<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 June 30, 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
 incorporation or organization)                       Identification No.)

                              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 August 14, 2000
-----------------------------------------      ------------------------------
Common Stock ($.01 Par Value)                               100



<PAGE>


                          THE MULTICARE COMPANIES, INC.
                                AND SUBSIDIARIES

                              DEBTOR-IN-POSSESSION

                                Table of Contents


                                                                            Page

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS.................. 1-2


Part I: FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets
June 30, 2000 (Unaudited) and September 30, 1999............................. 3

Consolidated Statements of Operations
Three and nine months ended June 30, 2000 and 1999 (Unaudited)............... 4

Consolidated Statements of Cash Flows
Nine months ended June 30, 2000 and 1999 (Unaudited)......................... 5

Notes to Consolidated Financial Statements ............................... 6-10

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations............................. 11-20

Item 3.  Quantitative and Qualitative Disclosures about
         Market Risk........................................................ 21


Part II: OTHER

INFORMATION................................................................. 22

SIGNATURES.................................................................. 23



<PAGE>



                          THE MULTICARE COMPANIES, INC.
                                AND SUBSIDIARIES

                              DEBTOR-IN-POSSESSION

            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 and 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 bankruptcy cases;

         o        defaults under our debt agreements;

         o        confirmation of a restructuring plan;

         o        our substantial indebtedness and significant debt service
                  obligations;

         o        the effect 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.

                                       1
<PAGE>

On June 22, 2000, The Multicare Companies, Inc. and certain of its affiliates
filed voluntary petitions with the United States Bankruptcy Court for the
District of Delaware to reorganize their capital structure under Chapter 11 of
the United States Bankruptcy Code. On the same date, Genesis Health Ventures
Inc. (Multicare's principal owner and manager) and certain of Genesis' direct
and indirect affiliates also filed voluntary petitions with the United States
Bankruptcy Court for the District of Delaware to reorganize its capital
structure under Chapter 11 of the United States Bankruptcy Code. These
bankruptcy cases, among other factors such as the Company's recurring losses,
raise substantial doubt about the Company's ability to continue as a going
concern. 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. However, as a result of the bankruptcy cases and circumstances
relating to this event, including the Company's leveraged financial structure
and losses from operations, such realization of assets and liquidation of
liabilities is subject to significant uncertainty. While under the protection of
Chapter 11, the Company may sell or otherwise dispose of assets, and liquidate
or settle liabilities, for amounts other than those reflected in the financial
statements. Further, a plan of reorganization could materially change the
amounts reported in the financial statements, which do not give effect to all
adjustments of the carrying value of assets or liabilities that might be
necessary as a consequence of a plan of reorganization. Additionally, a deadline
will be established for the assertion of pre-bankruptcy claims against the
Company (commonly referred to as a bar date); including contingent, unliquidated
or disputed claims, which claims could result in an increase in liabilities
subject to compromise as reported in the financial statements. The Company's
ability to continue as a going concern is dependent upon, among other things,
confirmation of a plan of reorganization, future profitable operations, the
ability to comply with the terms of the Company's debtor-in-possession financing
agreement and the ability to generate sufficient cash from operations and
financing arrangements to meet obligations.

These and other factors have been discussed in more detail in the Company's
periodic reports.


                                       2
<PAGE>



                          PART I: FINANCIAL INFORMATION

                          Item 1. Financial Statements

                          THE MULTICARE COMPANIES, INC.
                                AND SUBSIDIARIES

                              DEBTOR-IN-POSSESSION

                      Condensed Consolidated Balance Sheets

                 (In thousands, except share and per share data)
<TABLE>
<CAPTION>

                                                               June 30,     September 30,
                                                                 2000           1999
                                                             -----------    -----------
                                                             (Unaudited)
                              Assets
Current Assets:
<S>                                                          <C>            <C>
       Cash and cash equivalents                             $    12,429    $     3,967
       Accounts receivable, net                                  109,341        113,586
       Prepaid expenses and other current assets                  12,604         13,130
       Deferred taxes - current portion                            2,027          2,027
                                                             -----------    -----------
                Total current assets                             136,401        132,710
                                                             -----------    -----------

Property, plant and equipment, net                               571,071        621,371

Goodwill, net                                                    470,857        480,809
Other assets                                                      61,678         67,474
                                                             -----------    -----------
                                                             $ 1,240,007    $ 1,302,364
                                                             ===========    ===========

               Liabilities and Stockholders' Equity

Current Liabilities not subject to compromise:
       Accounts payable and accrued liabilities              $    33,312    $    97,205
       Current portion of long-term debt                            --           34,700
                                                             -----------    -----------
                Total current liabilities                         33,312        131,905
                                                             -----------    -----------

