<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 SEPTEMBER 30, 1997

                                       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 HEALTH CARE, INC.
             (Exact name of registrant as specified in its charter)



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

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 outstanding as of 
November 19, 1997, follows:

          Common Stock, par value $0.01 per share -10,848,327 shares
<PAGE>
 
                   RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

                                   FORM 10-Q

                                     INDEX
                                                                            Page
                                                                            ----
PART I.  FINANCIAL INFORMATION

 Item 1. Financial Statements.............................................     1

 Consolidated balance sheets--September 30, 1997 and June 30, 1997 
   (unaudited)............................................................     1

 Consolidated statements of operations - quarters ended September 30, 
   1997 and  1996 (unaudited).............................................     3

 Consolidated statements of cash flows - quarters ended September 30, 1997 
   and 1996 (unaudited)...................................................     4

 Notes to consolidated financial statements - September 30, 1997 
   (unaudited)............................................................     5

 Item 1. Legal Proceedings................................................     8

 Item 2. Management's Discussion and Analysis of Financial Condition and
   Results of Operations..................................................     8
 
 PART II.  OTHER INFORMATION

 Item 5. Other Information................................................    14

 Item 6. Exhibits and Current Reports on Form 8-K.........................    14

 SIGNATURES...............................................................    16
<PAGE>
 
                         PART I.  FINANCIAL INFORMATION

                   RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                              SEPTEMBER 30       JUNE 30
                                                                  1997             1997
                                                              --------------  -------------
<S>                                                           <C>             <C>
ASSETS
Current assets
 Cash and cash equivalents..................................    $  4,113,000   $  1,723,000
 Patient accounts receivable, less allowances for doubtful
  accounts of $4,166,000 and $4,386,000 at September 30,
  1997 and June 30, 1997, respectively......................      24,933,000     25,802,000
 Amounts due from third-party contractual agencies..........       5,260,000      5,653,000
 Other receivables..........................................       3,123,000      3,139,000
 Other current assets.......................................       1,829,000      1,699,000
                                                                ------------   ------------
   Total current assets.....................................      39,258,000     38,016,000
 
 
Other assets
 Cash held in trust.........................................         827,000        827,000
 Cash held for debt expected to be refinanced...............      12,300,000            ---
 Cost in excess of net asset value of purchased businesses..      19,120,000     19,281,000
 Other intangible assets....................................       4,500,000      4,680,000
 Unamortized preopening and loan costs......................       3,582,000      1,837,000
 Deferred income taxes......................................       9,411,000      9,411,000
 Other noncurrent assets....................................       1,296,000      1,155,000
                                                                ------------   ------------
   Total other assets.......................................      51,036,000     37,191,000
 
Property and equipment
 Land.......................................................       5,025,000      5,025,000
 Buildings and improvements.................................      71,720,000     71,190,000
 Equipment, furniture and fixtures..........................      23,188,000     22,294,000
                                                                ------------   ------------
                                                                  99,933,000     98,509,000
 
 Less accumulated depreciation..............................      33,706,000     32,527,000
                                                                ------------   ------------
                                                                  66,227,000     65,982,000
                                                                ------------   ------------
 
                                                                $156,521,000   $141,189,000
                                                                ============   ============
</TABLE>

                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       1
<PAGE>
 
                   RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                 SEPTEMBER 30      JUNE 30
                                                                     1997            1997
                                                                --------------  --------------
<S>                                                             <C>             <C>
LIABILITIES AND STOCKHOLDERS' EQUITY                          
Current liabilities                                           
 Accounts payable.............................................   $  6,120,000    $  7,284,000
 Accrued salaries and wages...................................      6,235,000       6,282,000
 Hospital and medical claims payable..........................      1,750,000       1,975,000
 Other accrued liabilities....................................      4,568,000       5,218,000
 Amounts due to third-party contractual agencies..............      7,123,000       7,075,000
 Current portion of long-term debt............................        695,000         222,000
                                                                 ------------    ------------
 Total current liabilities....................................     26,491,000      28,056,000
Noncurrent liabilities                                        
 Other accrued liabilities....................................      6,419,000       6,617,000
 Long-term debt, less current portion.........................     49,375,000      35,632,000
 Short term debt expected to be refinanced....................     12,300,000      11,622,000
 Minority interests...........................................         94,000          80,000
                                                                 ------------    ------------
     Total noncurrent liabilities.............................     68,188,000      53,951,000
                                                              
