<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                    FORM 10-Q


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

                  For the quarterly period ended March 31, 2000

                                       or

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


   For the transition period from ___________________ to ___________________,


                        Commission File Number: 34-22090


                          THE MULTICARE COMPANIES, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                       22-3152527
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)

                              101 East State Street
                       Kennett Square, Pennsylvania 19348
          (Address, including zip code, of principal executive offices)

                                 (610) 444-6350
               (Registrant's telephone number including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:

                               YES [x]       NO [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.

                Class                             Outstanding at May 15, 2000
----------------------------------------       --------------------------------
     Common Stock ($.01 Par Value)                            100


<PAGE>

                          THE MULTICARE COMPANIES, INC.
                                AND SUBSIDIARIES

                                Table of Contents
<TABLE>
<CAPTION>
<S>              <C>                                                                                 <C>
                                                                                                     Page
                                                                                                     ----

                  CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS...........................1


                  Part I:  FINANCIAL INFORMATION

                           Item 1.  Financial Statements

                                    Consolidated Balance Sheets
                                    March 31, 2000 (Unaudited) and September 30, 1999.................2

                                    Consolidated Statements of Operations
                                    Three and six months ended March 31, 2000 and 1999 (Unaudited)....3

                                    Consolidated Statements of Cash Flows
                                    Six months ended March 31, 2000 and 1999 (Unaudited)..............4

                                    Notes to Consolidated Financial Statements......................5-8

                           Item 2.  Management's Discussion and Analysis of Financial Condition
                                    and Results of Operations......................................9-17

                           Item 3.  Quantitative and Qualitative Disclosures about Market Risk.......18


                  Part II: OTHER INFORMATION ........................................................19

                           SIGNATURES................................................................20

</TABLE>


<PAGE>


                          THE MULTICARE COMPANIES, INC.
                                AND SUBSIDIARIES

            CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

         Statements  made in this report,  and in our other  public  filings and
         releases,  which are not  historical  facts  contain  "forward-looking"
         statements (as defined in the Private Securities  Litigation Reform Act
         of 1995) that involve risks and uncertainties and are subject to change
         at any time. These forward-looking  statements may include, but are not
         limited to statements as to:

         o    certain statements in "Management's Discussion and Analysis of
              Financial Condition and Results of Operations", such as our
              ability or inability to meet our liquidity needs, scheduled debt
              and interest payments, expected future capital expenditure
              requirements, to control costs, to consummate asset sales and the
              expected effects of government regulation on reimbursement for
              services provided and on the costs of doing business.

         The forward-looking statements involve known and unknown risks,
         uncertainties and other factors that are, in some cases, beyond our
         control. You are cautioned that any statements are not guarantees of
         future performance and that actual results and trends in the future may
         differ materially.

         Factors that could cause actual results to differ materially include,
         but are not limited to the following:

         o    our default under our "Senior Credit Agreement";

         o    our substantial indebtedness and significant debt service
              obligations;

         o    the affect of planned dispositions of assets;

         o    our ability or inability to secure the capital and the related
              cost of the capital necessary to fund future operations;

         o    the impact of health care reform, including the Medicare
              Prospective Payment System ("PPS"), the Balanced Budget Refinement
              Act ("BBRA"), and the adoption of cost containment measures by the
              federal and state governments;

         o    the adoption of cost containment measures by other third party
              payors;

         o    the impact of government regulation, including our ability to
              operate in a heavily regulated environment and to satisfy
              regulatory authorities;

         o    the occurrence of changes in the mix of payment sources utilized
              by our patients to pay for our services;

         o    competition in our industry;

         o    our ability to consummate or complete  development  projects or to
              profitably operate or successfully  integrate enterprises into our
              other operations; and

         o    changes in general economic conditions.

         On March 29, 2000, we elected not to make interest payments due under
         our Senior Credit Agreement. We are also in violation of certain
         covenants under our Senior Credit Agreement. We have begun discussions
         with our lenders under our Senior Credit Agreement to revise our
         capital structure. We have been granted a forbearance period while
         discussion on an overall restructuring take place. Under the
         forbearance agreement the majority of the Senior Creditors agreed to
         refrain from accelerating the Senior Loans or exercising other remedies
         against us. During the forbearance period we have not made scheduled
         interest and principal payments under our Senior Credit Agreement.
         There can be no assurances that the senior lenders or holder of Senior
         Subordinated Notes will approve any amendment or restructuring of the
         Credit Agreement or the Senior Subordinated Notes. If Senior lenders
         accelerate obligations under the agreements, such events would have a
         material adverse effect on our liquidity and financial position. Under
         such circumstances, our financial position would necessitate the
         development of an alternative financial structure. Considering the
         limited financial resources and the existence of certain defaults there
         can be no assurance the we would succeed in formulating and
         consummating an acceptable alternative financial structure. In light of
         our current financial condition and default under our Senior Loans, the
         Company may need to seek protection under federal bankruptcy law.

         These and other factors have been discussed in more detail in the
         Company's periodic reports, including its Annual Report on Form 10-K
         for the fiscal year ended September 30, 1999.

<PAGE>

                          PART I: FINANCIAL INFORMATION

                          Item 1. Financial Statements

                          THE MULTICARE COMPANIES, INC.
                                AND SUBSIDIARIES

                      Condensed Consolidated Balance Sheets

                 (In thousands, except share and per share data)
<TABLE>
<CAPTION>
                                                                                    March 31,       September 30,
                                                                                      2000              1999
                                                                                      ----              ----
                                                                                   (Unaudited)
<S>                                                                                <C>               <C>
                                        Assets
          Current Assets:
                 Cash and cash equivalents                                         $    3,198        $    3,967
                 Accounts receivable, net                                             112,661           113,586
                 Prepaid expenses and other current assets                             12,598            13,130
                 Deferred taxes - current portion                                       2,027             2,027
                                                                                   ----------        ----------
                          Total current assets                                        130,484           132,710
                                                                                   ----------        ----------

          Property, plant and equipment, net                                          614,825           621,371

          Goodwill, net                                                               474,175           480,809
          Other assets                                                                 60,860            67,474
                                                                                   ----------        ----------
                                                                                   $1,280,344        $1,302,364
                                                                                   ==========        ==========

                         Liabilities and Stockholders' Equity

          Current Liabilities:
                 Accounts payable and accrued liabilities                          $  111,517        $   97,205
                 Current portion of long-term debt                                    720,352            34,700
                                                                                   ----------        ----------
                          Total current liabilities                                   831,869           131,905
                                                                                   ----------        ----------

          Long-term debt                                                               49,619           741,256
          Deferred taxes                                                               65,003            76,007
          Due to Genesis Health Ventures, Inc. and other liabilities                   33,752            27,285

          Stockholders' Equity:
                 Common stock, par value $.01, 100 shares authorized
                   100 shares issued and outstanding                                      ---               ---
                 Additional paid-in-capital                                           733,000           733,000
                 Accumulated deficit                                                 (432,899)         (407,089)
                                                                                   ----------        ----------
                          Total stockholders' equity                                  300,101           325,911
                                                                                   ----------        ----------
                                                                                   $1,280,344        $1,302,364
                                                                                   ==========        ==========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       2