Long-term debt not subject to compromise                          10,440        741,256
Deferred taxes                                                    55,677         76,007
Due to Genesis Health Ventures, Inc. and other liabilities           442         27,285

Liabilities subject to compromise                                859,688           --

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                                      (452,552)      (407,089)
                                                             -----------    -----------
                Total stockholders' equity                       280,448        325,911
                                                             -----------    -----------
                                                             $ 1,240,007    $ 1,302,364
                                                             ===========    ===========

</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>



                          THE MULTICARE COMPANIES, INC.
                                AND SUBSIDIARIES

                              DEBTOR-IN-POSSESSION

                 Condensed Consolidated Statements of Operations

                                   (Unaudited)

                                 (In thousands)
<TABLE>
<CAPTION>

                                                               Three Months Ended        Nine Months Ended
                                                                    June 30,                  June 30,
                                                             ----------------------    ----------------------
                                                                2000         1999         2000         1999
                                                             ---------    ---------    ---------    ---------
<S>                                                          <C>            <C>          <C>        <C>
Net revenues                                                 $ 161,846      157,295      485,448    $ 480,504

Expenses:
    Operating expense                                          136,059      127,792      405,996      385,145
    Management fee                                               9,711        9,437       29,133       28,766
    Depreciation and amortization expense                        9,435       11,412       28,490       34,003
    Lease expense                                                3,227        3,281        9,762        9,735
    Interest expense, net                                       19,562       16,554       56,525       48,966
    Debt restructuring, reorganization and other expense        12,386         --         14,529         --
                                                             ---------    ---------    ---------    ---------
      Total expenses                                           190,380      168,476      544,435      506,615
                                                             ---------    ---------    ---------    ---------

      Loss before income tax benefit, share in loss of
      unconsolidated affiliates, and cumulative effect of
      accounting change                                        (28,534)     (11,181)     (58,987)     (26,111)

Income tax benefit                                              (9,325)      (2,672)     (18,378)      (4,867)
                                                             ---------    ---------    ---------    ---------

Loss before share in loss of unconsolidated affiliates and
cumulative effect of accounting change                         (19,209)      (8,509)     (40,609)     (21,244)
                                                             ---------    ---------    ---------    ---------

Share in loss of unconsolidated affiliates                         444         --          1,231         --
                                                             ---------    ---------    ---------    ---------

Loss before cumulative effect of accounting change             (19,653)      (8,509)     (41,840)     (21,244)
                                                             ---------    ---------    ---------    ---------

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

      Net loss                                               $ (19,653)      (8,509)     (45,463)   $ (21,244)
                                                             =========    =========    =========    =========

</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       4

<PAGE>


                          THE MULTICARE COMPANIES, INC.
                                AND SUBSIDIARIES

                              DEBTOR-IN-POSSESSION

                 Condensed Consolidated Statements of Cash Flows

                                   (Unaudited)

                                 (In thousands)

<TABLE>
<CAPTION>

                                                                 Nine months ended
                                                                     June 30,

                                                                 2000         1999
                                                               ---------    ---------
Cash flows from operating activities:
<S>                                                            <C>          <C>
   Net loss                                                    $ (45,463)   $ (21,244)
   Adjustments to reconcile net loss to net cash provided by
   (used in) operating activities:
     Cumulative effect of accounting change, net of tax            3,623         --
     Loss on sale of Ohio assets                                   7,922         --
     Depreciation and amortization                                28,490       34,003
     Deferred tax benefit                                        (18,379)         229
     Changes in assets and liabilities:
       Accounts receivable                                         4,245      (26,552)
       Prepaid expenses and other current assets                     528        1,267
       Accounts payable and accrued liabilities                   32,998      (10,836)
                                                               ---------    ---------
         Net cash provided by (used in) operating activities      13,964      (23,133)
                                                               ---------    ---------

Cash flows from investing activities:
     Proceeds from sale of Ohio assets                            33,000         --
     Capital expenditures                                         (6,777)     (11,591)
     Other assets and liabilities                                  7,574        6,672
                                                               ---------    ---------
         Net cash provided by (used in) investing activities      33,797       (4,919)
                                                               ---------    ---------

Cash flows from financing activities:
     Proceeds from long-term debt                                 17,534      298,730
     Repayments of long-term debt                                (56,833)    (277,095)
     Debt issuance costs                                            --         (1,387)
                                                               ---------    ---------
         Net cash (used in) provided by financing activities     (39,299)      20,248
                                                               ---------    ---------