Commitments and contingencies                                 
                                                              
Class B convertible redeemable preferred stock, Series        
 1997, $1 par value - authorized 100,000 shares;              
 issued 100,000 shares (liquidation value of                  
 $2,500,000)..................................................      2,401,000             ---
                                                              
Class B redeemable preferred stock, Series 1997-A,            
$1 par value - authorized 4,000 shares; issued                
 4,000 shares (liquidation value of $4,000,000)...............      4,001,000             ---
                                                              
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)............        142,000         504,000
                                                              
 Class B convertible preferred stock, Series 1996, $1         
  par value--authorized 100,000 shares; issued                
  100,000 shares (liquidation value of $3,000,000)............      3,000,000       3,121,000
                                                              
 Common stock, $.01 par value--authorized                     
  20,000,000 shares; issued 11,167,393 shares at              
  September 30, 1997 and 11,150,640 shares at June            
  30, 1997....................................................        112,000         112,000
 Additional paid-in capital...................................    106,249,000     106,332,000
 Retained earnings (deficit)..................................    (50,164,000)    (46,988,000)
 Treasury stock--581,550 common shares at                     
  September 30, 1997 and June 30, 1997, at cost...............     (3,899,000)     (3,899,000)
                                                                 ------------    ------------ 
                                                                   55,440,000      59,182,000
                                                                 ------------    ------------
   Total stockholders' equity.................................   $156,521,000    $141,189,000
                                                                 ============    ============
</TABLE>

                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       2
<PAGE>
 
                   RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)



<TABLE>
<CAPTION>
                                                                  QUARTER ENDED SEPTEMBER 30
                                                                  ---------------------------
                                                                      1997           1996
                                                                  -------------  ------------
 
<S>                                                               <C>            <C>
Provider-based operations.......................................   $31,561,000    $31,315,000
Managed care operations.........................................     6,132,000            ---
Investment income and other.....................................        62,000        220,000
                                                                   -----------    -----------
 
TOTAL REVENUES..................................................    37,755,000     31,535,000
 
Expenses:
 Salaries, wages and benefits...................................    19,347,000     16,616,000
 Managed care provider expenses.................................     2,387,000            ---
 Other operating expenses.......................................    11,566,000     11,024,000
 Provision for doubtful accounts................................     1,099,000        889,000
 Depreciation and amortization..................................     1,638,000      1,313,000
 Interest and other financing charges...........................     1,320,000      1,545,000
                                                                   -----------    -----------
 
TOTAL EXPENSES..................................................    37,357,000     31,387,000
                                                                   -----------    -----------
 
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM...............       398,000        148,000
Income taxes....................................................           ---            ---
                                                                   -----------    -----------
 
INCOME BEFORE EXTRAORDINARY ITEM................................       398,000        148,000
Extraordinary item:
 Loss from early extinguishment of debt.........................    (3,574,000)           ---
                                                                   -----------    -----------
 
NET INCOME (LOSS)...............................................   $(3,176,000)   $   148,000
                                                                   ===========    ===========
 
Income (loss) per common and dilutive common equivalent share:
Primary:
 Before extraordinary item......................................   $      0.03    $      0.01
 Extraordinary item.............................................         (0.34)           ---
                                                                   -----------    -----------
                                                                   $     (0.31)   $      0.01
                                                                   ===========    ===========
Fully diluted:
 Before extraordinary item......................................   $      0.03    $      0.01
 Extraordinary item.............................................         (0.34)           ---
                                                                   -----------    -----------
                                                                   $     (0.31)   $      0.01
                                                                   ===========    ===========
Weighted average number of shares outstanding:
 Primary........................................................    10,576,000      8,174,000
 Fully diluted..................................................    10,580,000      8,174,000
</TABLE>