<PAGE>



                          THE MULTICARE COMPANIES, INC.
                                AND SUBSIDIARIES

                 Condensed Consolidated Statements of Operations

                                   (Unaudited)

                                 (In thousands)
<TABLE>
<CAPTION>
                                                                     Three Months Ended               Six Months Ended
                                                                          March 31,                        March 31,

                                                                      2000         1999               2000        1999
                                                                      ----         ----               ----        ----
<S>                                                                <C>           <C>                <C>        <C>
        Net revenues                                               $ 163,241     154,725            323,602    $ 323,209

        Expenses:
            Operating expense                                        136,769     127,541            269,937      257,353
            Management fee                                             9,798       9,278             19,422       19,329
            Depreciation and amortization expense                      9,497      11,310             19,055       22,591
            Lease expense                                              3,284       3,330              6,535        6,454
            Interest expense, net                                     18,634      16,227             36,963       32,412
            Debt restructuring expense                                 2,143         ---              2,143          ---
                                                                   ---------    --------           --------    ---------
              Total expenses                                         180,125     167,686            354,055      338,139
                                                                   ---------    --------           --------    ---------

              Loss before income taxes, share in loss of
              unconsolidated affiliates, and cumulative effect
              of accounting change                                   (16,884)    (12,961)           (30,453)     (14,930)

        Income tax benefit                                            (5,068)     (2,804)            (9,053)      (2,195)
                                                                   ---------    --------           --------    ---------
        Loss before share in loss of unconsolidated affiliates
        and cumulative effect of accounting change                   (11,816)    (10,157)           (21,400)     (12,735)
                                                                   ---------    --------           --------    ---------

        Share in loss of unconsolidated affiliates                       336         ---                787          ---
                                                                   ---------    --------           --------    ---------

        Loss before cumulative effect of accounting change           (12,152)    (10,157)           (22,187)     (12,735)
                                                                   ---------    --------           --------    ---------

        Cumulative effect of accounting change, net of tax               ---         ---              3,623          ---
                                                                   ---------    --------           --------    ---------

              Net loss                                             $ (12,152)    (10,157)           (25,810)   $ (12,735)
                                                                   =========    ========           ========    =========

</TABLE>


See accompanying notes to condensed consolidated financial statements.

                                       3

<PAGE>

                          THE MULTICARE COMPANIES, INC.
                                AND SUBSIDIARIES

                 Condensed Consolidated Statements of Cash Flows

                                   (Unaudited)

                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                              Six months ended
                                                                                                   March 31,

                                                                                           2000               1999
                                                                                           ----               ----
<S>                                                                                     <C>                <C>
             Cash flows from operating activities:
                Net loss                                                                $ (25,810)         $(12,735)
                Adjustments to reconcile net loss to net cash provided by
                (used in) operating activities:
                  Cumulative effect of accounting change, net of tax                        3,623               ---
                  Depreciation and amortization                                            19,055            22,591
                  Deferred taxes                                                           (9,053)              229
                  Changes in assets and liabilities:
                    Accounts receivable                                                       925           (18,078)
                    Prepaid expenses and other current assets                                 532              (437)
                    Accounts payable and accrued liabilities                               14,311           (18,121)
                                                                                        ---------          --------
                      Net cash provided by (used in) operating activities                   3,583           (26,551)
                                                                                        ---------          --------
             Cash flows from investing activities:
                  Capital expenditures                                                     (4,274)           (8,396)
                  Other assets and liabilities                                              5,907             4,548
                                                                                        ---------          --------
                      Net cash provided by (used in) investing activities                   1,633            (3,848)
                                                                                        ---------          --------
             Cash flows from financing activities:
                  Proceeds from long-term debt                                             17,534           229,900
                  Repayments of long-term debt                                            (23,519)         (205,367)
                  Debt issuance costs                                                         ---            (1,387)
                                                                                        ---------          --------
                      Net cash (used in) provided by financing activities                  (5,985)           23,146
                                                                                        ---------          --------
                      (Decrease) in cash and cash equivalents                                (769)           (7,253)

             Cash and cash equivalents at beginning of period                               3,967            11,344
                                                                                        ---------          --------
             Cash and cash equivalents at end of period                                 $   3,198          $  4,091
                                                                                         ========          ========

</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>
                          THE MULTICARE COMPANIES, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                                 March 31, 2000

                                   (Unaudited)

                 (In thousands except share and per share data)

(1)      Organization and Basis of Presentation

         The Multicare Companies, Inc. and Subsidiaries ("Multicare" or the
         "Company") own, operate and manage skilled eldercare and assisted
         living facilities which provide long-term care and specialty medical
         services in selected geographic regions within the eastern and
         midwestern United States. As a result of the Merger (as defined below)
         of Genesis ElderCare Acquisition Corp. with the Company, Genesis Health
         Ventures, Inc. ("Genesis") owns approximately 44% of Genesis ElderCare
         Corp., which owns 100% of the outstanding capital stock of the Company.
         The Company and Genesis have entered into a management agreement
         pursuant to which Genesis manages the Company's operations.

         Multicare operates predominantly in one industry segment, operating
         skilled eldercare centers, which represents over 95% of consolidated
         revenues.

         The accompanying unaudited consolidated financial statements have been
         prepared assuming that the Company will continue as a going concern.
         The Company has experienced significant losses and has a working
         capital deficit of $701.4 million at March 31, 2000. In addition the
         Company has violated certain financial covenants (as described below)
         under the Company's Senior Credit Agreement. In addition, the Company
         has received default notices from Eldertrust alleging certain payment
         and non-payment related defaults under certain mortgage loans.

         The financial information as of March 31, 2000, and for the three and
         six months ended March 31, 2000 and 1999, is unaudited and has been
         prepared in conformity with the accounting principles and practices as
         reflected in the Company's audited annual financial statements. The
         unaudited financial statements contain all adjustments, consisting only
         of normal recurring adjustments, necessary to present fairly the
         financial position as of March 31, 2000 and the operating results for
         the three and six months ended March 31, 2000 and 1999 and the cash
         flows for the six months ended March 31, 2000 and 1999. Results for
         interim periods are not necessarily indicative of those to be expected
         for the year.

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         date of the financial statements and the reported amounts of revenues
         and expenses during the reporting period. Actual results could differ
         from these estimates.

         Certain information and footnote disclosures normally included in
         financial statements prepared in accordance with generally accepted
         accounting principles have been condensed or omitted. It is suggested
         that these consolidated financial statements be read in conjunction
         with the consolidated financial statements and notes thereto
         incorporated in the Company's Annual Report on Form 10-K for the fiscal
         year ended September 30, 1999.

         Certain prior year balances have been reclassified to conform with
         current year presentation.


                                       5
<PAGE>



(2)      Certain Significant Risks and Uncertainties - Liquidity and Going
         Concern Assumption

         The following information is provided in accordance with the AICPA
         Statement of Position No. 94-6, "Disclosure of Certain Significant
         Risks and Uncertainties."

