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

                                    FORM 10-Q

(MARK ONE)

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

       FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

                                       OR

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

       FOR THE TRANSITION PERIOD FROM ______ TO ______

                         COMMISSION FILE NUMBER 0-13849

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


          DELAWARE                                            63-0857352
(STATE OR OTHER JURISDICTION                               (I.R.S. EMPLOYER
OF 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
May 2, 2001, follows:

         Common Stock, par value $0.01 per share - 9,137,430 shares


<PAGE>   2


                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES

                                    FORM 10-Q

                                      INDEX
<TABLE>
<CAPTION>

                                                                                                   PAGE
                                                                                                   ----

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

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

Condensed Consolidated Balance Sheets - March 31, 2001 and
         December 31, 2000.....................................................................      1

Condensed Consolidated Statements of Operations - Quarters ended
         March 31, 2001 and 2000...............................................................      3

Condensed Consolidated Statements of Cash Flows - Quarters ended March 31,
         2001 and 2000.........................................................................      4

Notes to Condensed Consolidated Financial Statements - March 31, 2001..........................      5

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk............................     13


PART II. OTHER INFORMATION

Item 1.  Other Information.....................................................................     14

Item 2.  Exhibits and Current Reports on Form 8-K..............................................     15

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

</TABLE>


<PAGE>   3




                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>

                                                                            MARCH 31,         DECEMBER 31,
                                                                              2001                2000
                                                                          --------------     ---------------
                                                                           (UNAUDITED)

<S>                                                                           <C>                <C>
ASSETS

Current assets
   Cash and cash equivalents...................................               $1,075,000         $1,539,000
   Accounts receivable, less allowances for doubtful accounts of
     $2,403,000 and $2,807,000 at March 31, 2001 and December 31,
     2000, respectively........................................               23,544,000         22,368,000
   Amounts due from third-party contractual agencies...........                1,135,000          1,164,000
   Other receivables...........................................                  739,000            602,000
   Other current assets........................................                2,476,000          2,323,000
                                                                          --------------     ---------------
     Total current assets......................................               28,969,000         27,996,000


Other assets
   Cash held in trust..........................................                1,012,000          1,041,000
   Cost in excess of net asset value of purchased
     businesses, net...........................................                2,495,000          2,548,000
   Unamortized loan costs, net.................................                1,328,000          1,415,000
   Net assets held for sale....................................                2,131,000          2,129,000
                                                                          --------------     ---------------
     Total other assets........................................                6,966,000          7,133,000

Property and equipment
   Land........................................................                4,666,000          4,666,000
   Buildings and improvements..................................               36,732,000         36,351,000
   Equipment, furniture and fixtures...........................               11,883,000         11,698,000
                                                                          --------------     ---------------
                                                                              53,281,000         52,715,000

   Less accumulated depreciation...............................               18,792,000         18,246,000
                                                                          --------------     ---------------
                                                                              34,489,000         34,469,000
                                                                          --------------     ---------------
                                                                             $70,424,000        $69,598,000
                                                                          ==============     ===============
</TABLE>


            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.



                                       1
<PAGE>   4


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

<TABLE>
<CAPTION>

                                                                           MARCH 31,         DECEMBER 31,
                                                                              2001               2000
                                                                         ---------------    ---------------
                                                                          (UNAUDITED)
<S>                                                                         <C>                <C>

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
   Accounts payable............................................             $7,151,000         $7,606,000
   Accrued salaries and wages..................................              5,864,000          4,284,000
   Other accrued liabilities...................................              1,280,000          1,343,000
   Amounts due to third-party contractual agencies.............              3,830,000          3,632,000
   Current portion of long-term debt...........................              2,924,000          2,803,000
                                                                         ---------------    ---------------
     Total current liabilities.................................             21,049,000         19,668,000

Noncurrent liabilities
   Other accrued liabilities...................................              4,049,000          4,389,000
   Long-term debt, less current portion........................             24,095,000         24,708,000
                                                                         ---------------    ---------------
     Total liabilities.........................................             49,193,000         48,765,000
                                                                         ---------------    ---------------

Commitments and contingencies

Stockholders' equity

   Common stock $.01 par value--authorized 30,000,000 shares;
     issued 9,137,430 shares at March 31, 2001 and 9,121,180
     shares at December 31, 2000...............................                 91,000             91,000
   Additional paid-in capital..................................            127,038,000        127,024,000
   Accumulated deficit.........................................           (101,999,000)      (102,383,000)
   Treasury stock--193,850 common shares at March 31, 2001 and
     December 31, 2000, at cost................................             (3,899,000)        (3,899,000)
                                                                         ---------------    ---------------
           Total stockholders' equity..........................             21,231,000         20,833,000
                                                                         ---------------    ---------------
                                                                           $70,424,000        $69,598,000
                                                                         ===============    ===============

</TABLE>


            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.