                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       3
<PAGE>
 
                   RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                     QUARTER ENDED SEPTEMBER 30
                                                                    ----------------------------
                                                                        1997           1996
                                                                    -------------  -------------
<S>                                                                 <C>            <C>
Cash flows from operating activities
Net income (loss).................................................  $ (3,176,000)   $   148,000
Adjustments to reconcile net income (loss) to net cash
 provided by operating activities:
 Depreciation and amortization....................................     1,638,000      1,386,000
 Loss from early extinguishment of debt...........................     3,574,000            ---
 Provision for doubtful accounts..................................     1,099,000        889,000
 Management fees paid in common stock.............................           ---        189,000
 Cash flows from (increase) decrease in operating assets:
     Accounts receivable..........................................      (230,000)    (1,343,000)
     Amounts due from third-party contractual agencies............       393,000      2,742,000
     Other current assets.........................................      (423,000)      (583,000)
     Other noncurrent assets......................................      (141,000)       (60,000)
 Cash flows from increase (decrease) in operating liabilities:
     Accounts payable.............................................    (1,729,000)      (683,000)
     Accrued salaries, wages and other liabilities................      (526,000)      (109,000)
     Hospital and medical claims payable..........................      (225,000)           ---
     Amounts due to third-party contractual agencies..............        48,000        870,000
                                                                    ------------    -----------
     Total adjustments............................................     3,478,000      3,298,000
                                                                    ------------    -----------
     Net cash provided by operating activities....................       302,000      3,446,000
                                                                    ------------    -----------
Cash flows from investing activities
 Expenditures for property and equipment..........................    (1,398,000)      (654,000)
 Preopening and other costs.......................................       (35,000)       (23,000)
                                                                    ------------    -----------
     Net cash used in financing activities........................    (1,433,000)      (677,000)
                                                                    ------------    -----------
Cash flows from financing activities
 Payment of loan costs............................................    (2,325,000)      (101,000)
                                                                    
 Proceeds from exercise of stock options and employee
     stock purchase plan..........................................        47,000            ---
                                                                    
 Distributions to minority interests..............................           ---       (900,000)
                                                                    
 Proceeds from issuance of debt, net of cash held for debt to be
     refinanced...................................................    41,100,000            ---
 Payments on debt.................................................   (38,256,000)    (3,428,000)
                                                                    
 Payments related to early extinguishment of debt.................    (2,229,000)           ---
 Cost of issuance of Series 1997 preferred stock..................      (100,000)           ---
 Proceeds from preferred stock issues.............................     5,284,000            ---
 Payment of preferred stock dividends.............................           ---        (91,000)
 Cash held in trust...............................................           ---        161,000
                                                                    ------------    -----------
         Net cash provided by (used in) financing activities......     3,521,000     (4,359,000)
                                                                    ------------    -----------
Net increase (decrease) in cash and cash equivalents..............     2,390,000     (1,590,000)
                                                                    
Cash and cash equivalents at beginning of period..................     1,723,000      7,605,000
                                                                    ------------    -----------
Cash and cash equivalents at end of period........................  $  4,113,000    $ 6,015,000
                                                                    ============    ===========
 
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
 Interest.........................................................  $  1,034,000    $ 1,254,000
 Income taxes.....................................................       458,000         13,000
</TABLE>

                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       4
<PAGE>
 
                   RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

                               SEPTEMBER 30, 1997


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, 1997 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, 1997.

NOTE 2

  On September 30, 1997, the Company refinanced its existing senior and
subordinated secured notes, its variable rate demand revenue bonds and its
demand note to a corporate affiliate of Paul J. Ramsay, the Company's Chairman
of the Board and a significant shareholder of the Company, with proceeds from a
credit facility consisting of term and revolving credit debt of $38,500,000 (the
"Senior Credit Facility") and the sale of $2,500,000 of Class B Preferred Stock,
Series 1997 (the "Series 1997 Preferred Stock") to a financial institution.  In
addition, on September 30, 1997, the Company issued a $17,500,000 subordinated
bridge facility, of which $15,000,000 was purchased by a financial institution
and $2,500,000 was purchased by a corporate affiliate of Mr. Ramsay (the "Bridge
Facility").

  Under the terms of the Senior Credit Facility, the Company was provided (a) a
$12,500,000 term loan, (b) a $10,000,000 term loan and (c) a revolving credit
facility (the "Revolver") for an amount up to the lesser of $16,000,000 or the
borrowing base of the Company's receivables (defined as 70% of the Company's
patient accounts receivable, receivables due from managed care customers and
receivables due from customers whose behavioral health operations are managed by
the Company).  In addition, on September 30, 1997, the Company entered into an
agreement with a corporate affiliate of Mr. Ramsay pursuant to which the
corporate affiliate purchased 4,000 shares of non-convertible, non-voting Class
B Preferred Stock, Series 1997-A ("Series 1997-A Preferred Stock"), $1.00 par
value, at $1,000 per share.  The shares are entitled to cumulative dividends at
a rate of 9% per annum ($360,000 per year) and to a liquidation preference of
$1,000 per share under certain circumstances.  The Series 1997-A Preferred Stock
shall be redeemed at a price of $1,000 per share and

