SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q

                                   (Mark One)
          /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1996

                                       OR

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

                       For the Transition period from to 

                           Commission file No. 0-13849

                            RAMSAY HEALTH CARE, INC.

             (Exact name of registrant as specified in its charter)

   Delaware                                             63-0857352
   (State or other jurisdiction                         (I.R.S. Employer
    of incorporation or organization)                    Identification Number)

                         Entergy Corporation Building
                         639 Loyola Avenue, Suite 1700
                            New Orleans, Louisiana              70113
                    (Address of principal executive offices)  (Zip Code)

      Registrant's telephone number, including area code:  (504) 525-2505

           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        

           The number of shares of the Registrant's  Common Stock outstanding at
November 12, 1996 follows:

                  Common Stock, par value $0.01 per share - 8,307,131 shares

<PAGE>


                    RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

                                    FORM 10-Q


                                      INDEX



                                                                            Page

Part I.   FINANCIAL INFORMATION
 
Item 1. Financial Statements
    Consolidated balance sheets - September 30, 1996 and
        June 30, 1996 (unaudited).........................................     1

    Consolidated statements of operations - quarter ended September 30, 1996
        and 1995 (unaudited)..............................................     3

    Consolidated statements of cash flows - quarter ended September 30, 1996
        and 1995 (unaudited)..............................................     4

    Notes to consolidated financial statements - September 30, 1996
        (unaudited).......................................................     5

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................     8


Part II.  OTHER INFORMATION

Item 5. Other Information................................................     12

Item 6. Exhibits and Current Reports on Form 8-K.........................     13

SIGNATURES ..............................................................     14


<PAGE>

                          PART I. FINANCIAL INFORMATION

                    RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                   (unaudited)


                                              September 30            June 30
                                                  1996                  1996    


     ASSETS

CURRENT ASSETS
     Cash and cash equivalents............. $     6,015,000     $     7,605,000
     Patient accounts receivable, less 
       allowances for doubtful accounts
       of $3,799,000 and $4,573,000 at
       September 30, 1996 and June 30, 
       1996, respectively..................      23,864,000          23,410,000
     Amounts due from third-party 
       contractual agencies................       3,737,000           6,479,000
     Current portion of receivable
       from affiliated company.............       1,765,000           1,412,000
     Other receivables.....................       3,440,000           2,985,000
     Deferred income taxes.................       1,398,000           1,398,000
     Other current assets..................       2,635,000           2,372,000
       TOTAL CURRENT ASSETS................      42,854,000          45,661,000



OTHER ASSETS
     Cash held in trust....................         584,000             745,000
     Cost in excess of net asset value 
       of purchased businesses.............         586,000             591,000
     Unamortized preopening and loan 
        costs..............................         983,000           1,040,000
     Receivable from affiliated company,
        less current portion...............       6,799,000           6,795,000
     Deferred income taxes.................      10,141,000          10,141,000
     Other noncurrent assets...............       1,452,000           1,392,000
                                                 20,545,000          20,704,000


PROPERTY AND EQUIPMENT
     Land..................................       5,025,000           5,025,000
     Building and improvements.............      69,576,000          69,200,000
     Equipment, furniture and fixtures.....      20,603,000          20,325,000
                                                 95,204,000          94,550,000
     Less accumulated depreciation.........      29,280,000          28,157,000
                                                 65,924,000          66,393,000

                                            $   129,323,000     $   132,758,000





                 See notes to consolidated financial statements.

                                        1
<PAGE>

                    RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                                   (unaudited)






                                                 September 30        June 30
                                                     1996              1996     

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable.......................  $    4,307,000     $    4,990,000
     Accrued salaries and wages.............       4,478,000          5,169,000
     Other accrued liabilities..............       5,055,000          4,412,000
     Amounts due to third-party
       contractual agencies..............          9,305,000          8,435,000
     Current portion of long-term 
       debt............................           12,645,000         10,940,000
       TOTAL CURRENT LIABILITIES............      35,790,000         33,946,000

NONCURRENT LIABILITIES
     Other accrued liabilities..............       7,109,000          7,170,000
     Long-term debt, less current
       portion..............................      39,531,000         44,664,000
     Minority interests.....................          25,000            925,000
                                                  46,665,000         52,759,000