         Liquidity and Going Concern Assumption

         The accompanying unaudited financial statements have been prepared
         assuming that the Company will continue as a going concern with the
         realization of assets and the settlement of liabilities and commitments
         in the normal course of business. The Company has experienced
         significant losses and has a working capital deficit of $701.4 million
         as of March 31, 2000 due to the reclassification of the Senior Loans
         and 9% Senior Subordinated Notes as currently due.

         The Company is in violation of certain covenants under the Company's
         Senior Credit Agreement. On March 29, 2000 the Company elected not to
         make interest payments due under the Senior Credit Agreement.

         Management has begun discussions with the Company's lenders under its
         Senior Credit Agreement and advisors to certain holders of the
         Company's 9% Senior Subordinated Notes to revise the Company's capital
         structure. The Company's Senior Lenders have granted a forbearance
         period while discussions on an overall restructuring take place. Under
         the forbearance agreement, the majority of the Senior Lenders have,
         subject to certain conditions, agreed to refrain from accelerating the
         Senior Loans or exercising other remedies against the Company. During
         the forbearance period, Multicare has not made scheduled interest and
         principal payments under its Senior Credit Agreement. As a result of
         the uncertainty related to the covenant defaults and corresponding
         remedies, amounts outstanding under Multicare's Senior Credit Agreement
         and its 9% Senior Subordinated Notes have been reclassified as a
         current liability at March 31, 2000. The forbearance period expires on
         May 19, 2000. The Company has requested that the forbearance period be
         extended through June 30, 2000. There can be no assurance that the
         Senior Lenders will agree to this request.

         There can be no assurances that the Senior Lenders or holders of
         Subordinated Notes will approve any amendment or restructuring of the
         Senior Credit Agreement or the Subordinated Notes. The financial
         statements do not include adjustments, if any, to reflect the possible
         future effects on the recoverability and classification of recorded
         assets or the amounts and classification of liabilities that may result
         from the outcome of the uncertainty related to the covenant defaults
         and corresponding remedies.

         If the Senior Lenders accelerate the obligations under the agreement,
         such events would have a material adverse effect on the Company's
         liquidity and financial position and, if such acceleration were not
         discharged, rescinded or annulled within thirty days, would result in a
         default under the Indenture for the Company's 9% Senior Subordinated
         Notes. Under such circumstances, the financial position of the Company
         would necessitate the development of an alternative financial
         structure. Considering the limited financial resources and the
         existence of certain defaults there can be no assurance that the
         Company would succeed in formulating and consummating an acceptable
         alternative financial structure.

         Debt Restructuring Expense

         In connection with the debt restructuring discussions, the Company has
         incurred legal, bank, and other professional costs of $2.1 million
         which are recorded as expense in the quarter ended March 31, 2000.
         Included in the debt restructuring expense was $0.3 million in bank
         charges and $1.8 million in legal and financial consultant expense.

         Reimbursement Risk

         The Company receives revenues from Medicare, Medicaid, private
         insurance, self-pay residents, and other third party payors. The health
         care industry is experiencing a strong trend toward cost containment,
         as government and other third party payors seek to impose lower
         reimbursement and utilization rates and negotiate reduced payment
         schedules with providers. These cost containment measures, combined
         with the increasing influence of managed care payors and competition
         for patients, have resulted in reduced rates of reimbursement for
         services provided by the Company.

                                       6

<PAGE>

         In recent years, several significant actions have been taken with
         respect to Medicare and Medicaid reimbursement, including the
         following:

         o    the adoption of the Medicare Prospective Payment System ("PPS")
              pursuant to the Balanced Budget Act of 1997, as modified by the
              Medicare Balanced Budget Refinement Act; and

         o    the repeal of the "Boren Amendment" federal payment standard for
              Medicaid payments to nursing facilities.

         While the Company has prepared certain estimates of the impact of the
         above changes, it is not possible to fully quantify the effect of
         recent legislation, the interpretation or administration of such
         legislation or any other governmental initiatives on its business.
         Accordingly, there can be no assurance that the impact of these changes
         will not be greater than estimated or that these legislative changes or
         any future healthcare legislation will not adversely affect the
         Company's business. There can be no assurance that payments under
         governmental and private third party payor programs will be timely,
         will remain at levels comparable to present levels or will, in the
         future, be sufficient to cover the costs allocable to patients eligible
         for reimbursement pursuant to such programs. The Company's financial
         condition and results of operations may be affected by the revenue
         reimbursement process, which in the Company's industry is complex and
         can involve lengthy delays between the time that revenue is recognized
         and the time that reimbursement amounts are settled.

         (3)  Tender Offer and Merger and its Restructuring

         In October 1997, Genesis, affiliates of Cypress, TPG and certain of its
         affiliates and an affiliate of Nazem, acquired all of the issued and
         outstanding common stock of Genesis ElderCare Corp., a Delaware
         corporation. Cypress, TPG and Nazem purchased 210,000, 199,500 and
         10,500 shares of Genesis ElderCare Corp. common stock, respectively,
         representing in the aggregate approximately 56.4% of the issued and
         outstanding common stock of Genesis ElderCare Corp., for an aggregate
         purchase price of $420,000. Genesis purchased 325,000 shares of Genesis
         ElderCare Corp. common stock, representing approximately 43.6% of the
         issued and outstanding common stock of Genesis ElderCare Corp., for an
         aggregate purchase price of $325,000. Cypress, TPG and Nazem are
         sometimes collectively referred to herein as the "Sponsors."

         In October 1997, as a result of a tender offer and a merger
         transaction, Genesis ElderCare Corp. acquired 100% of the outstanding
         shares of common stock of Multicare, making Multicare a wholly-owned
         subsidiary of Genesis ElderCare Corp. In connection with their
         investments in the common stock of Genesis ElderCare Corp., Genesis,
         Cypress, TPG and Nazem entered into a stockholders agreement dated as
         of October 9, 1997 (the "Multicare Stockholders Agreement"), and
         Genesis, Cypress, TPG and Nazem entered into a put/call agreement,
         dated as of October 9, 1997 (the "Put/Call Agreement") relating to
         their respective ownership interests in Genesis ElderCare Corp.

         On October 9, 1997, Genesis ElderCare Corp. and Genesis ElderCare
         Network Services, Inc., a wholly-owned subsidiary of Genesis, entered
         into a management agreement (the "Management Agreement") pursuant to
         which Genesis ElderCare Network Services manages Multicare's
         operations.

         Restructuring

         On October 8, 1999, Genesis entered into a restructuring agreement with
         Cypress, TPG and Nazem (the "Restructuring Agreement") to restructure
         their joint investment in Genesis ElderCare Corp., the parent company
         of Multicare.

         Amendment to Put/Call Agreement

         Pursuant to the Restructuring Agreement, the Put under the Put/Call
         Agreement was terminated in exchange for shares of Genesis preferred
         stock. In addition, the Call under the Put/Call Agreement was amended
         to provide Genesis with the right to purchase all of the shares of
         common stock of Genesis ElderCare Corp. not owned by Genesis for $2,000
         in cash at any time prior to the 10th anniversary of the closing date
         of the restructuring transaction.