                                       5
<PAGE>
 
dividends on the Series C Preferred Stock, Series 1996 Preferred Stock and
Series 1997-A Preferred Stock (all of which are held by corporate affiliates of
Mr. Ramsay) shall be paid provided (a) the Company's EBITDA (as defined in the
Company's credit documentation) for its fiscal year ending June 30, 1998 is
equal to or greater than $16,500,000, (b) the Company has availability under the
Revolver in excess of $4,000,000, (c) the financial institution syndicates a
portion of the Revolver and (d) the Bridge Facility is refinanced as described
below.

The Bridge Facility, which is unsecured and is due and payable in September
2005, bears interest at rates ranging from 11% to 12.5% through September 1998,
at which time the interest rate increases to 13%.  The Bridge Facility is
expected to be refinanced with the proceeds of a private placement of
$17,500,000 8-year senior subordinated notes prior to March 31, 1998.

  In connection with the refinancing of the Company's debt on September 30,
1997, the Company also sold to the financial institution, which effected the
refinancing, $2,500,000 of Series 1997 Preferred Stock.  The Series 1997
Preferred Stock is non-voting, is senior to the Series C Preferred Stock, the
Series 1996 Preferred Stock and the Series 1997-A Preferred Stock in liquidation
and as to dividends, is convertible, at the option of the holder, into 394,945
shares of Common Stock, is optionally redeemable by the Company at a premium
beginning in September 2000, and is mandatorily redeemable at the earlier to
occur of a change in control of the Company or September 2007.  Dividends on the
Series 1997 Preferred Stock are payable quarterly at 9%, or $56,250 per quarter,
unless the Company is unable to meet a fixed charge ratio provided in the Senior
Credit Facility, at which time dividends accrue at 11%.

  The Company has pledged substantially all of its real property, receivables
and other assets as collateral for the Senior Credit Facility.

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 approximately $1,620,000, 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 $4,000,000.

                                       6
<PAGE>
 
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, 1997, net operating loss carryovers of approximately $26,800,000 (of which
approximately $14,300,000 expires from 2001 to 2002, $5,700,000 expires in 2010
and $6,800,000 expires from 2011 to 2012) and alternative minimum tax credit
carryovers of approximately $1,140,000 are available to reduce future federal
income taxes, subject to certain annual limitations.

NOTE 5

  On October 1, 1996, the Company and Ramsay Managed Care, Inc. ("RMCI") entered
into a merger agreement providing for the acquisition of RMCI by a wholly owned
subsidiary of the Company.  The transaction was approved by the shareholders of
both companies on April 18, 1997 and became effective on June 10, 1997, at which
time the results of operations of RMCI are included in the Company's statement
of operations.  The merger was structured as a tax-free exchange recorded using
the purchase method of accounting and, accordingly, the purchase price was
allocated to the assets purchased and the liabilities assumed based upon their
fair value at the date of acquisition.

  In exchange for all of the outstanding shares of RMCI common and preferred
stock, the Company issued 2,135,826 shares of Common Stock (valued based on the
closing price of the Company's Common Stock on June 10, 1997 of $3.00 per share)
and 100,000 shares of Series 1996 Preferred Stock, which are convertible into
1,000,000 shares of Common Stock.  In addition, amounts owed by RMCI to the
Company, totalling approximately $7,000,000 on June 10, 1997, were included as a
portion of the consideration for the acquisition of RMCI.  The Company also
assumed all liabilities of RMCI as of June 10, 1997, including a $2,750,000
obligation (and related unpaid accrued interest and commitment fees of
approximately $300,000) owed by RMCI to a corporate affiliate of Mr. Ramsay.
This obligation was refinanced in September 1997 (see Note 2 above).