STOCKHOLDERS' EQUITY
     Class B convertible preferred 
       stock, Series C, $1 par value
       --authorized 152,321 shares; 
       issued 142,486 shares (liquidation
       value of $7,244,000) including 
       accrued dividends of $91,000 ........        233,000             233,000
     Common Stock, $.01 par value--
       authorized 20,000,000 shares; 
       issued 8,888,681 shares at 
        September 30, 1996 and 8,605,108
        shares at June 30, 1996.............         89,000              86,000
     Additional paid-in capital.............    100,563,000          99,899,000
     Retained earnings (deficit)............    (50,118,000)        (50,266,000)
     Treasury Stock, at cost--581,550
        shares at September 30, 1996
       and June 30, 1996....................     (3,899,000)         (3,899,000)
           Total stockholders' equity ......     46,868,000          46,053,000

                                             $  129,323,000      $  132,758,000





                 See notes to consolidated financial statements.

                                        2

<PAGE>

                    RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)





                                                   Quarter Ended September 30
                                                     1996               1995

NET REVENUES                                    $ 31,535,000       $ 29,129,000
Expenses:
   Salaries, wages and benefits............       16,616,000         16,239,000
   Other operating expenses................       11,024,000          9,556,000
   Provision for doubtful accounts.........          889,000            956,000
   Depreciation and amortization...........        1,313,000          1,335,000
   Interest and other financing charges....        1,545,000          1,726,000
        TOTAL EXPENSES.....................       31,387,000         29,812,000

INCOME (LOSS) BEFORE MINORITY INTERESTS
   AND INCOME TAXES........................         148,000            (683,000)
Minority interests.........................            ---              (52,000)
INCOME (LOSS) BEFORE INCOME TAXES..........         148,000            (631,000)
Benefit for income taxes...................            ---             (240,000)

      NET INCOME (LOSS)....................     $   148,000        $   (391,000)

Income (loss) per common and dilutive 
  common equivalent share:
   Primary.................................           $0.01              $(0.06)
   Fully diluted...........................           $0.01              $(0.06)

Weighted average number of shares 
  outstanding:
   Primary.................................       8,174,000           7,721,000
   Fully diluted...........................       8,174,000           7,735,000

















                 See notes to consolidated financial statements.


                                        3

<PAGE>

                    RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)


                                                    Quarter Ended September 30
                                                       1996             1995

Cash Flows from Operating Activities
Net income (loss)...........................      $   148,000    $     (391,000)
Adjustments to reconcile net income 
   (loss) to net cash provided by
   (used in) operating activities:
   Depreciation and amortization............        1,386,000         1,526,000
   Benefit for deferred income taxes........              ---          (280,000)
   Provision for doubtful accounts..........          889,000           956,000
   Management fees paid in common stock.....          189,000               ---
   Minority interests.......................              ---           (52,000)
   Cash flows from (increase) decrease 
    in operating assets:
      Accounts receivable...................       (1,343,000)       (3,097,000)
      Amounts due from third-party 
        contractual agencies................        2,742,000           653,000
      Other current assets..................         (583,000)          605,000
      Other noncurrent assets...............          (60,000)            3,000
   Cash flows from increase (decrease)
    in operating liabilities:
      Accounts payable......................         (683,000)         (796,000)
      Accrued salaries, wages and other 
        liabilities.........................         (109,000)       (1,035,000)
      Amounts due to third-party
        contractual agencies................          870,000           596,000 
         Total adjustments..................        3,298,000          (921,000)
            Net cash provided by 
              (used in) operating activities        3,446,000        (1,312,000)
Cash Flows from Investing Activities
   Expenditures for property and
      equipment.............................         (654,000)         (345,000)
   Preopening costs.........................          (23,000)          (22,000)
            Net cash used in investing
              activities....................         (677,000)         (367,000)
Cash Flows from Financing Activities
   Loan costs...............................         (101,000)          (21,000)
   Proceeds from exercise of stock
     options and employee stock
     purchase plan..........................              ---            90,000
   Distributions to minority interests......         (900,000)         (540,000)
   Payments on debt.........................       (3,428,000)         (888,000)
   Payment of preferred stock dividends.....          (91,000)          (91,000)
   Cash held in trust.......................          161,000           130,000
            Net cash used in financing
              activities....................       (4,359,000)       (1,320,000)
Net decrease in cash and cash equivalents...       (1,590,000)       (2,999,000)
Cash and cash equivalents at beginning of
 period.....................................        7,605,000         9,044,000
Cash and cash equivalents at end of period..     $  6,015,000    $    6,045,000

Supplemental Disclosures of Cash Flow
 Information
Cash paid during the period for:
   Interest.................................     $  1,254,000    $    1,344,000
   Income taxes.............................           13,000                 0


                 See notes to consolidated financial statements.

