
contracts are collectable, there can be no assurances that future transactions
or events will not result in the need for additional reserves for these accounts
receivable. If the Company were to record additional reserves, it would
adversely affect earnings in the period in which the reserves are recorded.

         The Government of Puerto Rico has informed the Company that, as a
result of budgetary constraints, it will cancel various contracts with private
sector providers. In connection therewith, on December 15, 2001, the Company's
contract to provide mental health and substance abuse services to juveniles in
Puerto Rico was cancelled. In addition, on April 16, 2002, the Company and the
Government of Puerto Rico agreed to the cancellation of the Company's contract
to provide a 20-bed specialized mental health treatment program for youth
referred by the Mental Health and Anti-Addiction Services Administration of
Puerto Rico. Total revenues and operating income from these contracts during the
year ended December 31, 2001 were $3.9 million and $0.1 million, respectively.

         Management of the Company believes that it can meet its current cash
requirements and future identifiable needs with internally generated funds from
operations and funds available under its Senior Credit Facility. However, if the
Company should need to obtain liquidity through other sources of debt or equity,
the following factors, in addition to the risk factors discussed in the
Company's Form 10-K for December 31, 2001, should be considered:

         o  ABILITY TO RAISE ADDITIONAL CAPITAL. Although the Company believes
            that it can obtain additional liquidity, there can be no assurances
            that the Company will be able to raise debt or equity capital
            through other sources, or if obtained, that it will be on terms
            acceptable to the Company. The incurring or assumption by the
            Company of additional indebtedness could result in the issuance of
            additional equity and/or debt which could have a dilutive effect on
            current shareholders and a significant effect on the Company's
            operations.

         o  ABILITY TO BORROW FUNDS UNDER SENIOR CREDIT FACILITY. The Company's
            ability to borrow funds under its Senior Credit Facility may be



                                       14
<PAGE>
                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES


            terminated if the Company fails to comply with the restrictive
            financial and operating covenants contained in the Senior Credit
            Facility. If the Company is unable to operate its business within
            the covenants specified in the Senior Credit Facility, the Company's
            ability to obtain future amendments to the covenants is not assured,
            and the Company's ability to make borrowings required to operate its
            business could be restricted or terminated. Such a restriction or
            termination would have a material adverse effect on the Company's
            liquidity.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         While the Company is exposed to changes in interest rates as a result
of its outstanding variable rate debt, the Company does not currently utilize
any derivative financial instruments related to its interest rate exposure. The
Company believes that its exposure to market risk will not result in a material
adverse effect on the Company's consolidated financial condition, results of
operations or liquidity.

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         The Company is party to certain claims, suits and complaints, whether
arising from the acts or omissions of its employees, providers or others, which
arise in the ordinary course of business. The Company has established reserves
at March 31, 2002 for the estimated amounts which might be recovered from the
Company as a result of all outstanding legal proceedings. In the opinion of
management, the ultimate resolution of these pending legal proceedings is not
expected to have a material adverse effect on the Company's financial position,
results of operations or liquidity.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

         None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

         None.

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

         None.

ITEM 5. OTHER INFORMATION

         None.

         (a)      Exhibits

                  The Exhibits required to be filed as part of this Quarterly
                  Report on Form 10-Q are as follows:

                  None.

         (b)      Current Reports on Form 8-K

                  The Company did not file any Current Reports on Form 8-K
                  during the quarter ended March 31, 2002.



                                       15
<PAGE>

                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES


                                   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 thereupon duly authorized.

                                                RAMSAY YOUTH SERVICES, INC.
                                                Registrant



                                                /s/ MARCIO C. CABRERA
                                                --------------------------
                                                Marcio C. Cabrera
                                                Executive V.P. and
                                                Chief Financial Officer



Date:  May 9, 2002



                                       16