  Pursuant to an Agreement and Plan of Merger (the "Merger Agreement") dated as
of July 1, 1997, between a wholly owned subsidiary of the Company and Summa
Healthcare Group, Inc. ("Summa"), the Company agreed to acquire Summa for
$300,000 in cash, 250,000 shares of the Company's Common Stock and fully
exercisable warrants to purchase 500,000 shares of the Company's Common Stock,
with an exercise price of $3.25 per share (the fair market value of the
Company's Common Stock on the date of the Merger Agreement) and an expiration
date of July 2007.  The principal assets of Summa, whose principal stockholder
is Luis E. Lamela, the Vice Chairman, a director and, effective January 1, 1998,
the Chief Executive Officer of the Company, consist of projects in the specialty
managed care and health services industry.  These projects were undertaken by
the Company on October 9, 1997, the effective date of the merger.

                                       7
<PAGE>
 
ITEM 1.  LEGAL PROCEEDINGS

  On March 31, 1997, RMCI (now a subsidiary of the Company) sold all of
the issued and outstanding shares of its HMO subsidiary to RoTech Medical
Corporation ("RoTech") pursuant to a Stock Purchase Agreement dated October 30,
1996. On November 4, 1997, RoTech commenced an action in the Circuit Court of
Orange County, Florida against the Company and RMCI. The complaint asserts a
claim for contractual indemnity and a claim of breach of contract. Although
damages are unspecified, it appears that the complaint seeks damages of
approximately $5.8 million, an amount in excess of the purchase price for the
HMO subsidiary. The Company believes that the claims are without merit and
intends to vigorously defend these proceedings.

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

  The Company's strategy is to maintain and enhance its position as a leading
high-quality provider and manager of specialty managed care and behavioral
healthcare services. The Company's strategic objectives include:

 .  Pursue Youth Services Opportunities.  The Company's youth services division
actively pursues contracts to provide care that address the needs of the
increasing population of at-risk and troubled youth.  The division offers
specialized programs for adjudicated and non-adjudicated youth with
developmental disabilities, children and adolescent males and females with
emotional and behavioral disorders, and juvenile offenders.

 .  Assess Existing Products, Services and Markets.  The Company evaluates its
existing products, services, markets and facilities against financial and
quality performance standards.  In targeted geographic markets where demand
warrants, the Company's youth services and managed care products will be
expanded.  In non-target markets, where economic, competitive, social and/or
legislative factors do not support profitable or strategic delivery of services,
products and facility operations will be phased out or modified to generate
acceptable levels of financial performance.

 .  Expand Managed Care Business.  The Company actively pursues the management
and coordination of behavioral healthcare for populations served under Medicaid
and other government programs and will organize new and expand current systems
which provide care for these beneficiaries.

 .  Pursue Capitated Behavioral Healthcare Contracts.

 .  Identify New Product Development Opportunities.  The Company intends to
identify new market niches and to apply its expertise to develop products and
specialized programs which serve these markets.

  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

                                       8
<PAGE>
 
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.
Some of the most significant factors include (i) accelerating changes occurring
in the healthcare industry, including competition from consolidating and
integrated healthcare provider systems and managers of healthcare, 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 healthcare programs,
including Medicare and Medicaid, (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) the loss of significant
managed care customers or the loss of a significant number of members from the
Company's provider network.  There can be no assurance that any anticipated
future results will be achieved.  As a result of the factors identified above
and other factors, the Company's actual results or financial or other condition
could vary significantly from the performance or financial or other condition
set forth in any forward-looking statements or information.

RESULTS OF OPERATIONS

  Net revenues from provider based operations totaled $31.6 million in the
quarter ended September 30, 1997, compared to $31.3 million in the comparable
quarter of the prior fiscal year. Inpatient revenues from the Company's same
facility behavioral health operations, including youth services, decreased
approximately $1.4 million between periods as youth services revenues, which
increased between periods, are generally less on a per-patient-day basis than
that of acute inpatient revenues, which decreased between periods. Outpatient
revenues decreased $0.5 million and subacute revenues increased $2.5 million
between periods due to a decrease in outpatient visits and an increase in
subacute patient days, respectively, between periods. Also, the incremental
revenues in the current year period associated with a facility opened by the
Company in December 1996 were less than the reduction in revenues between
periods of a facility which was leased to an unaffiliated company on August 1,
1997. These two facilities are hereinafter referred to as the "Other
Facilities."

  Net revenues associated with the Company's managed care operations, which were
acquired by the Company on June 10, 1997, totaled $6.1 million.  Based on two
additional contracts which became effective September 1, 1997 and cover more
than 250,000 new lives, the Company expects that its managed care revenues will
increase in future quarters.