                                        4


<PAGE>

                    RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               September 30, 1996


NOTE 1

           The accompanying  unaudited  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 September 30, 1996 are not  necessarily  indicative of the results
that  may be  expected  for the  year.  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 June 30, 1996.

NOTE 2

           At September  30, 1996,  the  Company's  credit  facilities  included
$31,075,000 in senior secured notes and $1,615,386 in subordinated secured notes
(the 1990 Credit Facility),  and approximately  $20,000,000 in letters of credit
to support the  Company's  variable  rate demand  revenue bonds (the 1993 Credit
Facility).  The  senior  secured  notes  bear  interest  at  11.6%  and  require
semi-annual  principal  payments  of  $3,531,250  from  March 31,  1997  through
September  30, 1998 and  $5,650,000  from March 31, 1999 through March 31, 2000.
The subordinated secured notes bear interest at 15.6% and are due in semi-annual
installments of $230,769 that began on March 31, 1994 and end on March 31, 2000.

           The variable rate demand  revenue bonds were issued in 1984 and 1985,
have  terms of 30 years  and  require  annual  principal  payments  of  $800,000
(through year 2000) and $900,000 to $1,200,000 from years 2001 to maturity.  The
Company is required to maintain an irrevocable standby letter of credit for each
bond in an  amount  equal to the  total  principal  payments  due under the bond
(totalling  $19,300,000 at September 30, 1996), plus approximately one quarter's
interest. Such letters of credit are provided in the 1993 Credit Facility.

           In August  1996,  the  Company and banks  supporting  the 1993 Credit
Facility  agreed to terms which extended its expiration  date from February 1997
to August 1997. In connection with this extension,  the Company agreed to reduce
the bank group's  exposure  under the 1993 Credit  Facility to  $17,145,835  (an
approximate  $3 million  reduction) by December 31, 1996 and to  $15,000,000  by
July 1, 1997.

           Under the 1993 and 1990 Credit Facilities, the Company is required to
meet certain  covenants,  including:  (1) the  maintenance of a minimum level of
consolidated  tangible  net  worth;  (2) the  maintenance  of a minimum  working
capital ratio; and (3) the maintenance of certain fixed charge and debt service

                                        5


<PAGE>

                    RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

coverage  ratios.  From time to time, the lenders under the 1993 and 1990 Credit
Facilities have agreed to waive or otherwise  adjust certain of these ratios and
levels.  In  connection  with these  waivers and  adjustments,  the Company pays
additional  fees and expenses.  Further,  as part of the waivers and adjustments
obtained  as of June 30,  1996,  the  Company  agreed to provide  its  Hillcrest
Hospital facility and related assets as additional collateral to the lenders and
agreed not to pay cash  dividends  in  respect  of its  Common  Stock or Class B
Preferred Stock, Series C.

A summary of the Company's debt obligations is as follows:

                                                  September 30        June 30
                                                      1996              1996

11.6% senior secured notes .................   $    31,075,000   $   34,169,000
Variable rate demand revenue bonds .........        19,300,000       19,400,000
15.6% subordinated secured notes ...........         1,615,000        1,846,000
Other notes payable.........................           186,000          189,000
                                                    52,176,000       55,604,000
Less amounts due within one year............        12,645,000       10,940,000
                                               $    39,531,000   $   44,664,000


           The  Company has pledged  substantially  all of its real  property as
collateral on its long-term debt.