                                       7
<PAGE>

         Amendment to Stockholders Agreement

         On November 15, 1999, the Multicare Stockholders Agreement was amended
         to:

         o    provide that all shareholders will grant to Genesis an irrevocable
              proxy to vote their shares of common stock of Genesis ElderCare
              Corp. on all matters to be voted on by shareholders, including the
              election of directors;

         o    provide that Genesis may appoint two-thirds of the members of the
              Genesis ElderCare Corp. board of directors;

         o    omit the requirement that specified significant actions receive
              the approval of at least one designee of each of Cypress, TPG and
              Genesis;

         o    permit Cypress, TPG and Nazem and their affiliates to sell their
              Genesis ElderCare Corp. stock, subject to certain limitations;

         o    provide that Genesis may appoint 100% of the members of the
              operating committee of the board of directors of Genesis ElderCare
              Corp.; and

         o    eliminate all pre-emptive rights.

         (4)  Sale of Ohio Assets

         The Company is actively involved in negotiations to sell the assets of
         14 eldercare centers in Ohio for approximately $36 million in cash in
         accordance with a signed letter of intent. The net proceeds of the
         disposition of assets located in Ohio are expected to be applied
         against the Company's Senior Credit facility at the time outstanding on
         a pro rata basis in accordance with the relative aggregate principal
         amount thereof held by each applicable lender. There can be no
         assurance that any such sale of assets can be consummated.







                                       8
<PAGE>

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


         General

         Upon consummation of the Merger, the Company and Genesis entered into
         the Management Agreement pursuant to which Genesis manages the
         Company's operations. Under Genesis' management, the Company's strategy
         is to integrate the talents of case managers, comprehensive discharge
         planning and, to provide cost effective care management to achieve
         superior outcomes and return the Company's customers to the community.
         Genesis' management believes that achieving improved customer outcomes
         will result in increased utilization of specialty medical services and
         a broader base of repeat customers in the Company's network. Moreover,
         the Company believes that this strategy will lead to a high quality
         payor mix and continued high levels of occupancy. It is contemplated
         that the Company will do little, if any, new acquisitions or new
         construction after the Merger.

         Liquidity and Going Concern Assumption

         The accompanying unaudited financial statements have been prepared
         assuming that the Company will continue as a going concern with the
         realization of assets and the settlement of liabilities and commitments
         in the normal course of business. The Company has experienced
         significant losses and has a working capital deficit of $701.4 million
         as of March 31, 2000 due to the reclassification of the Senior Loans
         and 9% Senior Subordinated Notes to currently due.

         The Company is in violation of certain covenants under the Company's
         Senior Credit Agreement. On March 29, 2000 the Company elected not to
         make interest payments due under the Senior Credit Agreement.

         Management has begun discussions with the Company's lenders under its
         Senior Credit Agreement and advisors to certain holders of the
         Company's 9% Senior Subordinated Notes to revise the Company's capital
         structure. The Company's Senior Lenders have granted a forbearance
         period while discussions on an overall restructuring take place. Under
         the forbearance agreement, the majority of the Senior Lenders have,
         subject to certain conditions, agreed to refrain from accelerating the
         Senior Loans or exercising other remedies against the Company. During
         the forbearance period, Multicare has not made scheduled interest and
         principal payments under its Senior Credit Agreement. As a result of
         the uncertainty related to the covenant defaults and corresponding
         remedies, amounts outstanding under Multicare's Senior Credit Agreement
         and its 9% Senior Subordinated Notes have been reclassified as a
         current liability at March 31, 2000. The forbearance period expires on
         May 19, 2000. The Company has requested that the forbearance period be
         extended through June 30, 2000. There can be no assurance that the
         Senior Lenders will agree to this request.

         There can be no assurances that the Senior Lenders or holders of
         Subordinated Notes will approve any amendment or restructuring of the
         Senior Credit Agreement or the Subordinated Notes. The financial
         statements do not include adjustments, if any, to reflect the possible
         future effects on the recoverability and classification of recorded
         assets or the amounts and classification of liabilities that may result
         from the outcome of the uncertainty related to the covenant defaults
         and corresponding remedies.

         If the Senior Lenders accelerate the obligations under the agreement,
         such events would have a material adverse effect on the Company's
         liquidity and financial position and, if such acceleration were not
         discharged, rescinded or annulled within thirty days, would result in a
         default under the Indenture for the Company's 9% Senior Subordinated
         Notes. Under such circumstances, the financial position of the Company
         would necessitate the development of an alternative financial
         structure. Considering the limited financial resources and the
         existence of certain defaults there can be no assurance that the
         Company would succeed in formulating and consummating an acceptable
         alternative financial structure.

         The Tender Offer and Merger and its Restructuring

         In October 1997, Genesis, affiliates of Cypress, TPG and certain of its
         affiliates and an affiliate of Nazem, acquired all of the issued and
         outstanding common stock of Genesis ElderCare Corp., a Delaware

                                       9
<PAGE>

         corporation. Cypress, TPG and Nazem purchased 210,000, 199,500 and
         10,500 shares of Genesis ElderCare Corp. common stock, respectively,
         representing in the aggregate approximately 56.4% of the issued and
         outstanding common stock of Genesis ElderCare Corp., for an aggregate
         purchase price of $420,000,000. Genesis purchased 325,000 shares of
         Genesis ElderCare Corp. common stock, representing approximately 43.6%
         of the issued and outstanding common stock of Genesis ElderCare Corp.,
         for an aggregate purchase price of $325,000,000. Cypress, TPG and Nazem
         are sometimes collectively referred to herein as the "Sponsors."

         In October 1997, as a result of a tender offer and a merger
         transaction, Genesis ElderCare Corp. acquired 100% of the outstanding
         shares of common stock of Multicare, making Multicare a wholly-owned
         subsidiary of Genesis ElderCare Corp. In connection with their
         investments in the common stock of Genesis ElderCare Corp., Genesis,
         Cypress, TPG and Nazem entered into a stockholders agreement dated as
         of October 9, 1997 (the "Multicare Stockholders Agreement"), and
         Genesis, Cypress, TPG and Nazem entered into a put/call agreement,
         dated as of October 9, 1997 (the "Put/Call Agreement") relating to
         their respective ownership interests in Genesis ElderCare Corp.

         On October 9, 1997, Genesis ElderCare Corp. and Genesis ElderCare
         Network Services, Inc., a wholly-owned subsidiary of Genesis, entered
         into a management agreement (the "Management Agreement") pursuant to
         which Genesis ElderCare Network Services manages Multicare's
         operations.

         Restructuring

         On October 8, 1999, Genesis entered into a restructuring agreement with
         Cypress, TPG and Nazem (the "Restructuring Agreement") to restructure
         their joint investment in Genesis ElderCare Corp., the parent company
         of Multicare.

         Amendment to Put/Call Agreement

         Pursuant to the Restructuring Agreement, the Put under the Put/Call
         Agreement was terminated in exchange for shares of Genesis preferred
         stock. In addition, the Call under the Put/Call Agreement was amended
         to provide Genesis with the right to purchase all of the shares of
         common stock of Genesis ElderCare Corp. not owned by Genesis for
         $2,000,000 in cash at any time prior to the 10th anniversary of the
         closing date of the restructuring transaction.