  Salaries, wages and benefits in the quarter ended September 30, 1997 were
$19.3 million, compared to $16.6 million in the comparable quarter of the prior
fiscal year.  A decrease in same facility salaries, wages and benefits of $0.4
million (or 2.9%), as well as a $0.4 million decrease related to the Other
Facilities, was offset by a $1.2 million increase in subacute salaries,
wages and benefits (due to the additional patient volume) and $2.2 million of
salaries, wages and benefits related to the Company's managed care operations.

                                       9
<PAGE>
 
  Managed care provider expenses relate to the provider costs, including medical
professionals, inpatient facilities and outpatient centers, associated with
managing and providing the delivery of behavioral healthcare services on behalf
of the Company's managed care customers.  The Company provides for claims
incurred but not yet reported based on its past experience, together with
current factors.  The overall ratio of managed care provider expenses to the
related revenues was consistent with management's expectations in the quarter
ended September 30, 1997.

  Other operating expenses in the quarter ended September 30, 1997 were $11.6
million, compared to $11.0 million in the comparable quarter of the prior fiscal
year.  A decrease in same facility other operating expenses of $0.7 million (or
8.7%), as well as a $0.2 million decrease related to the Other Facilities, was
offset by a $0.5 million increase in other operating expenses of the Company's
subacute units (due to the additional patient volume) and $1.0 million of other
operating expenses related to the Company's managed care operations.

  The provision for doubtful accounts in the quarter ended September 30, 1997
was $1.1 million, or 3.5% of revenues from provider-based operations, which
compares reasonably to the provision for doubtful accounts of $0.9 million, or
2.8% of revenues from provider-based operations, in the comparable quarter of
the prior fiscal year.

  Depreciation and amortization increased from $1.3 million in the comparable
prior year quarter to $1.6 million in the quarter ended September 30, 1997
primarily due to the current period amortization of intangible assets recorded 
in connection with the RMCI merger in June 1997.

  Interest and other financing charges decreased from $1.5 million in the
comparable prior year quarter to $1.3 million in the quarter ended September 30,
1997 through principal payments made on the Company's former credit facilities
from September 30, 1996 to March 31, 1997.  As mentioned previously, the Company
refinanced its credit facilities on September 30, 1997.

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

  The Company's credit facilities which were refinanced on September 30, 1997
included senior and subordinated debt held by a group of life insurance
companies (the "Life Company Debt") which had terms extending through March
2000. In connection with the extinguishment of its former credit facilities, the
Company incurred and paid a $2.2 million prepayment penalty associated with the
Life Company Debt, incurred legal fees of $0.1 million and wrote-off unamortized
loan costs related to this debt of $1.3 million. In accordance with Statement of
Financial Accounting Standards Number 4, this amount is reported as an
extraordinary item in the Company's statement of operations.

                                       10
<PAGE>
 
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, 1997, amounts due from Medicare, Medicaid and
Blue Cross totaled $3.2 million, $0.9 million and $1.2 million, respectively.
Also, at September 30, 1997, amounts due to Medicare, Medicaid and Blue Cross
totaled $6.0 million, $0.9 million and $0.2 million, respectively.  Changes in
these amounts since June 30, 1997 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, 1997.

  In connection with the merger of RMCI in June 1997, the Company recorded cost
in excess of net asset value of purchased businesses of approximately $18.8
million and identifiable intangible assets, which included the value of RMCI's
established clinical protocols and existing managed care contracts, of
approximately $4.7 million.  The identifiable intangible assets are expected to
be recovered over periods ranging from four to fifteen years and cost in excess
of net asset value of purchased businesses is expected to be recovered over a
25-year period.

  The Company has net deferred tax assets totaling approximately $14.6 million,
which are reduced by a valuation allowance of approximately $5.2 million, at
September 30, 1997.  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, 1997.
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.