                                       2
<PAGE>   5


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

<TABLE>
<CAPTION>

                                                                            QUARTER ENDED MARCH 31,
                                                                       -----------------------------------
                                                                            2001               2000
                                                                       ----------------   ----------------
<S>                                                                      <C>                <C>
REVENUES.......................................................          $31,789,000        $23,457,000

Operating Expenses:
   Salaries, wages and benefits................................           19,827,000         14,687,000
   Other operating expenses....................................            8,992,000          6,931,000
   Provision for doubtful accounts.............................              832,000            581,000
   Depreciation and amortization...............................              593,000            590,000
                                                                       ----------------   ----------------
TOTAL OPERATING EXPENSES.......................................           30,244,000         22,789,000
                                                                       ----------------   ----------------

Income from operations.........................................            1,545,000            668,000

Non-operating income (expenses):
   Investment and other income.................................                   --             28,000
   Interest and other financing charges........................             (985,000)          (494,000)
                                                                       ----------------   ----------------
     Total non-operating income (expenses), net................             (985,000)          (466,000)

INCOME BEFORE INCOME TAXES.....................................              560,000            202,000

Provision for income taxes.....................................              176,000             42,000
                                                                       ----------------   ----------------
NET INCOME.....................................................             $384,000           $160,000
                                                                       ================   ================
Income attributable to common stockholders.....................             $384,000           $160,000
                                                                       ================   ================
Income per common share:
   Basic.......................................................                 $.04               $.02
                                                                       ================   ================
   Diluted.....................................................                 $.04               $.02
                                                                       ================   ================

Weighted average number of common shares outstanding:

   Basic.......................................................            8,929,000          8,895,000
                                                                       ================   ================
   Diluted.....................................................            8,929,000          9,003,000
                                                                       ================   ================

</TABLE>

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.



                                       3
<PAGE>   6


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


                                                                              QUARTER ENDED MARCH 31,
                                                                        ------------------------------------
                                                                             2001                2000
                                                                        ----------------    ----------------

<S>                                                                           <C>                 <C>
Cash flows from operating activities:
   Net income..................................................               $384,000            $160,000
   Adjustments to reconcile net income to net cash used in
     operating activities:
     Depreciation..............................................                546,000             468,000
     Amortization, including loan costs........................                236,000             196,000
     Provision for doubtful accounts...........................                832,000             581,000
     Change in operating assets and liabilities:
       Accounts receivable.....................................             (2,008,000)         (1,798,000)
       Other current assets....................................               (261,000)          1,385,000
       Accounts payable........................................               (455,000)         (2,365,000)
       Accrued salaries, wages and other accrued liabilities...              1,177,000             192,000
       Amounts due to third-party contractual agencies.........                198,000             283,000
                                                                        ----------------    ----------------
         Total adjustments.....................................                265,000          (1,058,000)
                                                                        ----------------    ----------------
           Net cash provided by (used in) operating activities.                649,000            (898,000)
                                                                        ----------------    ----------------
Cash flows from investing activities:
   Increase in net assets held for sale........................                 (2,000)            (33,000)
   Expenditures for property and equipment.....................               (566,000)           (394,000)
   Acquisitions................................................                     --            (149,000)
   Cash held in trust..........................................                 30,000                  --
                                                                        ----------------    ----------------
           Net cash used in investing activities...............               (538,000)           (576,000)
                                                                        ----------------    ----------------
Cash flows from financing activities:
   Loan costs..................................................                 (2,000)           (326,000)
   Proceeds from issuance of debt and warrants.................                 89,000           5,149,000
   Payments on debt............................................               (676,000)         (2,375,000)
   Net proceeds from exercise of options and stock purchases...                 14,000              24,000
   Registration costs..........................................                     --             (18,000)
                                                                        ----------------    ----------------
           Net cash (used in) provided by financing activities.               (575,000)          2,454,000
                                                                        ----------------    ----------------
Net (decrease) increase in cash and cash equivalents...........               (464,000)            980,000
Cash and cash equivalents at beginning of period...............              1,539,000             622,000
                                                                        ----------------    ----------------
Cash and cash equivalents at end of period.....................             $1,075,000          $1,602,000
                                                                        ================    ================
Cash paid during the period for:
   Interest....................................................               $813,000            $422,000
                                                                        ================    ================
   Income taxes................................................               $211,000            $889,000
                                                                        ================    ================
</TABLE>

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.