         Increase (Decrease) in cash and cash equivalents          8,462       (7,804)

Cash and cash equivalents at beginning of period                   3,967       11,344
                                                               ---------    ---------
Cash and cash equivalents at end of period                     $  12,429    $   3,540
                                                               =========    =========

</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       5

<PAGE>

                          THE MULTICARE COMPANIES, INC.
                                AND SUBSIDIARIES

                              DEBTOR-IN-POSSESSION

                   Notes to Consolidated Financial Statements

                                  June 30, 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. On
         June 22, 2000, The Multicare Companies, Inc. and certain of its
         affiliates filed voluntary petitions with the United States Bankruptcy
         Court for the District of Delaware to reorganize their capital
         structure under Chapter 11 of the United States Bankruptcy Code. On the
         same date, Genesis Health Ventures Inc. (Multicare's indirect principal
         shareholder and manager) and certain of Genesis' direct and indirect
         affiliates also filed voluntary petitions with the United States
         Bankruptcy Court for the District of Delaware to reorganize its capital
         structure under Chapter 11 of the United States Bankruptcy Code. These
         cases, among other factors such as the Company's recurring losses,
         raise substantial doubt about the Company's ability to continue as a
         going concern.

         The financial information as of June 30, 2000, and for the three and
         nine months ended June 30, 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. In the
         opinion of management, the consolidated financial statements include
         all necessary adjustments (consisting of normal recurring accruals and
         all adjustments pursuant to the adoption of the American Institute of
         Certified Public Accountants' ("AICPA') Statement of Position 90-7,
         "Financial Reporting by Entities in Reorganization under the Bankruptcy
         Code" ("SOP 90-7")) for a fair presentation of the financial position
         and results of operations for the interim periods presented. 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.

                                       6
<PAGE>



(2)      Voluntary Petition for Relief Under Chapter 11 of the
         United States Bankruptcy Code
         -----------------------------------------------------------------------

     On June 22, 2000, The Multicare Companies, Inc. and 196 of its affiliates
     ("the Debtors") filed voluntary petitions with the United States Bankruptcy
     Court for the District of Delaware to reorganize their capital structure
     under Chapter 11 of the United States Bankruptcy Code. On the same date,
     Genesis Health Ventures Inc. (Multicare's principal owner and manager) and
     certain of Genesis' direct and indirect affiliates also filed voluntary
     petitions with the United States Bankruptcy Court for the District of
     Delaware to reorganize its capital structure under Chapter 11 of the United
     States Bankruptcy Code. These cases, among other factors such as the
     Company's recurring losses raise substantial doubt about the Company's
     ability to continue as a going concern.

     Except for relief that might otherwise be granted by the Bankruptcy Court
     overseeing the Chapter 11 cases, and further subject to certain statutory
     exceptions, the automatic stay protection afforded by Chapter 11 of the
     Bankruptcy Code cases prevents any creditor or other third parties from
     taking any action in connection with any defaults under pre-petition debt
     obligations or agreements of the Company and those of its affiliates which
     are debtors in the Chapter 11 cases. In connection with the Chapter 11
     cases, the Company expects to develop a plan of reorganization that will be
     approved by its creditors and confirmed by the Bankruptcy Court overseeing
     the Company's Chapter 11 cases. In the event the plan of reorganization is
     accepted, continuation of the business thereafter is dependent on the
     Company's ability to achieve successful future operations.

     The Bankruptcy Court approved, on a final basis, borrowings of up to $50
     million in respect of the debtor in possession financing facility (the "DIP
     Facility") with Mellon Bank, N.A. as Agent and a syndicate of lenders. The
     Bankruptcy Court also authorized, on a final basis, the Debtors to use the
     cash collateral of certain third party lenders. The Debtors intend to
     utilize the DIP Facility and existing cash flow to fund ongoing operations
     during the Chapter 11 proceedings. As of June 30, 2000, no amounts are
     outstanding under the DIP Facility.

     Since the Company filed for protection under the Bankruptcy Code, the
     accompanying consolidated financial statements as of and for the three and
     nine months ended June 30, 2000 have been prepared in accordance with SOP
     90-7. Pursuant to SOP 90-7, the Company has segregated liabilities subject
     to compromise at June 30, 2000.