NOTE 3

           In April 1995,  the Company sold and leased back the land,  buildings
and fixed  equipment  of two of its  inpatient  facilities.  The  leases  have a
primary term of 15 years (with three successive renewal options of 5 years each)
and  currently  require an aggregate  annual  minimum  rental of $1.58  million,
payable monthly.  Effective April 1 of each year, the lease payments are subject
to any upward adjustment (not to exceed 3% annually) in the consumer price index
over the preceding  twelve months.  Effective  April 1995, the Company agreed to
lease an 80-bed  facility  near Salt Lake  City,  Utah for four  years,  with an
option to renew for an additional  three years.  The lease requires  annual base
rental payments of $456,000,  payable  monthly,  and percentage  rental payments
equal to 2% of the net revenues of the facility,  payable quarterly. The Company
leases  office space for various  other  purposes over terms ranging from one to
five years.  Annual rent  expense  related to  noncancellable  operating  leases
totals approximately $3.0 million.

NOTE 4

           Income  taxes are  accounted  for in  accordance  with  Statement  of
Financial  Accounting Standards (SFAS) No. 109. SFAS 109 requires recognition of
deferred tax assets and liabilities for the expected future tax  consequences of
temporary differences between the carrying amounts of assets and liabilities for
financial  reporting  purposes and the amounts used for income tax purposes.  At
September 30, 1996, net operating loss carryovers of  approximately  $23,600,000
(of which $17,600,000 expires from 2000 to 2003,  $3,800,000 expires in 2010 and
$2,200,000 expires in 2011) and alternative minimum tax credit carryovers of 

                                        6


<PAGE>

                    RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

approximately  $1,500,000  are available to reduce future  federal income taxes,
subject to certain annual limitations.

NOTE 5

           In October 1993, the Company,  through its subsidiary  Ramsay Managed
Care,  Inc.  ("RMCI"),  entered the managed  mental health  business  through an
acquisition of Florida  Psychiatric  Management,  Inc. The managed care division
expanded in June 1994 with the acquisition of a Phoenix,  Arizona-based  managed
mental health  business  and, in fiscal 1995,  through the award of contracts in
Hawaii and West Virginia.  On April 24, 1995, the Company  distributed the stock
of RMCI held by it to the holders of record on April 21,  1995 of the  Company's
Common and Preferred Stock. Subsequent to this distribution,  which was recorded
at net book value, RMCI ceased being a subsidiary of the Company.

           At September 30, 1996, total net cash advances made by the Company to
or on behalf of RMCI,  including for purposes of partially funding  acquisitions
and for working capital and other corporate purposes,  totalled  $8,564,000.  Of
this amount, $6,000,000 is represented by an unsecured,  interest- bearing (8%),
subordinated  promissory  note due from RMCI and issued on October 25, 1994. The
remaining amount, which is also unsecured, includes $480,000 of accrued interest
on the  promissory  note since  October  1, 1995 and  $2,084,000  of  additional
amounts  paid by RHCI on behalf of RMCI or charges  by RHCI to RMCI for  certain
administrative  services.  Of the $6,000,000 due on the subordinated  promissory
note,  approximately  $1,765,000 is due on or before  September  30,1997 and the
remainder is payable in 12 quarterly  installments  of  approximately  $353,000,
beginning December 31, 1997. RHCI has agreed that the payment of interest on the
subordinated  promissory  note for the period October 1, 1995 through  September
30, 1997,  as well as the  $2,084,000 of  additional  amounts owed,  will not be
required until after October 1, 1997, all on terms and conditions to be mutually
agreed to by RHCI and RMCI.

           As  previously  announced,  on October 1, 1996,  the Company and RMCI
entered into an agreement  and plan of merger  providing  for the merger of RMCI
into a wholly owned subsidiary of the Company. Following the merger, all amounts
owed by RMCI to the Company will become an  intercompany  payable and receivable
between  RMCI and RHCI,  respectively.  The merger is subject to approval by the
shareholders  of each  company,  the receipt of lender,  governmental  and other
consents and the  declaration  of  effectiveness  by the Securities and Exchange
Commission  of a  registration  statement  filed by the Company.  Subject to the
satisfaction  of  these  conditions,  it is  expected  that the  merger  will be
consummated in March 1997.