         Amendment to Stockholders Agreement

         On November 15, 1999, the Multicare Stockholders Agreement was amended
         to:

         o    provide that all shareholders will grant to Genesis an irrevocable
              proxy to vote their shares of common stock of Genesis ElderCare
              Corp. on all matters to be voted on by shareholders, including the
              election of directors;

         o    provide that Genesis may appoint two-thirds of the members of the
              Genesis ElderCare Corp. board of directors;

         o    omit the requirement that specified significant actions receive
              the approval of at least one designee of each of Cypress, TPG and
              Genesis;

         o    permit Cypress, TPG and Nazem and their affiliates to sell their
              Genesis ElderCare Corp. stock, subject to certain limitations;

         o    provide that Genesis may appoint 100% of the members of the
              operating committee of the board of directors of Genesis ElderCare
              Corp.; and

         o    eliminate all pre-emptive rights.



                                       10
<PAGE>
         Results of Operations

         Three Months Ended March 31, 2000 Compared to Three Months ended March
         31, 1999

         Net revenues. Net revenues for the three months ended March 31, 2000
         increased $8.5 million or 5.5% from the same period last year to $163.2
         million. In the quarter ended March 31, 2000, net revenues increased by
         $1.7 million due to one more day in the quarter. In the quarter ended
         March 31, 2000, an increase in average daily Medicare census resulted
         in an increase in revenue of $7.8 million which was offset by a
         decrease in private and other average daily census decline causing a
         $1.0 million decline in revenue.

         The Company's quality mix of private, Medicare and insurance patient
         days was 40.4% of patient days for the three months ended March 31,
         2000 compared to 40.6% in the similar period of last year. Occupancy
         rates were 91.3% for the three months ended March 31, 2000 compared to
         90.5% in the similar period of last year.

         Operating Expense. Operating expenses for the three months ended March
         31, 2000 increased $9.2 million or 7.2% from the comparable period last
         year to $136.8 million. Of this increase, $1.4 million was due to one
         more day in the March 31, 2000 quarter. The remaining increase resulted
         primarily from higher salaries, wages and benefits and overtime due to
         more competitive labor markets. Facility operating margins were 16.2%
         and 17.6% for the three months ended March 31, 2000 and 1999
         respectively.

         Management Fee. In connection with the Management Agreement, Genesis
         manages Multicare's operations for a fee of approximately six percent
         of Multicare's non-extraordinary (as defined by the Management
         Agreement) sales and is responsible for Multicare's corporate general
         and administrative expenses other than certain specified third party
         expenses. Management fees increased by $0.5 million or 5.6% to $9.8
         million for the three months ended March 31, 2000 due to the increase
         in net revenues.

         Lease Expense. Lease expense of $3.3 million for the three months ended
         March 31, 2000 and 1999 was unchanged as the same number of eldercare
         centers were leased in 2000 and 1999.

         Depreciation and Amortization. Depreciation and amortization expense
         for the three months ended March 31, 2000 decreased $1.8 million or
         16.0% from the prior period to $9.5 million. Effective September 30,
         1999, the Company wrote-down impaired long-lived assets of $397.3
         million. Due to this write-down of long-lived assets, amortization of
         goodwill decreased by approximately $1.8 million for the three months
         ended March 31, 2000. Decreases in depreciation due to the write-down
         of long lived assets were offset by increases due to capital
         expenditures for routine maintenance and renovation. The Company has
         not completed any acquisitions and has begun little new construction
         since the Merger.

         Interest Expense, net. Interest expense for the three months ended
         March 31, 2000 increased $2.4 million or 14.8% to $18.6 million from
         the same period in the prior year. The increase is due to an increase
         in the effective borrowing rate to 9.7% for the three months ended
         March 31, 2000 from 8.4% for the three months ended March 31, 1999. The
         primary reason for the borrowing rate increase was due to amendments to
         the Senior Credit Agreement.

         Debt Restructuring Expense. During the March 31, 2000 quarter, the
         Company began discussions with its lenders under its Senior Credit
         Agreement to revise its capital structure. In connection with the debt
         restructuring, the Company has incurred legal, bank, and other
         professional costs of $2.1 million. Included in the debt restructuring
         expense was $0.3 million in bank charges and $1.8 million in legal and
         financial consultant expense.

         Income Tax Benefit. The income taxes benefit increased by $3.0 million
         to $5.1 million for the three months ended March 31, 2000. The increase
         relates to the increase in operating losses offset by lower
         non-deductible goodwill amortization.



                                       11
<PAGE>

         Six Months Ended March 31, 2000 Compared to Six Months ended March 31,
         1999

         Net revenues. Net revenues for the six months ended March 31, 2000
         increased $0.4 million from the same period last year to $323.6
         million. In the six months ended March 31, 2000, net revenues decreased
         $10.8 due to Medicare rate dilution as a result of the Medicare
         Prospective Pay System implemented on January 1, 1999. Net revenues
         increased by $1.7 million due to one more day in the March 31, 2000
         period. In the six months ended March 31, 2000, an increase in average
         daily Medicare census resulted in an increase in revenue of $15.5
         million which was offset by private and other average daily census
         decline causing approximately a $6.0 million decline in revenue.

         The Company's quality mix of private, Medicare and insurance patient
         days was 39.9% of patient days for the six months ended March 31, 2000
         compared to 41.0% in the similar periods of last year. Occupancy rates
         were 90.9% for the six months ended March 31, 2000 compared to 90.8% in
         the similar periods of last year.

         Operating Expense. Operating expenses for the six months ended March
         31, 2000 increased $12.6 million or 4.9% from the comparable period
         last year to $269.9 million. Of this increase, $1.4 million was due to
         one more day in the March 31, 2000 quarter. The remaining increase
         resulted primarily from higher salaries, wages and benefits and
         overtime due to more competitive labor markets. Facility operating
         margins were 16.6% and 20.4% for the six months ended March 31, 2000
         and 1999 respectively.

         Management Fee. In connection with the Management Agreement, Genesis
         manages Multicare's operations for a fee of approximately six percent
         of Multicare's non-extraordinary (as defined by the Management
         Agreement) sales and is responsible for Multicare's corporate general
         and administrative expenses other than certain specified third party
         expenses. Management fees increased by $0.1 million to $19.4 million
         for the six months ended March 31, 2000 due to the increase in net
         revenues.

         Lease Expense. Lease expense of $6.5 million for the six months ended
         March 31, 2000 and 1999 was unchanged as the same number of eldercare
         centers were leased in 2000 and 1999.

         Depreciation and Amortization. Depreciation and amortization expense
         for the six months ended March 31, 2000 decreased $3.5 million or 15.7%
         from the prior period to $19.1 million. Effective September 30, 1999,
         the Company wrote-down impaired long-lived assets of $397.3 million.
         Due to this write-down of long-lived assets, amortization of goodwill
         decreased by approximately $3.4 million for the six months ended March
         31, 2000. Decreases in depreciation due to the write-down of long lived
         assets were offset by increases due to capital expenditures for routine
         maintenance and renovation. The Company has not completed any
         acquisitions and has begun little new construction since the Merger.