                                       4
<PAGE>   7


                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                 MARCH 31, 2001



NOTE 1.  BASIS OF PRESENTATION

         The Company is a provider and manager of juvenile justice and
behavioral healthcare programs and services for at-risk and troubled youth in
residential and non-residential settings nationwide. The Company offers its full
spectrum of education, treatment and community based programs and services in
Alabama, Florida, Hawaii, Missouri, Michigan, Nevada, North Carolina, South
Carolina, Texas, Utah and the Commonwealth of Puerto Rico. The Company also
provides a limited range of adult behavioral services at certain of its
locations in response to community demand.

         The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation of the interim information are,
unless otherwise discussed in this report, of a normal recurring nature and have
been included. The Company's business is seasonal in nature and subject to
general economic conditions and other factors. Accordingly, operating results
for the quarter ended March 31, 2001 are not necessarily indicative of the
results that may be expected for the year. The balance sheet at December 31,
2000 has been derived from the audited financial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. For further
information, refer to the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2000.

         On August 4, 2000, the Company acquired the operating assets of Charter
Behavioral Health System of Manatee Palms, L.P. ("Manatee Palms") from Charter
Behavioral Health Systems, LLC and the corresponding real estate from Crescent
Real Estate Funding VII, L.P. for a cash purchase price of $7,700,000. The
acquisition was accounted for under the purchase method of accounting. In
connection with the acquisition, the Company recorded cost in excess of net
asset value of purchased businesses of $1,892,000. This amount is being
amortized on a straight-line basis over a term of 20 years. The operations of
Manatee Palms have been included in the Company's consolidated statement of
operations effective August 4, 2000. The Company's Senior Credit Facility was
amended on August 4, 2000 to provide for the approval of this acquisition.

NOTE 2.  LONG-TERM DEBT

         The Company's long-term debt is as follows:

<TABLE>
<CAPTION>

                                                                                  MARCH 31,         DECEMBER 31,
                                                                                    2001                2000
                                                                               ----------------    ----------------

<S>                                                                               <C>                  <C>
                   Variable rate Term Loan, due October 30, 2003.......           $10,002,000          $10,597,000
                   Revolver, due October 30, 2003......................             5,676,000            5,586,000
                   Acquisition Loan, due October 30, 2003..............             2,084,000            2,162,000
                   Subordinated Note (net of discount of $375,000 and
                      $421,000), due January 24, 2007..................             4,625,000            4,579,000
                   Subordinated Note (net of discount of $392,000 and
                      $440,000), due January 24, 2007..................             4,608,000            4,560,000
                   Other ..............................................                24,000               27,000
                                                                               ----------------    ----------------
                                                                                   27,019,000           27,511,000
                   Less current portion................................             2,924,000            2,803,000
                                                                               ----------------    ----------------
                                                                                  $24,095,000          $24,708,000
                                                                               ================    ================

</TABLE>


                                       5
<PAGE>   8
                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES


         The Company's senior credit facility (the "Senior Credit Facility") was
amended on August 4, 2000 to provide for the acquisition of Manatee Palms. The
amended Senior Credit Facility consists of (i) a term loan (the "Term Loan")
payable in monthly installments ranging from $83,000 to $302,000 with a final
installment of $2,100,000 due on October 30, 2003, (ii) a revolving credit
facility (the "Revolver") for an amount up to the lesser of $12,000,000 or the
borrowing base of the Company's receivables (as defined in the agreement) and
(iii) an acquisition loan commitment of up to $6,000,000 (the "Acquisition
Loan").

         The Company's amended Senior Credit Facility also provided for a
$1,250,000 bridge loan advance under the Acquisition Loan. The bridge loan
advance is payable on the occurrence of certain events (as defined in the
agreement).

         In connection with the aforementioned bridge loan advance, a corporate
affiliate of Paul J. Ramsay, Chairman of the Board of the Company, entered into
a Junior Subordinated Note Purchase Agreement with the Senior Credit Facility
lender to participate in the Senior Credit Facility in an amount equal to the
bridge loan advance.

         The Company failed to maintain the required senior debt fixed charged
coverage and leverage ratios as of December 31, 2000. The Company's senior
lender agreed to waive these requirements as of December 31, 2000. Effective
March 31, 2001, the Company's Senior Credit Facility was amended (the "Seventh
Amendment"). Under the Seventh Amendment, certain coverage and leverage ratios
required to be met by the Company were revised. As of March 31, 2001, the
Company is in compliance with all senior debt covenants under the Seventh
Amendment.