     On June 23, 2000 the Bankruptcy Court entered an order authorizing the
     Debtors to pay certain pre-petition wages, salaries, benefits and other
     employee obligations, as well as to continue in place the Debtors' various
     employee compensation programs and procedures. On that date, the Bankruptcy
     Court also authorized the Debtors to pay, among other claims, the
     pre-petition claims of certain critical vendors and patients. All other
     unsecured pre-petition liabilities are classified in the consolidated
     balance sheet as liabilities subject to compromise. The Debtors intend to
     remain in possession of their assets and continue in the management and
     operation of their properties and businesses, and to pay the post-petition
     claims of their various vendors and providers in the ordinary course of
     business.

     A summary of the principal categories of claims classified as liabilities
     subject to compromise under the Chapter 11 cases follows (in thousands):

                                                                 As of June 30,
                                                                      2000
                                                                 --------------
               Liabilities Subject to Compromise

                    Revolving credit and term loans                   $424,110
                    Senior subordinated notes                          249,004
                    Revenue Bonds and Other Debt                        53,103
                    Deferred Management Fee Due to Genesis              36,577
                    Accrued interest                                    30,179
                    Accounts payable and accrued liabilities            66,715
                                                                      --------
                                                                      $859,688



                                       7


<PAGE>



         A summary of the principal categories of reorganization items follows
(in thousands):
<TABLE>
<CAPTION>

                                                              For the                    For the
                                                         Three Months Ended         Nine Months Ended
                                                           June 30, 2000              June 30, 2000
                                                         ------------------         -----------------
          Reorganization Items
<S>                                                            <C>                       <C>
               Legal, accounting and consulting fees           $3,514                    $5,324
               Bank fees                                          950                     1,283
                                                               ------                    ------
                                                               $4,464                    $6,607

</TABLE>



         (3)      Certain Significant Risks and Uncertainties

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

         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, generally have resulted in reduced rates of reimbursement
         for services to be provided by the Company.

         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.


                                       8

<PAGE>

         (4)  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.

         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.


                                       9
<PAGE>



         (5)  Disposition of  Assets

         Effective May 31, 2000, Multicare sold all of its Ohio operations which
         included 14 eldercare centers with 1,128 beds, to Trans Healthcare,
         Inc. for $33.0 million in cash. Included in debt restructuring,
         reorganization and other expense for the three months ended June 30,
         2000 was a $7.9 million loss on the sale of the Ohio assets. The net
         proceeds of the disposition of assets located in Ohio were applied
         against the Company's term loans and revolving credit facility on a pro
         rata basis in accordance with the relative aggregate principal amount
         thereof held by each applicable lender.

         During the quarter ended March 31, 2000, Multicare did not renew an
         operating lease which expired on an eldercare center with 85 beds in
         Virginia. No gain or loss was recorded in connection with the
         expiration of this lease.

         (6)  Debtor-in-Possession Financing

         On June 22, 2000, (the "Petition Date"), the Company, the Company's
         immediate parent and substantially all of the Company's affiliates,
         filed voluntary petitions in the United States Bankruptcy Court for the
         District of Delaware under Title 11 of the United States Code, 11
         U.S.C. (S) (S) 101, et seq. (the "Bankruptcy Code"). While this action
         constituted a default under the Company's and such affiliate's various
         financing arrangements, Section 362(a) of the Bankruptcy Code imposes
         an automatic stay that generally precludes creditors and other
         interested parties under such arrangements from taking any remedial
         action in response to any such resulting default without prior
         Bankruptcy Court approval. Among the orders entered by the Bankruptcy
         Court on June 23, 2000 were orders approving on an interim basis (a)
         the use of cash collateral by the Company and those of its affiliates
         which had filed petitions for reorganization under Chapter 11 of the
         Bankruptcy Code and (b) authorization for the Company to enter into an
         interim secured debtor-in-possession revolving credit facility with a
         group of banks led by Mellon Bank, N. A. and authorization for advances
         in the interim period of up to $30 million out of a possible $50
         million facility. On July 18, 2000, the Bankruptcy Court entered the
         final order approving the $50 million DIP Facility and permitting full
         usage thereunder. Usage under the DIP Facility is subject to a
         borrowing base which provides for maximum borrowings (subject to the
         $50 million commitment limit) by the Company of up to 90% of
         outstanding eligible accounts receivable and a real estate component.
         The DIP Facility matures on December 21, 2001 and advances thereunder
         accrue interest at either Prime plus 2.25% or the Eurodollar Rate plus
         3.75%. Proceeds of the DIP Facility are available for general working
         capital purposes. Through July 31, 2000, there has been no usage under
         the DIP Facility. The DIP Facility also provides for the issuance of up
         to $20 million in standby letters of credit. As of July 31, 2000 there
         was $3.7 million in letters of credit issued thereunder.