  As mentioned elsewhere, on September 30, 1997, the Company refinanced its then
existing credit facilities through borrowings totalling $50.0 million.
Consequently, the amounts which were due within one year at June 30, 1997 under
the Company's former credit facilities, totaling $11.6 million, were excluded
from current liabilities at June 30, 1997 since the refinancing resulted in this
amount being outstanding for an uninterrupted period extending beyond one year
from June 30, 1997.  In connection with this refinancing, the Company (a) issued
the Series 1997 Preferred Stock and the Series 1997-A Preferred Stock which,
based on the redemption features of these issues, are not reflected as
stockholders' equity in the accompanying balance sheet, (b) wrote off
unamortized loan costs and letter of credit fees related to its former credit
facilities of approximately $1.3 million, (c) incurred loan costs of
approximately $3.4 million and (d) created a cash collateral account to redeem
by December 1, 1997 the remaining $12.3 million of principal (and related
accrued interest) due on its outstanding variable rate demand revenue bonds.

                                       11
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES

  Under the terms of the Senior Credit Facility, the Company was provided (a) a
$12.5 million term loan, payable in 18 quarterly installments ranging from
approximately $0.4 million to $0.9 million, beginning July 1, 1998, (b) a $10
million term loan, payable in 20 quarterly installments of $62,500, beginning
January 1, 1998 and eight quarterly installments of approximately $1.0 million,
beginning January 1, 2003, (c) the Revolver for an amount up to the lesser of
$16 million or the borrowing base of the Company's receivables, as defined in
the Senior Credit Facility, and (d) a $17.5 million unsecured Bridge Facility,
of which $15.0 million was purchased by the financial institution and $2.5
million was purchased by a corporate affiliate of Mr. Ramsay.  The Bridge
Facility provides for a contingent payment obligation ("CPO") in the event that
it is not refinanced prior to March 31, 1998.  The CPO would be payable (i) upon
the earlier to occur of certain events (each, an "Event"), including a change of
control involving the Company, a public offering by the  Company of Common
Stock, the repayment after March 1998 of the Bridge Facility, and September 30,
2002, (ii) by the issuance of shares of Common Stock, as required by the Senior
Credit Facility and (iii) in an amount which is to be determined immediately
prior to an Event, depending on the date of the Event, either (a) by reference
to a percentage of the increase in the aggregate market value for the Company's
Common Stock, calculated on a fully-diluted basis, over a base amount or (b) by
reference to a percentage of the aggregate market value for the Company's Common
Stock, calculated on a fully-diluted basis, on the date of the Event.  It is
contemplated that any refinancing of the Bridge Facility would also contain a
CPO based upon a percentage increase in the aggregate market value for the
Company's Common Stock, calculated on a fully-diluted basis, over a base amount.
The Senior Credit Facility permits the Bridge Facility to be refinanced with
subordinated indebtedness provided by a corporate affiliate of Mr. Ramsay on
specified terms, including the provision of a CPO by the Company to a corporate
affiliate of Mr. Ramsay based upon a percentage increase in the aggregate market
value for the Company's Common Stock, calculated on a fully-diluted basis, over
a base amount.

  Also, on September 30, 1997, a corporate affiliate of Mr. Ramsay purchased
additional preferred shares in the Company and, under certain limited
circumstances related to an estimated liability, agreed to purchase Common Stock
at a price of $5.17 per share (the 30-day average stock price prior to the
closing).  As a result, on September 30, 1997, the Company entered into an
agreement with a corporate affiliate of Mr. Ramsay pursuant to which the
corporate affiliate purchased 4,000 shares of Series 1997-A Preferred Stock at
$1,000 per share.  The purchase price, which totaled $4.0 million, was paid by
(i) offset against approximately $0.6 million in dividends accrued through
September 30, 1997 on the Series C Preferred Stock and the Series 1996 Preferred
Stock, (ii) offset against approximately $0.4 million in unpaid accrued interest
and commitment fees on the former demand note owed to a corporate affiliate of
Mr. Ramsay, (iii) $0.25 million in principal due on the former demand note which
was not refinanced with proceeds of the Bridge Facility and (iv) approximately
$2.8 million in cash.  Provided certain operating and financing targets are
achieved by September 30, 1998, the Series 1997-A Preferred Stock is mandatorily
redeemable and the Revolver will increase to $20 million.