                                        7

<PAGE>


                    RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES


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

           The  Company  pursues  business  expansion  opportunities  which  are
consistent with its overall  strategic plan and disposes of operations no longer
considered  viable  or  consistent  with  this  plan.  Due  to  cost-containment
pressures imposed by managed care  organizations,  governmental and other third-
party  payors,  one of the  Company's  strategic  objectives  is to  reduce  its
dependence on acute  psychiatric  inpatient care revenues and to expand its less
intensive inpatient behavioral  programs,  including  residential  treatment and
youth-oriented  correctional  service programs,  which require longer lengths of
stay.

           Further,  the Company is restructuring its outpatient  services in an
effort to enhance the Company's relationship with managed care organizations and
increase the Company's outpatient revenues. In connection with this strategy and
as previously  announced,  on October 1, 1996, the Company and RMCI entered into
an agreement  and plan of merger  providing for the  acquisition  of RMCI by the
Company (see Note 5 in "Item 1. Financial Statements" above).

           In  connection  with  the  "safe-harbor"  provision  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
any forward- looking statement. Some of the most significant factors include (i)
accelerating   changes   occurring  in  the  health  care  industry,   including
competition from consolidating and integrated health care provider systems,  the
imposition  of more  stringent  admission  criteria by payors,  increased  payor
pressures  to limit  lengths of stay,  limitations  on  reimbursement  rates and
limitations  on annual and lifetime  patient health  benefits,  (ii) federal and
state governmental budgetary constraints which could have the effect of limiting
the amount of funds  available  to support  governmental  health care  programs,
including   Medicare  and  Medicaid,   and  (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.  While the Company believes
that  implementing  the above-described  strategies will enable the Company to
improve its operations and financial  condition,  there can be no assurance that
the Company will be successful in doing so.

Results of Operations

           The following table sets forth,  for the periods  indicated,  certain
items of the Company's Consolidated  Statements of Operations as a percentage of
the Company's net revenues.









                                        8

<PAGE>

                    RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

                                                Percentage of Net Revenues
                                                      Quarter Ended
                                                       September 30       
                                                1996                 1995

    Net revenues............................    100.0  %             100.0  %
    Expenses:
         Salaries, wages and benefits.......     52.7                 55.7
         Other operating expenses...........     34.9                 32.8
         Provision for doubtful accounts....      2.8                  3.3
         Depreciation and amortization......      4.2                  4.6
         Interest expense...................      4.9                  5.9
    Total expenses..........................     99.5                102.3
    Income loss before minority interests
     and income taxes.......................      0.5  %              (2.3)  %
 

           Net  revenues  in the  quarter  ended  September  30, 1996 were $31.5
million, compared to $29.1 million in the comparable quarter of the prior fiscal
year.  Same facility net inpatient  revenues  increased 2% between periods (from
$22.2 million in the September 1995 quarter to $22.6 million in the current year
quarter) due to a 6% increase in acute  psychiatric  and  residential  treatment
admissions  and patient  days,  offset by a 4% decrease  between  periods in the
Company's same facility net inpatient revenue per patient day. In addition,  net
revenues  related to  subacute  operations  increased  by $1.9  million  between
periods (from $2.2 million in the prior year period, or 8% of total net revenues
of the Company,  to $4.1 million in the current year period, or 13% of total net
revenues of the Company),  as subacute  patient days increased from 2,631 in the
prior year comparable quarter to 4,939 in the current year quarter. Net revenues
associated  with  outpatient and contract  management  services  remained stable
between periods.

           Salaries,  wages and benefits in the quarter ended September 30, 1996
were $16.6 million,  compared to $16.2 million in the comparable  quarter of the
prior fiscal year.  Same facility  salaries,  wages and benefits  decreased $0.4
million (from $14.2 million to $13.8 million) between periods, or 3%, due to the
continued  increase  in  residential  treatment  services,  which are less labor
intensive  than  acute  psychiatric  services.  The  decrease  in same  facility
salaries,  wages and benefits was offset by a $0.7 million  increase in subacute
salaries,  wages and benefits,  due to the increase in subacute  patient  volume
between periods.

           Other operating expenses in the quarter ended September 30, 1996 were
$11.0 million,  compared to $9.6 million in the comparable  quarter of the prior
fiscal year.  Same facility other  operating  expenses  remained  stable between
periods at $8.0 million,  whereas other operating expenses of the subacute units
increased  by $1.4  million  between  periods  due to the  previously  discussed
increase in subacute patient volume between periods.