         On April 14, 2001, the Company's subordinated debt agreement was
amended (the "Second Amendment"). Under the Second Amendment, certain coverage
and leverage ratios required to be met by the Company were revised retroactive
to March 31, 2001. As of March 31, 2001, the Company is in compliance with all
subordinated debt covenants.

NOTE 3.  EARNINGS PER SHARE

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

                                                                              QUARTER ENDED MARCH 31,
                                                                        ------------------------------------
                                                                             2001                2000
                                                                        ----------------    ----------------
                                                                          (unaudited)         (unaudited)
<S>                                                                            <C>                 <C>
Numerator:
     Numerator for basic earnings per share - income attributable
       to common stockholders.................................                 $384,000            $160,000

   Effect of dilutive securities..............................                       --                  --
                                                                        ----------------    ----------------
                                                                                     --                  --
                                                                        ----------------    ----------------
     Numerator for diluted earnings per share - income
       attributable to common stockholders after assumed
       conversions............................................                 $384,000            $160,000
                                                                        ================    ================

Denominator:
   Denominator for basic earnings per share - weighted-average
     shares...................................................                8,929,000           8,895,000

   Effect of dilutive securities:
     Employee stock options and warrants......................                       --             108,000
                                                                        ----------------    ----------------
   Dilutive potential common shares...........................                       --             108,000
                                                                        ----------------    ----------------
     Denominator for diluted earnings per share - adjusted
       weighted-average shares and assumed conversions........                8,929,000           9,003,000
                                                                        ================    ================
Basic earnings per share......................................                    $.04                $.02
                                                                        ================    ================
Diluted earnings per share....................................                    $.04                $.02
                                                                        ================    ================
</TABLE>


                                       6
<PAGE>   9
                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES


         For the quarter ended March 31, 2001 and 2000, respectively, 1,792,947
and 2,917,739 options and warrants were excluded from the above computation
because their effect would be antidilutive.

NOTE 4.  SEGMENT INFORMATION

         During the year ended December 31, 2000, the Company refined its
segment definitions to better reflect its business operations and management
responsibilities. The Company now manages its youth service operations under its
juvenile justice and behavioral healthcare operating segments. Additionally,
management evaluates the business by geographic area within each segment.
Accordingly, the corresponding information for earlier periods has been
reclassified to correspond with the new operating segments.

         The Company's juvenile justice programs provide care, custody, control
and treatment of committed delinquent youth. These programs focus on solving the
specialized needs of governmental agencies by providing effective treatment
interventions, including counseling, social interests, substance abuse education
and treatment, mental health services, cognitive and life skills development,
accredited education and vocational skills. The focus of these services is the
re-integration of youth into the family and community, crisis intervention and
aftercare.

         The Company's behavioral healthcare programs consist of residential
treatment programs, therapeutic community living facilities, acute inpatient
services and community-based programs. The residential treatment programs
provide safe, secure and highly structured environments for the evaluation and
development of long-term, intensive and transitional treatment services. The
therapeutic community living facilities provide shelter care for youth in a
community setting, usually in a residential neighborhood. Acute inpatient
services are generally provided to individuals needing the most intensive
behavioral healthcare treatment. The community-based programs are designed to
meet the special needs of youth and their families, while enabling them to
remain living at home or in their community. Many of the Company's programs and
services provide specialized educational services designed to modify disruptive
behavior and assist students to develop the academic and social skills necessary
for them to participate successfully in society.

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

                                                     QUARTER ENDED
                                                       MARCH 31,
                                              -----------------------------
                                                  2001           2000
                                              -------------- --------------

SEGMENT REVENUE
   Behavioral healthcare....................   $23,574,000    $19,389,000
   Juvenile justice.........................     8,215,000      4,068,000
                                              -------------- --------------
Total consolidated revenues.................   $31,789,000    $23,457,000
                                              ============== ==============

                                       7
<PAGE>   10
                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES



                                                           QUARTER ENDED
                                                             MARCH 31,
                                                    ---------------------------
                                                         2001           2000
                                                    ------------   ------------

SEGMENT DEPRECIATION AND AMORTIZATION
   Behavioral healthcare .........................  $    454,000   $    376,000
   Juvenile justice ..............................       102,000         92,000
                                                    ------------   ------------
                                                         556,000        468,000

Reconciling items
   Corporate depreciation and amortization .......        37,000        122,000
                                                    ------------   ------------
Total consolidated depreciation and amortization .  $    593,000   $    590,000
                                                    ============   ============