                                       12
<PAGE>
 
  Proceeds of the refinancing were used as follows: (a) principal repayments of
$27.5 million of 11.6% senior secured notes and $1.4 million of 15.6%
subordinated secured notes held by a group of insurance companies, (b) repayment
of $3.4 million of bank debt created on September 2, 1997 upon the redemption of
one of the Company's variable rate demand revenue bonds, (c) repayment of
approximately $0.9 million of accrued interest on the above obligations, (d)
creation of a cash collateral account in an amount totaling approximately $12.9
million which will be used to redeem $12.3 million of principal due on
outstanding variable rate demand revenue bonds and to pay accrued interest
thereon on their redemption dates of November 3, 1997 and December 1, 1997, (e)
repayment of $2.5 million of the $2.75 million loan to a corporate affiliate of
Mr. Ramsay, (f) payment of a $2.2 million prepayment penalty to the group of
insurance companies holding the senior and subordinated secured notes and (g)
transaction costs totaling approximately $2.8 million.  In order to satisfy
these payments, the amount drawn down on the Revolver totaled approximately $8.3
million on September 30, 1997.  In addition, the Company drew down an additional
$1.7 million on the Revolver on September 30, 1997, leaving the unused portion
of the Revolver at $6 million.

  The Senior Credit Facility and the Bridge Facility require that the Company
meet certain covenants, including (i) the maintenance of certain fixed charge,
interest coverage and leverage ratios, (ii) the maintenance of a minimum level
of EBITDA and tangible net worth (as defined in these agreements) and (iii) a
limitation on capital expenditures.  The Company is also required to meet an
adjusted minimum fixed charge ratio, which includes preferred dividends payable
in the calculation thereof, in order to pay dividends on the Series 1997
Preferred Stock.  The Company's credit facilities also prohibit the payments of
cash dividends to the common shareholders of the Company.

  During the three months ended September 30, 1997, net cash provided by the
operating activities of the Company decreased approximately $3.1 million from
the comparable quarter of the prior year.  This decrease is primarily the result
of cost report settlements received from third-party contractual agencies in the
prior year period of $2.7 million, compared to $0.4 million in the current year
period.

  The Company's current primary cash requirements relate to its normal operating
expenses and routine capital improvements at its facilities.  Also, the State of
Louisiana has taken the position that certain disproportionate share payments
were improperly paid to two of the Company's Louisiana facilities.  See Part II.
Other Information, "Item 5. Other Information" below.

  On the basis of its historical cash collection experience, its projected cash
needs and the refinancing of the Company's debt on September 30, 1997, the
Company believes that its cash resources and internally generated funds from
future operations will be sufficient to meet its current cash requirements and
future identifiable needs.

                                       13
<PAGE>
 
PART II - OTHER INFORMATION

ITEM 5.  OTHER INFORMATION

  During fiscal year 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 totaling approximately $5.0 million.
The repayment requests related to a) alleged overpayments made to the Company's
former Three Rivers Hospital, which was closed on June 30, 1995, because the
State of Louisiana 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 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.

  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 adequate provision has been made in its financial
statements for the estimated amount which might be recovered from the Company as
a result of this matter. Additionally, the Company believes that the resolution
of this matter will not have a material adverse effect on its liquidity.


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 3.14    Schedules to Preferred Stock Purchase Agreement dated as of
                     September 30, 1997 between the Company and General Electric
                     Capital Corporation (filed as Exhibit 3.11 to the Company's
                     Annual Report on Form 10-K for the year ended June 30,
                     1997).

     Exhibit 10.110  Employment Agreement dated as of October 1, 1997 by and
                     between the Company and Luis E. Lamela.

     Exhibit 10.111  Schedules to Credit Agreement dated as of September 30,
                     1997 among the Company, The Lenders from Time to Time Party
                     Thereto,

                                       14
<PAGE>
 
                     General Electric Capital Corporation, as Administrative
                     Agent, and GECC Capital Markets Group, as Syndication Agent
                     (filed as Exhibit 10.106 to the Company's Annual Report on
                     Form 10-K for the year ended June 30, 1997).

     Exhibit 10.112  Schedules to Subordinated Note Purchase Agreement dated as
                     of September 30, 1997 among the Company, as Issuer, General
                     Electric Capital Corporation and Paul Ramsay Holdings Pty.
                     Limited, as Purchasers (filed as Exhibit 10.107 to the
                     Company's Annual Report on Form 10-K for the year ended
                     June 30, 1997).

     Exhibit 11      Computation of Net Income (Loss) per Share

     Exhibit 27      Financial Data Schedule

 (b) Current Reports on Form 8-K

     On August 22, 1997, the Company filed a Current Report on Form 8-K/A to
     include the financial statements and pro forma financial information
     related to the merger with RMCI.

                                       15
<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, 1997
 

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