           The  provision for doubtful  accounts in the quarter ended  September
30, 1996 totalled $0.9 million, which compares to the $1.0 million provision for
doubtful accounts in the prior year comparable quarter.  Also,  depreciation and
amortization  expense in the quarters ended September 30, 1996 and 1995 totalled
$1.3 million.

                                        9


<PAGE>

                    RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

           Interest  expense  decreased  from $1.7 million in the quarter  ended
September 30, 1995 to $1.5 million in the current year comparable quarter.  Debt
levels were  reduced  between  periods  through  regularly  scheduled  principal
payments on the  Company's  subordinated  secured notes and variable rate demand
revenue bonds. Also, in the prior year comparable quarter,  the Company recorded
interest expense in respect of borrowings under a working capital facility which
was paid off and cancelled in December 1995.

           The  Company  did not  record a  provision  for  income  taxes in the
current  year quarter  based on an  adjustment  to the  deferred  tax  valuation
allowance recorded on deferred tax assets.

Financial Condition

           The Company  records amounts due to or from  third-party  contractual
agencies (Medicare,  Medicaid and Blue Cross) based on its best estimate,  using
the principles of cost  reimbursement,  of amounts to be ultimately  received or
paid under current and prior years' cost reports filed (or to be filed) with the
appropriate intermediaries.  Ultimate settlements and other lump-sum adjustments
due from and paid to these  intermediaries  occur at  various  times  during the
fiscal year. At September 30, 1996, amounts due from Medicare, Medicaid and Blue
Cross totalled $2.7 million, $0.8 million and $0.2 million,  respectively.  Also
at September 30, 1996, amounts due to Medicare, Medicaid and Blue Cross totalled
$7.8  million,  $0.9 million and $0.6  million,  respectively.  Changes in these
amounts  since  June 30,  1996 are the  result of fiscal  intermediary  lump sum
adjustments,  prior year cost  report  settlements  and current  year  estimated
settlements recorded during the three months ended September 30, 1996.

           During the three months  ended  September  30, 1996,  amounts owed to
minority interests decreased by $0.9 million due to a final distribution made to
the  minority  partners  in  the  Three  Rivers  Hospital  Limited  Partnership.
Subsequent to this distribution,  the Three Rivers Hospital Limited  Partnership
was dissolved.

           The Company has net deferred tax assets totalling approximately $11.5
million,  which includes a valuation allowance of $4.4 million, at September 30,
1996.  Management  has  considered  the  effects of  implementing  tax  planning
strategies,  consisting  of the sales of certain  appreciated  property,  as the
primary basis for  recognizing  deferred tax assets at September  30, 1996.  The
ultimate  realization  of deferred  tax assets may be affected by changes in the
underlying  values of the  properties  considered  in the Company's tax planning
strategies, which values are dependent upon the operating results and cash flows
of the individual  properties.  The Company  evaluates the  realizability of its
deferred  tax  assets  on a  quarterly  basis  by  reviewing  its  tax  planning
strategies and the adequacy of its valuation allowance.

           At September  30,  1996,  the current  portion of long-term  debt was
$12.6  million,  compared  to $10.9  million  at June 30,  1996.  This  increase
primarily  resulted from the  Company's  commitment in August 1996 to reduce the
exposure of its bank group from approximately $17 million to $15 million by July
1, 1997.

           In August 1996, a corporate affiliate of Paul J. Ramsay, the Chairman
of the Board of the Company, acquired through a private placement 275,546 shares
of Common Stock of the Company at a price of $2.75 per share.  These shares were

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<PAGE>

                    RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

issued  for  management  fees due  under a  management  agreement  with  another
corporate affiliate of Mr. Ramsay during 1997. The Company recorded the issuance
of these  shares as prepaid  management  fees,  which is included in prepaid and
other current assets in the  accompanying  balance sheet, and will amortize this
amount in its statement of operations ratably over the twelve months ending June
30, 1997.

           On September 10, 1996,  the Company  entered into a letter  agreement
with  the  corporate  affiliates  discussed  above  terminating  the  management
agreement  effective July 1, 1997. In consideration  for this  termination,  the
Company issued warrants to one of the corporate  affiliates to purchase  250,000
shares of Common Stock at an exercise  price of $2.63 per share.  These warrants
are fully exercisable as of September 10, 1996 and expire on September 10, 2006.