Segment profit
   Behavioral healthcare .........................  $  2,285,000   $  1,857,000
   Juvenile justice ..............................       862,000        380,000
                                                    ------------   ------------
                                                       3,147,000      2,237,000

Reconciling items
   Corporate expenses ............................    (1,602,000)    (1,569,000)
   Investment income and other ...................            --         28,000
   Interest and other financing charges ..........      (985,000)      (494,000)
                                                    ------------   ------------
Total consolidated income before income taxes ....  $    560,000   $    202,000
                                                    ============   ============

Segment capital expenses
   Behavioral healthcare .........................  $    336,000   $    454,000
   Juvenile justice ..............................       200,000         69,000
                                                    ------------   ------------
                                                         536,000        523,000

Reconciling items
   Corporate assets ..............................        28,000         20,000
  Assets held for sale ...........................         2,000         33,000
                                                    ------------   ------------
Total consolidated capital expenditures ..........  $    566,000   $    576,000
                                                    ============   ============

SEGMENT ASSETS
   Juvenile justice ..............................  $ 12,905,000   $  6,644,000
   Behavioral healthcare .........................    54,605,000     46,625,000
                                                    ------------   ------------
Total segment assets .............................    67,510,000     53,269,000

RECONCILING ITEMS
   Corporate assets ..............................     2,914,000      4,407,000
                                                    ------------   ------------
Total consolidated assets ........................  $ 70,424,000   $ 57,676,000
                                                    ============   ============

NOTE 5.  ACCOUNTS RECEIVABLE

         The Company has experienced delays in the collection of receivables
from its contracts in Puerto Rico. As of March 31, 2001, the Company had
approximately $5,180,000 in outstanding receivables due from the Commonwealth of
Puerto Rico, of which $1,485,000 was over 120 days past due. As of May 9, 2001,
the Company had collected approximately $1,357,000 of the outstanding receivable
balance and had established reserves of $362,000 against the remaining balance.
The Company and its advisors are in active discussions with the Government of
Puerto Rico with respect to the payment of the outstanding receivables. The
Company believes that it has fully performed its obligations under the Puerto
Rico contracts and is entitled to receive payment of these receivables in full.
Although the Company has been advised by its legal counsel that the net
receivables due on the Puerto Rico contracts are collectable, there can be no
assurances that future transactions or events will not result in the need for
additional reserves for these accounts receivable. If the Company were to record
additional reserves, it would adversely affect earnings in the period in which
the reserves are recorded.


                                       8
<PAGE>   11

                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES

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

         The Company receives revenues primarily from the delivery of
diversified education, treatment and community based programs and services for
at-risk and troubled youth in residential and non-residential settings. The
Company receives revenues based on per diem rates, fixed fee contracts or flat
or cost-based rate contracts. In addition, the Company also receives revenues
from management consulting contracts with other entities. Revenues under the
Company's programs are recognized as services are rendered. Revenues of the
Company's programs and services are affected by changes in the rates the Company
charges, changes in reimbursement rates by third-party payors, the volume of
individuals treated and changes in the mix of payors.

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

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

         The Company's quarterly results may fluctuate significantly as a result
of a variety of factors, including the timing of the opening of new programs.
When the Company opens a new program, the program may be unprofitable until the
program's population, and net revenues contributed by the program, approach
intended levels, primarily because the Company staffs its programs in
anticipation of achieving such levels. The Company's quarterly results may also
be impacted by seasonality, as revenues generated by youth education and
treatment services are generally seasonal in nature.

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

                                       9
<PAGE>   12
                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES

                              RESULTS OF OPERATIONS

JUVENILE JUSTICE SEGMENT

         The following table states for the period indicated our juvenile
justice and percentage of revenue terms (in thousands):

<TABLE>
<CAPTION>

                                                                 QUARTER ENDED
                                               ---------------------------------------------------
                                                         2001                      2000
                                               ------------------------- -------------------------

<S>                                                <C>           <C>         <C>           <C>
Revenues..................................         $8,215        100.0%      $4,068        100.0%

Expenses:
   Salaries, wages and benefits...........          5,316         64.7%       2,651         65.2%
   Other operating expenses...............          1,871         22.8%         923         22.7%
   Provision for doubtful accounts........             64          0.8%          22          0.5%
   Depreciation and amortization..........            102          1.2%          92          2.2%
                                               ------------ ------------ ------------ ------------
     Total operating expenses.............          7,353         89.5%       3,688         90.7%
                                               ------------ ------------ ------------ ------------
Income (loss) from operations.............           $862         10.5%        $380          9.3%
                                               ============ ============ ============ ============

</TABLE>

REVENUES

         Juvenile justice revenues increased from $4.1 million in the quarter
ended March 31, 2000 to $8.2 million in the quarter ended March 31, 2001. The
increase of $4.1 million in revenues from 2000 to 2001 is primarily a result of
an increase in revenues of $1.9 million from new programs awarded to the
Company, the acquisition of Manatee Palms in August 2000 and the full quarter
effect of programs initiated by the Company, during the quarter ended March 31,
2000.