         Interest Expense, net. Interest expense for the six months ended March
         31, 2000 increased $4.6 million or 14.0% to $37.0 million from the same
         period in the prior year. The increase is due to an increase in the
         effective borrowing rate to 9.6% for the six months ended March 31,
         2000 from 8.4% for the six months ended March 31, 1999. The primary
         reason for the borrowing rate increase was due to amendments to the
         Senior Credit Agreement.

         Debt  Restructuring  Expense.  During the March 31, 2000  quarter,  the
         Company  began  discussions  with its lenders  under its Senior  Credit
         Agreement to revise its capital structure.  In connection with the debt
         restructuring  discussions,  the Company has incurred legal,  bank, and
         other  professional  costs  of  $2.1  million.  Included  in  the  debt
         restructuring expense was $0.3 million in bank charges and $1.8 million
         in legal and financial consultant expense.

         Cumulative effect of accounting  change,  net of tax. Effective October
         1, 1999, the Company adopted the provisions of the AICPA's Statement of
         Position No.  98-5,  "Reporting  on the Costs of Start-up  Activities,"
         (SOP  98-5)  which  requires  the costs of  start-up  activities  to be
         expensed as incurred. The initial application of SOP 98-5 resulted in a
         charge of $3.6 million,  net of tax for the  cumulative  effect of this
         accounting change.

         Income Tax Benefit. The income tax benefit increased by $6.9 million to
         $9.1 million for the six months ended March 31, 2000. Of the increase
         $2.0 million relates to the tax benefit related to the cumulative
         effect of accounting change. The remainder of the increase relates to
         the increase in operating losses offset by lower non-deductible
         goodwill amortization.

                                       12
<PAGE>

         Liquidity and Capital Resources

         General

         The accompanying unaudited financial statements have been prepared
         assuming that the Company will continue as a going concern with the
         realization of assets and the settlement of liabilities and commitments
         in the normal course of business. The Company has experienced
         significant losses and has a working capital deficit of $701.4 million
         as of March 31, 2000 due to the reclassification of the Senior Loans
         and 9% Senior Subordinated Notes to currently due.

         The Company is in violation of certain covenants under the Company's
         Senior Credit Agreement. On March 29, 2000 the Company elected not to
         make interest payments due under the Senior Credit Agreement. In
         addition, the Company has received default notices from Eldertrust
         alleging certain payment related defaults under certain mortgage loans.

         Management has begun discussions with the Company's lenders under its
         Senior Credit Agreement and advisors to certain holders of the
         Company's 9% Senior Subordinated Notes to revise the Company's capital
         structure. The Company's Senior Lenders have granted a forbearance
         period while discussions on an overall restructuring take place. Under
         the forbearance agreement, the majority of the Senior Lenders have,
         subject to certain conditions, agreed to refrain from accelerating the
         Senior Loans or exercising other remedies against the Company. During
         the forbearance period, Multicare has not made scheduled interest and
         principal payments under its Senior Credit Agreement. As a result of
         the uncertainty related to the covenant defaults and corresponding
         remedies, amounts outstanding under Multicare's Senior Credit Agreement
         and its 9% Senior Subordinated Notes have been reclassified as a
         current liability at March 31, 2000. The forbearance period expires on
         May 19, 2000. The Company has requested that the forbearance period be
         extended through June 30, 2000. There can be no assurance that the
         Senior Lenders will agree to this request.

         There can be no assurances that the Senior Lenders or holders of
         Subordinated Notes will approve any amendment or restructuring of the
         Senior Credit Agreement or the Subordinated Notes. The financial
         statements do not include adjustments, if any, to reflect the possible
         future effects on the recoverability and classification of recorded
         assets or the amounts and classification of liabilities that may result
         from the outcome of the uncertainty related to the covenant defaults
         and corresponding remedies.

         If the Senior Lenders accelerate the obligations under the agreement,
         such events would have a material adverse effect on the Company's
         liquidity and financial position and, if such acceleration were not
         discharged, rescinded or annulled within thirty days, would result in a
         default under the Indenture for the Company's 9% Senior Subordinated
         Notes. Under such circumstances, the financial position of the Company
         would necessitate the development of an alternative financial
         structure. Considering the limited financial resources and the
         existence of certain defaults there can be no assurance that the
         Company would succeed in formulating and consummating an acceptable
         alternative financial structure. In light of the Company's current
         financial condition and its default under the Senior Loans, the Company
         may need to seek protection under federal bankruptcy law.


         Cash flow provided by operations was $3.6 million for the six months
         ended March 31, 2000 compared to cash flow used in operations of $26.6
         million in the comparable period of 1999. Operating cash flows
         increased as a result of the decline of receivable growth from the
         prior period of $19.0 million. Operating cash flow decreased by $15.5
         million which relates to the increase in net losses primarily as a
         result of the implementation of PPS. Net accounts receivable were
         $112.7 million and $113.6 million at March 31, 2000 and September 30,
         1999, respectively. Legislative and regulatory action and government
         budgetary constraints have changed, and may in the future continue to
         change the timing of payments and reimbursement rates of the Medicare
         and Medicaid programs in the future. These changes have had and may in
         the future have a material adverse effect on the Company's operating
         results and cash flows and could have a further material adverse impact
         in the future. In addition growth of accounts payable and accrued
         liabilities resulted in increased cash flow of $32.4 million primarily
         as a result of increased accrued interest and amounts owed Genesis.
         Accrued interest was $12.3 million as of March 31, 2000. Trade payables
         owed to Genesis were $54.3 million as of March 31, 2000. Genesis is the
         primary provider of pharmacy, rehabilitation and hospitality services.

                                       13
<PAGE>

         Cash flows provided by investing activities in fiscal year 1999
         includes the deferred management fees due to Genesis of $6.5 million as
         a source of cash. Capital expenditures of $4.3 million are principally
         for routine maintenance and renovation. The Company has not completed
         any new acquisitions and has begun little new construction since the
         Merger.

         Multicare anticipates an adverse effect on operating cash flow
         beginning in the third quarter of 2000 due to an increase in the cost
         of certain of its insurance programs due to the timing of funding of
         premiums for new policies. Specifically, the costs of general and
         professional liability and property insurance premiums are expected to
         increase due to the rising costs of elder care malpractice litigation
         involving nursing care operators. In addition, as a result of the
         Company's current financial condition it is unable to continue certain
         self insured programs and has replaced these programs with outside
         insurance carriers.

         Credit Facility and Other Debt

         In connection with the Merger, Multicare entered into three term loans
         and a revolving credit facility of up to $525 million, in the aggregate
         (collectively, the "Credit Facility"), provided by a syndicate of banks
         and other financial institutions (collectively, the "Lenders") led by
         Mellon Bank, N.A., as administrative agent (the "Administrative
         Agent"), pursuant to a certain credit agreement (the "Senior Credit
         Agreement") dated as of October 14, 1997, as amended from time to time.