Liquidity and Capital Resources

           The  Company's  credit  facilities  include  $31.1  million in senior
secured notes,  approximately  $20 million in letters of credit and $1.6 million
in subordinated  secured notes.  The senior secured notes bear interest at 11.6%
and require  semi-annual  principal payments of $3.5 million from March 31, 1997
through  September  30, 1998 and $5.65 million from March 31, 1999 through March
31, 2000.  The  subordinated  secured  notes bear  interest at 15.6% and require
semi-annual  principal payments of $0.2 million through March 31, 2000. Required
annual  principal  payments on the variable rate demand revenue bonds total $0.8
million through year 2000 and $0.9 million to $1.2 million in years 2001 through
2015.  In August  1996,  the  Company and the banks  supporting  the 1993 Credit
Facility  agreed to terms which extended the expiration  date of the 1993 Credit
Facility  from  February 15, 1997 to August 15, 1997.  In  connection  with this
extension,  the  Company  agreed to reduce  the banks'  exposure  under the 1993
Credit Facility to $17,145,835 (an approximate $3 million reduction) by December
31, 1996 and to $15,000,000 by July 1, 1997.

           The  Company  expects to satisfy its  requirement  to reduce the bank
group's  exposure on  December  31, 1996  through  (a)  proceeds  from a working
capital  facility  secured  by  certain of the  Company's  receivables,  (b) the
possible sale of the Company's facility in Fort Walton Beach, Florida, or (c ) a
transaction in which the Company would contribute one of its facilities to a new
entity  which  would be  jointly  owned by the  Company  and a  medical/surgical
facility  in the  market  area  that the  Company's  facility  is  located.  The
medical/surgical  facility would contribute cash and other  consideration to the
new entity. Through economies of scale,  infrastructure savings and new business
opportunities  of the new entity,  the Company  believes its income from the new
entity could  approximate the income currently  realized from this facility.  In
connection with this transaction,  the revenue bonds outstanding on the facility
would be  redeemed or a  substitute  letter of credit  would be issued,  thereby
achieving the  Company's  commitment to reduce the exposure of its bank group by
approximately $3 million by December 31, 1996. At present,  the Company does not
have a  commitment  for a working  capital  facility,  has not  entered  into an
agreement  to sell its Fort Walton  Beach  facility  and has not entered into an
agreement in respect of the above-described joint venture transaction. There can
be  no  assurance  that  the  Company  will  consummate  any  of  the  foregoing
transactions.


                                       11

<PAGE>


                    RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

           In May 1996,  the Company signed a letter of intent to sell its Three
Rivers  facility  to an  independent  party.  The  Company  expects  to  receive
approximately  $2.2 million from the sale of this facility in December  1996. At
present,  the Company has not entered  into a  definitive  agreement to sell its
Three Rivers facility.

           In response to market demands, the Company is currently converting an
additional 37 beds at its Texas  facilities  from  psychiatric  care to subacute
care. Future renovation costs associated with this project, which is expected to
be  completed  by January 1,  1997,  will  approximate  $0.5  million.  No other
commitments to make material capital expenditures exist at this time.

           As part of the Company's  business  strategy,  the Company intends to
refinance  its debt during the next fiscal year to provide  funds for growth and
working  capital,  as well as to  reschedule  the  current  level  of  principal
repayment required under the 1990 Credit Facility.  At present, the Company does
not  have a  commitment  from any  lender  to  refinance  its  outstanding  debt
obligations.

           The Company's current primary cash requirements  relate to its normal
operating  expenses,  the  requirement  to reduce its banks' credit  exposure as
discussed above, principal payments on its senior secured notes, routine capital
improvements at its facilities and the above mentioned renovation project.

           On the  basis  of  its  historical  cash  collection  experience  and
projected  cash needs,  the Company  believes that its existing cash  resources,
internally  generated  funds from  operations,  proceeds  from the sale of Three
Rivers Hospital,  debt reductions derived from the Company's business strategies
discussed  above and a  refinancing  of the Company's  outstanding  debt will be
sufficient to meet its current cash requirements and future  identifiable needs.
Further,  the Company  believes that the resolution of the matter with the State
of  Louisiana  discussed  below in "Item 5. Other  Information"  will not have a
material adverse effect on its liquidity.