SALARIES, WAGES AND BENEFITS

         Juvenile justice salaries, wages and benefits increased from $2.7
million in the quarter ended March 31, 2000 to $5.3 million in the quarter ended
March 31, 2001. The decrease as a percentage of revenues is primarily due to the
Manatee Palms acquisition. Salaries, wages and benefits as a percentage of
revenues for the Manatee Palms facilities are lower than the Company's other
Juvenile Justice programs.

OTHER OPERATING EXPENSES

         Juvenile justice other operating expenses increased from $0.9 million
in the quarter ended March 31, 2000 to $1.9 million in the quarter ended March
31, 2001. Other operating expenses during the quarter ended March 31, 2001 did
not fluctuate significantly as a percentage of revenue when compared to the same
period in the prior year.

PROVISION FOR DOUBTFUL ACCOUNTS

         Juvenile justice provision for doubtful accounts increased as a
percentage of revenue from 0.5% in the quarter ended March 31, 2000 to 0.8% in
the quarter ended March 31, 2001 primarily as a result of increases in reserves
in the Puerto Rico market.

DEPRECIATION AND AMORTIZATION

         The growth in the Company's Juvenile Justice programs has been
primarily in contracts which have been awarded to the Company with the right to
occupy a building owned by the payor source. As a result, depreciation and
amortization as a percentage of revenues has decreased when compared to the
same period as last year.

                                       10
<PAGE>   13
                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES


BEHAVIORAL HEALTHCARE SEGMENT

<TABLE>
<CAPTION>

                                                                 QUARTER ENDED
                                               ---------------------------------------------------
                                                         2001                      2000
                                               ------------------------- -------------------------
<S>                                               <C>            <C>        <C>            <C>
Revenues..................................        $23,574        100.0%     $19,389        100.0%

Expenses:
   Salaries, wages and benefits...........         13,730         58.2%      11,382         58.7%
   Other operating expenses...............          6,337         26.9%       5,214         26.9%
   Provision for doubtful accounts........            768          3.3%         560          2.9%
   Depreciation and amortization..........            454          1.9%         376          1.9%
                                               ------------ ------------ ------------ ------------
     Total operating expenses.............         21,289         90.3%      17,532         90.4%
                                               ------------ ------------ ------------ ------------
Income (loss) from operations.............         $2,285          9.7%      $1,857          9.6%
                                               ============ ============ ============ ============
</TABLE>

REVENUES

         Behavioral healthcare revenues increased form $19.4 million in the
quarter ended March 31, 2000 to $23.6 million in the quarter ended March 31,
2001. The increase of $4.2 million in revenues from 2000 to 2001 is primarily a
result of (i) an increase in revenues of $0.9 million from new programs, (ii) an
increase in revenues of $1.7 million from the acquisition of Manatee Palms
facility and (iii) an increase of $1.6 million in the Company's other behavioral
healthcare facilities primarily due to a total increase in census of 9.4%
between periods (from 55,345 days during the quarter ended March 31, 2000 to
60,550 days during the quarter ended March 31, 2001).

SALARIES, WAGES AND BENEFITS

         Behavioral healthcare salaries, wages and benefits were $11.4 million,
or 58.7% of behavioral healthcare revenues for the quarter ended March 31, 2000,
compared to $13.7 million, or 58.2% of behavioral healthcare revenues for the
quarter ended March 31, 2001. The decrease as a percentage of revenues is
primarily due to the Manatee Palms acquisition. Salaries, wages and benefits as
a percentage of revenues of the Manatee Palm facility is lower than the
Company's other Behavioral healthcare programs.

OTHER OPERATING EXPENSES

         Behavioral healthcare other operating expenses were $5.2 million or
26.9% of behavioral healthcare revenues for the quarter ended March 31, 2000,
compared to $6.3 million, or 26.9% of behavioral healthcare revenues for the
quarter ended March 31, 2001. Other operating expenses during the quarter ended
March 31, 2001 did not fluctuate as a percentage of revenue when compared to the
same period in the prior year.