         Multicare entered into a fourth amended and restated credit agreement
         on August 20, 1999 which made the financial covenants for certain
         periods less restrictive, permitted a portion of the proceeds of assets
         sales to repay indebtedness under the Tranche A Term Facility and
         Revolving Facility (defined below), permitted the restructuring of the
         Put / Call Agreement, as defined, increased the interest rates applying
         to the Term Loans (defined below) and the Revolving Facility, and
         increased the level of management fees Multicare may defer from two
         percent to four percent (on an annualized basis) in any fiscal year.

         On March 20, 2000 the Company entered into a forbearance agreement with
         the Senior Lenders. Under the forbearance agreement, the majority of
         the Senior Lenders have, subject to certain conditions agreed to
         refrain from accelerating the Senior Loans or exercising other remedies
         against the Company through May 19, 2000. The Company has requested
         that the forbearance period be extended through June 30, 2000. There
         can be no assurance that the Senior Lenders will agree to this request.

         The Senior Credit Facilities consist of three term loans with an
         aggregate original balance of $400 million (collectively, the "Term
         Loans"), and a $125 million revolving credit loan (the "Revolving
         Facility") The Term Loans amortize in quarterly installments through
         2005. The loans consist of:

         o    an original six year term loan maturing in September 2003 with an
              outstanding balance of $139.3 million at March 31, 2000 (the
              "Tranche A Term Facility");

         o    an original seven year term loan maturing in September 2004 with
              an outstanding balance of $145.9 million at March 31, 2000 (the
              "Tranche B Term Facility"); and

         o    an original eight year term loan maturing in June 2005 with an
              outstanding balance of $48.3 million at March 31, 2000 (the
              "Tranche C Term Facility").

         o    The Revolving Facility, with an outstanding balance of $123.5
              million at March 31, 2000 becomes payable in full on September 30,
              2003.

         The Senior Credit Facility (as amended) is secured by first priority
         security interests (subject to certain exceptions) in all personal
         property, including inventory, accounts receivable, equipment and
         general intangibles. Mortgages on substantially all of Multicare's
         subsidiaries' real property were also granted. Loans under the Senior
         Credit Facility bear, interest at the per annum Prime Rate as announced
         by the administrative agent plus a margin (the "Annual Applicable
         Margin") that is dependent upon a certain financial ratio test.

         The Senior Lenders have agreed to waive the imposition of the Default
         Rate during the forbearance period. However, effective with the default
         under the Senior Credit Agreement, the Company shall no longer be

                                       14
<PAGE>

         entitled to elect a LIBO Rate. Effective March 20, 2000, loans under
         the Tranche A Term Facility bear interest at a rate equal to Prime Rate
         plus a margin up to 2.0%; loans under the Tranche B Term Facility bear
         interest at a rate equal to Prime Rate plus a margin up to 2.25%; loans
         under the Tranche C Term Facility bear interest at a rate equal to
         Prime Rate plus a margin up to 2.5%; loans under the Revolving Credit
         Facility bear interest at a rate equal to Prime Rate plus a margin up
         to 2.0%.

         The Company is actively involved in negotiations to sell the assets of
         14 eldercare centers in Ohio for approximately $36 million in cash in
         accordance with a signed letter of intent. All net proceeds of the
         disposition of assets located in Ohio are expected to be applied
         against the Company's Senior Credit facility at the time outstanding on
         a pro rata basis in accordance with the relative aggregate principal
         amount thereof held by each applicable lender. There can be no
         assurance that any such sale of assets can be consummated.

         The Senior Credit Facility contains a number of covenants that, among
         other things, restrict the ability of Multicare and its subsidiaries to
         dispose of assets, incur additional indebtedness, make loans and
         investments, pay dividends, engage in mergers or consolidations, engage
         in certain transactions with affiliates and change control of capital
         stock, and to make capital expenditures; prohibit the ability of
         Multicare and its subsidiaries to prepay debt to other persons, make
         material changes in accounting and reporting practices, create liens on
         assets, give a negative pledge on assets, make acquisitions and amend
         or modify documents; causes Multicare and its affiliates to maintain
         certain agreements including the Management Agreement and the Put/Call
         Agreement (as amended), as defined, and corporate separateness; and
         will cause Multicare to comply with the terms of other material
         agreements, as well as comply with usual and customary covenants for
         transactions of this nature.

         On August 11, 1997, Genesis ElderCare Acquisition Corp. sold $250
         million principal amount of 9% Senior Subordinated Notes due 2007 ("the
         9% Notes"). Interest on the 9% Notes is payable semiannually on
         February 1 and August 1 of each year.

         The 9% Notes are unsecured, general obligations of the issuer,
         subordinated in right of payment to all existing and future Senior
         Indebtedness, as defined in the Indenture, of the issuer, including
         indebtedness under the Senior Facilities. The 9% Notes rank pari passu
         in right of payment with any future senior subordinated indebtedness of
         the issuer and are senior in right of payment to all future
         subordinated indebtedness of the issuer. The 9% Notes are redeemable at
         the option of the issuer, in whole or in part, at any time on or after
         August 1, 2002, initially at 104.5% of their principal amount, plus
         accrued interest, declining ratably to 100% of their principal amount,
         plus accrued interest, on or after August 1, 2004. The 9% Notes are
         subject to mandatory redemption at 101%. Upon a Change in Control, as
         defined in the Indenture, the issuer is required to make an offer to
         purchase the 9% Notes at a purchase price equal to 101% of their
         principal amount, plus accrued interest. The Indenture contains a
         number of covenants that, among other things, restrict the ability of
         the issuer of the 9% Notes to incur additional indebtedness, pay
         dividends, redeem capital stock, make certain investments, issue the
         capital stock of its subsidiaries, engage in mergers or consolidations
         or asset sales, engage in certain transactions with affiliates, and
         other restrictions affecting its subsidiaries.

         Merger and Other Transactions

         Upon the consummation of the Merger, Multicare assumed all obligations
         of Acquisition Corp. with respect to and under the 9% Notes and the
         related Indenture.

         On October 9, 1997, Multicare, Genesis and Genesis ElderCare Network
         Services, Inc., a wholly-owned subsidiary of Genesis, entered into a
         management agreement (the "Management Agreement") pursuant to which
         Genesis manages Multicare's operations. The Management Agreement has a
         term of five years with automatic renewals for two years unless either
         party terminates the Management Agreement. Genesis will be paid a fee
         of six percent of Multicare's net revenues for its services under the
         Management Agreement provided that payment of such fee in respect of
         any month in excess of the greater of (i) $1.9 million and (ii) four
         percent of Multicare's consolidated net revenues for such month, shall
         be subordinate to the satisfaction of Multicare's senior and
         subordinate debt covenants; and provided, further, that payment of such
         fee shall be no less than $23.9 million in any given year. At December
         31, 1999 $30.1 million is subordinated and due to Genesis Health
         Ventures, Inc. Under the Management Agreement, Genesis is responsible
         for Multicare's non-extraordinary sales, general and administrative
         expenses (other than certain specified third-party expenses), and all
         other expenses of Multicare are paid by Multicare.