                           PART II - OTHER INFORMATION

Item 5.  Other Information

           During  fiscal 1996,  the State of Louisiana  requested  repayment of
disproportionate  share  payments  received  by two of the  Company's  Louisiana
facilities in fiscal years 1995 and 1994 totalling approximately $5,000,000. The
repayment  requests  related to a)  alleged  overpayments  made to Three  Rivers
Hospital because the State believed Three Rivers' actual annual inpatient volume
was less than its projection of annual inpatient volume made at the beginning of
its 1994 cost reporting year and b) alleged improper  teaching hospital payments
made to Three Rivers Hospital and Bayou Oaks Hospital because the State believed
these  facilities  were not  qualifying  teaching  hospitals  at the time  these
payments were made. The Company believes that certain of the calculations  which
support the State's  calculation of annual inpatient volume in 1994 are in error
and that other relevant factors affecting the State's  calculation have not been
considered.  Further,  the Company believes that, based on its  understanding of
the rules and  regulations in place at the time the teaching  hospital  payments
were made,  payments  received as a result of the teaching  classification  were
appropriate.

                                       12



<PAGE>

                    RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

           On the basis of  discussions  to date  between  the  Company  and the
State,  the  Company  believes  that this  matter may be  settled  for an amount
significantly  less than the State's  initial  requests.  Any settlement of this
matter will be contingent  upon the execution of settlement  documentation,  the
terms of which have not been agreed  upon.  Further,  there can be no  assurance
that the  Company and the State will agree on a  settlement  amount or the terms
and conditions of settlement  documentation.  The Company  intends to vigorously
contest any  position  by the State of  Louisiana  which the  Company  considers
adverse and believes that an adequate  reserve  exists at September 30, 1996 for
the  estimated  amount which might be recovered  from the Company as a result of
this matter.

           Effective  November 1, 1996, the Company amended the Rights Agreement
dated as of August 1,  1995,  as amended by the  Amendment  thereto  dated as of
October 3, 1995,  between the Company  and First  Union  National  Bank of North
Carolina,  as Rights Agent (as so amended,  the "Agreement"),  by excluding from
the definition of "Acquiring Person" in the Agreement persons who are elgible to
file a  statement  on  Schedule  13G under Rule  13d-1(b)  under the  Securities
Exchange  Act of 1934 who acquire  beneficial  ownership of less than 25% of the
Company's  capital  stock,  unless  and until the  conditions  set forth in Rule
13d-1(b) (3) or (4) exist. For a more complete description of the foregoing, see
Amendment No. 2 to the Agreement, attached hereto as Exhibit 10.101.

Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

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

         Exhibit 10.99
              Employment Agreement dated August 12, 1996 by and between the
              Company and Remberto Cibran

         Exhibit 10.100
              Services Agreement dated August 12, 1996 by and between the
              Company and Healthlink Enterprises, Inc.

         Exhibit 10.101
               Amendement  No. 2 dated as of  November  1, 1996 to that  certain
               Rights  Agreement  dated as of August 1, 1995, as amended by that
               certain  Amendment  dated as of October 3, 1995,  between  Ramsay
               Health  Care,  Inc.  and  First  Union  National  Bank  of  North
               Carolina, as Rights Agent.

         Exhibit 11
              Computation of Net Income per Share

         Exhibit 27
              Financial Data Schedule

(b)      Current Reports on Form 8-K

              The Company  did not file any Current  Reports on Form 8-K during
              the quarter ended September 30, 1996. Subsequent to September 30,
              1996, the Company filed the following  Current Report on Form 8-K
              with the Commission:

                  *        Form 8-K dated October 2, 1996 relating to the 
                           proposed merger between the Company and Ramsay
                           Managed Care, Inc.



                                       13


<PAGE>

                                   SIGNATURES


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


                                 RAMSAY HEALTH CARE, INC.
                                 Registrant



                                 /s/ Carol C. Lang                              
                                     Carol C. Lang
                                     Chief Financial Officer





Date:  November 19, 1996


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