PROVISION FOR DOUBTFUL ACCOUNTS

         Behavioral healthcare provision for doubtful accounts were $0.6 million
or 2.9% of behavioral healthcare revenues for the quarter ended March 31, 2000,
compared to $0.8 million, or 3.3% of behavioral healthcare revenues for the
quarter ended March 31, 2001. The increase as a percentage of behavioral
healthcare revenues was primarily a result of the recording of reserves in the
Puerto Rico market.

DEPRECIATION AND AMORTIZATION

         Behavioral healthcare depreciation and amortization was $0.4 million or
1.9% of behavioral healthcare revenues for the quarter ended March 31, 2000,
compared to $0.5 million, or 1.9% of behavioral healthcare revenues for the
quarter ended March 31, 2001. Depreciation and amortization during the quarter
ended March 31, 2001 did not fluctuate as a percentage of revenue when compared
to the same period in the prior year.



                                       11
<PAGE>   14
                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES

CORPORATE AND OTHER
<TABLE>
<CAPTION>

                                                                 QUARTER ENDED
                                               ---------------------------------------------------
                                                         2001                      2000
                                               ------------------------- -------------------------
<S>                                               <C>            <C>        <C>            <C>
Revenues:
   Juvenile justice.......................         $8,215                    $4,068
   Behavioral healthcare..................         23,574                    19,389
                                               ------------              ------------
     Total revenues.......................        $31,789        100.0%     $23,457        100.0%

Expenses:
   Salaries, wages and benefits...........            781          2.5%         655          2.8%
   Other operating expenses...............            784          2.5%         792          3.4%
   Depreciation and amortization..........             37          0.1%         122          0.5%
   Investment and other income............             --          0.0%          28          0.1%
   Investment and other financing charges.            985          3.1%         494          2.1%
   Provision for income taxes.............            176          0.6%          42          0.2%
</TABLE>

SALARIES, WAGES AND BENEFITS

         Corporate office salaries, wages and benefits were $0.8 million or 2.5%
of total consolidated revenues for the quarter ended March 31, 2001, compared to
$0.7 million or 2.8% of total consolidated revenues for the same period in 2000.
The decrease as a percentage of total consolidated revenues is primarily due to
the increase in total consolidated revenues of $8.3 million during the quarter.

OTHER OPERATING EXPENSES

         Corporate office other operating expenses were $0.8 million or 2.5% of
total consolidated revenues for the quarter ended March 31, 2001, compared to
$0.8 million or 3.4% of total consolidated revenues for the same period in 2000.
The decrease as a percentage of total consolidated revenues is primarily due to
the increase in total consolidated revenues of $8.3 million during the quarter.

DEPRECIATION AND AMORTIZATION

         Corporate office depreciation and amortization was $0.04 million or
0.1% of total consolidated revenues for the quarter ended March 31, 2001,
compared to $0.1 million or 0.5% of total consolidated revenues for the same
period in 2000. The decrease is due to the Company's completion of the
amortization of certain projects during the fiscal year ended December 31, 2000.

INTEREST AND OTHER FINANCING CHARGES

         Interest and other financing charges increase from $0.5 million for the
quarter ended March 31, 2000 to $1.0 million for the quarter ended March 31,
2001. The increase in interest and other financing charges is primarily
attributable to an increase in the Company's average outstanding borrowings
between quarters.

PROVISION FOR INCOME TAXES

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

                         LIQUIDITY AND CAPITAL RESOURCES

         At March 31, 2001 and December 31, 2000, the Company had $7.9 million
and $8.3 million, respectively, in working capital and $1.1 million and $1.5
million, respectively, in cash and cash equivalents. The Company's principal



                                       12
<PAGE>   15
                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES

sources of liquidity as of March 31, 2001 and December 31, 2000 consisted
primarily of the aforementioned cash and cash equivalents and accounts
receivable of $23.5 million and $22.4 million, respectively.

         Net cash provided by operating activities increased by $1.5 million
from the quarter ended March 31, 2000 results. During the quarter ended March
31, 2000, accounts payable decreased by $2.4 million, primarily contributing to
net cash used in operating activities of $0.9 million for the quarter ended
March 31, 2000. During 2001, accrued salaries and other accrued liabilities
increased by $1.2 million, primarily contributing to net cash provided by
operating activities of $0.6 million for the quarter ended March 31, 2001.

         Cash used in investing activities was $0.5 million for the quarter
ended March 31, 2001 compared to cash used in investing activities of $0.6
million for the quarter ended March 31, 2000. The fluctuation is primarily a
result of an acquisition of a group home for $0.1 million in the quarter ended
March 31, 2000.