         In February 1998 ElderTrust ("ETT"), a Maryland real estate investment


                                       15
<PAGE>

         trust sponsored by Genesis, made term loans to subsidiaries of the
         Company with respect to the lease-up of three assisted living
         facilities. The loans have a fixed annual rate of interest of 10.5% and
         mature three years from the date of the loans, subject to the right of
         the Company to extend the term for up to three one-year extension
         periods in the event the facility has not reached "stabilized
         occupancy" (as defined) as of the third anniversary of the loan (or at
         the end of any extension period, if applicable).

         ETT is obligated to purchase and leaseback the three facilities that
         secure the term and construction loans being made to the Company, upon
         the earlier of the facility reaching stabilized occupancy or the
         maturity of the loan secured by the facility provided, however, that
         the Company will not be obligated to sell any facility if the purchase
         price for the facility would be less than the applicable loan amount.
         The purchase agreements provide for a cash purchase price in an amount
         which will result in an annual yield of 10.5% to ETT. If acquired by
         ETT, these facilities would be leased to the Company under minimum rent
         leases. The initial term of any minimum rent lease will be ten years,
         and the Company will have the option to extend the term for up to two
         five-year extension periods upon 12 months notice to ETT. Minimum rent
         for the first lease year under any minimum rent lease will be
         established by multiplying the purchase price for the applicable
         facility times 10.5%, and the increase each year by an amount equal to
         the lesser of (i) 5% of the increase in the gross revenues for such
         facility (excluding any revenues derived from ancillary healthcare
         services provided by Genesis or its affiliates to residents of the
         applicable facility) during the immediately preceding year or (ii)
         one-half of the increase in the Consumer Price Index during the
         immediately preceding year. During the last four years of the term (as
         extended, if applicable), the Company is required to make minimum
         capital expenditures equal to $3,000 per residential unit in each
         assisted living facility covered by a minimum rent lease.

         Legislative and Regulatory Issues

         Legislative and regulatory action, including but not limited to the
         1997 Act and the Refinement Act, has resulted in continuing change in
         the Medicare and Medicaid reimbursement programs which has adversely
         impacted us. The changes have limited, and are expected to continue to
         limit, payment increases under these programs. Also, the timing of
         payments made under the Medicare and Medicaid programs is subject to
         regulatory action and governmental budgetary constraints; in recent
         years, the time period between submission of claims and payment has
         increased. Within the statutory framework of the Medicare and Medicaid
         programs, there are substantial areas subject to administrative rulings
         and interpretations which may further affect payments made under those
         programs. Further, the federal and state governments may reduce the
         funds available under those programs in the future or require more
         stringent utilization and quality reviews of eldercare centers or other
         providers. There can be no assurances that adjustments from Medicare or
         Medicaid audits will not have a material adverse effect on us.

         See "Cautionary Statements Regarding Forward Looking Statements."

         Anticipated Impact of Healthcare Reform

         The majority of the Multicare eldercare centers began implementation of
         PPS on January 1, 1999. The actual impact of PPS on our earnings in
         future periods will depend on many variables which can not be
         quantified at this time, including the effect of the Balanced Budget
         Refinement Act, regulatory changes, patient acuity, patient length of
         stay, Medicare census, referral patterns, ability to reduce costs and
         growth of ancillary business.

         As a result of the Balanced Budget Refinement Act, the Company
         transitioned 23 eldercare centers to the full federal rate effective
         January 1, 2000. The Company believes this transition will result in
         incremental annualized revenue of approximately $2.2 million, which
         will in part be offset by the continued phase in of PPS in other
         facilities.

         Year 2000 Compliance

         The Company did not experience any material interruptions of business
         as a result of the Year 2000 computer problem.


                                       16
<PAGE>

         Seasonality

         The Company's earnings generally fluctuate from quarter to quarter.
         This seasonality is related to a combination of factors which include
         the timing of Medicaid rate increases, seasonal census cycles, and the
         number of calendar days in a given quarter.

         Impact of Inflation

         The healthcare industry is labor intensive. Wages and other labor costs
         are especially sensitive to inflation and marketplace labor shortages.
         The Company has implemented cost control measures to attempt to limit
         increases in operating costs and expenses but cannot predict its
         ability to control such operating cost increases in the future.

         New Accounting Pronouncements

         In June 1998, the FASB issued Statement of Financial Accounting
         Standards No. 133, Accounting for Derivative Instruments and Hedging
         Activities ("Statement 133"). Statement 133 establishes accounting and
         reporting standards for derivative instruments, including certain
         derivative instruments embedded in other contracts, and for hedging
         activities. Statement 133 requires that an entity recognize all
         derivatives as either assets or liabilities in the statement of
         financial position and measure the instrument at fair value. The
         accounting changes in the fair value of a derivative depends on the
         intended use of the derivative and the resulting designation. This
         Statement is effective for all fiscal quarters of fiscal years
         beginning after June 15, 2000. The Company intends to adopt this
         accounting standard as required. The adoption of this standard is not
         expected to have a material impact on the Company's earnings or
         financial position.







                                       17
<PAGE>

Item 3. Quantitative and Qualitative Disclosures about Market Risk

         The Company is exposed to the impact of interest rate changes. The
         Company's objective in managing its exposure to interest rate changes
         is to limit the impact of such changes on earnings and cash flows and
         to lower its overall borrowing costs. To achieve its objectives, the
         Company primarily used interest rate swaps to manage net exposure to
         interest rate changes related to its portfolio of borrowings. During
         the forbearance period the Company is not required to maintain interest
         rate hedging agreements. During the quarter ended March 31, 2000, the
         Company terminated all of its interest rate swap agreements for $0.1
         million.












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<PAGE>


                           PART II: OTHER INFORMATION

Item 1.  Legal Proceedings.  Not Applicable.

Item 2.  Changes in Securities and Use of Proceeds.  Not Applicable.

Item 3.  Defaults Upon Senior Securities.

         The Company has not made scheduled  interest and principal  payments in
         the  amount of $13.5  million  as of March 31,  2000  under its  Senior
         Credit  Facilities.

Item 4.  Submission of Matters to a Vote of Security Holders.  Not Applicable.

Item 5.  Other Information.  Not Applicable.

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

         (a)    Exhibits

                Exhibit No.    Description
                -----------    -----------

                  27           Financial Data Schedule.

                  99.1         Forbearance Agreement, dated as of March 20,
                               2000, among The Multicare Companies, Inc., Mellon
                               Bank, N.A. as Administrative Agent, Issuer of
                               Letters of Credit, Collateral Agent and Synthetic
                               Lease Facility Agent, Citicorp USA, Inc. as
                               Syndication Agent, First Union National Bank as
                               Documentation Agent, Bank of America, N.A. as
                               Syndication Agent, and the Lenders and Secured
                               Parties

         (b)      Reports on Form 8-K.

                  On April 4, 2000, the Company filed a Report on Form 8-K dated
                  March 21, 2000 reporting that it had begun debt restructuring
                  discussions with its senior lenders and that it did not expect
                  to make scheduled debt payments during the discussion period.




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<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, thereunto duly authorized.


                                THE MULTICARE COMPANIES, INC.


Date: May 15, 2000                  /S/ George V. Hager, Jr.
                                ----------------------------
                                George V. Hager, Jr.
                                Executive Vice President and Chief
                                Financial Officer




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