         Net cash used in financing activities decreased $3.0 million from the
quarter ended March 31, 2000 results. During 2000, net cash provided by
financing activities totaled $2.4 million, due primarily to net debt proceeds of
$2.8 million. During 2001, net cash used in financing activities totaled $0.6
million, due primarily to net debt payments of $0.6 million.

         The Company has experienced delays in the collection of receivables
from its contracts in Puerto Rico. As of March 31, 2001, the Company had
approximately $5,180,000 in outstanding receivables due from the Commonwealth of
Puerto Rico, of which $1,485,000 was over 120 days past due. As of May 9, 2001,
the Company had collected approximately $1,357,000 of the outstanding receivable
balance and had established reserves of $362,000 against the remaining balance.
The Company and its advisors are in active discussions with the Government of
Puerto Rico with respect to the payment of the outstanding receivables. The
Company believes that it has fully performed its obligations under the Puerto
Rico contracts and is entitled to receive payment of these receivables in full.
Although the Company has been advised by its legal counsel that the net
receivables due on the Puerto Rico contracts are collectable, there can be no
assurances that future transactions or events will not result in the need for
additional reserves for these accounts receivable. If the Company were to record
additional reserves, it would adversely affect earnings in the period in which
the reserves are recorded.

         Management of the Company believes that it can meet its current cash
requirements and future identifiable needs with internally generated funds from
operations and availability in its Senior Credit Facility. If the Company is
unable to collect the Puerto Rico receivables, the Company may need to obtain
liquidity through other sources of debt or equity. Although the Company believes
that it has the ability to raise such additional liquidity, there can be no
assurances that the Company will be able to raise debt or equity capital
through other sources, or if obtained, that it will be on terms acceptable to
the Company. The incurring or assumption by the Company of additional
indebtedness could result in the issuance of additional equity and/or debt which
could have a dilutive effect on current shareholders and a significant effect on
the Company's operations.

         As of October 13, 2000, the Company's common stock was transferred from
the NASDAQ National Market System and commenced trading on the NASDAQ SmallCap
Market. On April 4, 2001, NASDAQ notified the Company that its common stock had
failed to maintain a minimum bid price of $1.00 over a 30 consecutive trading
day period, as required by The NASDAQ SmallCap Market rules. Failure to maintain
a minimum $1.00 bid price could result in a delisting of the Company's common
stock. The Company was provided 90 calendar days to regain compliance. At March
31, 2001, the Company's stock was trading below the $1.00 minimum bid price,
however, as of the date of this filing, the Company's common stock has
maintained a bid price of over $1.00 for more than 10 consecutive trading days.
There can be no assurance that the Company's common stock will continue to trade
above the minimum bid price of $1.00 or that it will continue to be listed on
the Nasdaq SmallCap Market.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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



                                       13
<PAGE>   16
                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES

                           PART II - OTHER INFORMATION

ITEM 1.  OTHER INFORMATION

         The Company is party to certain claims, suits and complaints, whether
arising from the acts or omissions of its employees, providers or others, which
arise in the ordinary course of business. The Company has established reserves
at March 31, 2001 for the estimated amounts which might be recovered from the
Company as a result of all outstanding legal proceedings. In the opinion of
management, the ultimate resolution of these pending legal proceedings is not
expected to have a material adverse effect on the Company's financial position,
results of operations or liquidity.



                                       14
<PAGE>   17

                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES

ITEM 2.  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 10.149    Seventh Amendment to Loan and Security Agreement
                           dated as of March 31, 2001 by and among the Company,
                           the subsidiaries of the Company and Fleet Capital
                           Corporation, as agent and lender....................

         Exhibit 10.150    Second Amendment to Amended and Restated Subordinated
                           Note and Warrant Purchase Agreement and First
                           Amendment to Amended and Restated Subordination
                           Agreement dated as of April 16, 2001 by and among the
                           Company, the subsidiaries of the Company listed on
                           the signature pages hereto, as Guarantors, SunTrust
                           Banks, Inc., and ING (U.S.) Capital, LLC as
                           Purchasers..........................................

         Exhibit 11        Computation of Net Income (Loss) Per
                           Share...............................................

         Exhibit 99.18     Press Release dated March 30, 2001..................


(b)      Current Reports on Form 8-K

         The Company did not file any Current Reports on Form 8-K during the
         quarter ended March 31, 2001.



                                       15
<PAGE>   18
                  RAMSAY YOUTH SERVICES, INC. AND SUBSIDIARIES

                                   SIGNATURES

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

                                           RAMSAY YOUTH SERVICES, INC.
                                           Registrant



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



Date:  May 14, 2001



                                       16