         The obligations of the Company under the DIP Facility are jointly and
         severally guaranteed by each of the Company's filing affiliates (the
         "Filing Affiliates"). Pursuant to the agreement, the Company and each
         of its Filing Affiliates have granted to the lenders first priority
         liens and security interests (subject to valid, perfected, enforceable
         and nonavoidable liens of record existing immediately prior to the
         petition date and other carve-outs and exceptions as fully described in
         the DIP Facility) in all unencumbered pre- and post- petition property
         of the Company. The DIP Facility also has priority over the liens on
         all collateral pledged under the Pre-petition Senior Credit Facility
         dated as of October 9, 1997 as amended, which collateral includes, but
         is not limited to, all personal property, including bank accounts and
         investment property, accounts receivable, inventory, equipment, and
         general intangibles, substantially all fee owned real property, and the
         capital stock of Multicare and its borrower and guarantor affiliates.

         The DIP financing agreement limits, among other things, the Company's
         ability to incur additional indebtedness or contingent obligations, to
         permit additional liens, to make additional acquisitions, to sell or
         dispose of assets, to create or incur liens on assets, to pay dividends
         and to merge or consolidate with any other person. The DIP Facility
         contains customary representations, warranties and covenants, including
         certain financial covenants relating to minimum EBITDA, occupancy and
         DIP facility usage amounts and maximum capital expenditures. The breach
         of any such provisions, to the extent not waived or cured within any
         applicable grace or cure periods, could result in the Company's
         inability to obtain further advances under the DIP Facility and the
         potential exercise of remedies by the DIP Facility lenders (without
         regard to the automatic stay unless reimposed by the Bankruptcy Court)
         which could materially impair the ability of the Company to
         successfully reorganize under Chapter 11.

                                       10

<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 an increased  broader base of repeat customers in the
         Company's network. Moreover, Genesis' management believes that this
         strategy will lead to a high quality payor mix and continued high
         levels of occupancy.

         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. However, as a result of the
         Bankruptcy cases and circumstances relating to this event, including
         the Company's leveraged financial structure and losses from operations,
         such realization of assets and liquidation of liabilities is subject to
         significant uncertainty. While under the protection of Chapter 11, the
         Company may sell or otherwise dispose of assets, and liquidate or
         settle liabilities, for amounts other than those reflected in the
         financial statements. Further, a plan of reorganization could
         materially change the amounts reported in the financial statements,
         which do not give effect to all adjustments of the carrying value of
         assets or liabilities that might be necessary as a consequence of a
         plan of reorganization. The Company's ability to continue as a going
         concern is dependent upon, among other things, confirmation of a plan
         of reorganization, future profitable operations, the ability to comply
         with the terms of the Company's debtor-in-possession financing
         agreement and the ability to generate sufficient cash from operations
         and financing arrangements to meet obligations.

         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
         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.

                                       11
<PAGE>



         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.

                                       12
<PAGE>
         Results of Operations

         Three Months Ended June 30, 2000 Compared to Three Months ended
         June 30, 1999

         Net revenues. Net revenues for the three months ended June 30, 2000
         increased $4.6 million or 2.9% from the same period last year to $161.8
         million. In the quarter ended June 30, 2000, an increase in same store
         average daily Medicare census resulted in an increase in revenue of
         $6.3 million and an increase in Medicaid per diem rates which increased
         net revenues by $2.3 million. Offsetting these increases was a $4.0
         million decrease relating to the impact of the sale of Ohio assets
         effective May 31, 2000. Since the Ohio assets were sold effective May
         31, 2000, the consolidated results for the three months ended June 30,
         2000 include the Ohio results for only two months compared to the prior
         period where they were included for the entire period.

         The Company's quality mix of private, Medicare and insurance patient
         days was 41.0% of patient days for the three months ended June 30, 2000
         compared to 40.6% in the corresponding period last year. Occupancy
         rates were 91.5% for the three months ended June 30, 2000 compared to
         90.1% in the corresponding period last year.

         Operating Expense. Operating expenses for the three months ended June
         30, 2000 increased $8.3 million or 6.5% from the comparable period last
         year to $136.1 million. The increase resulted primarily from higher
         salaries, wages and benefits and overtime due to more competitive labor
         markets. In addition, for the three months ended June 30, 2000 the
         Company recorded $1.0 million in expenses associated with the
         transition of its incentive compensation program from stock-based to
         cash-based. Offsetting these increases was a $2.9 million decrease
         relating to the impact of the sale of Ohio assets effective May 31,
         2000. Facility operating margins were 15.9% and 18.8% for the three
         months ended June 30, 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 sales (as defined by the Management
         Agreement) and is responsible for Multicare's corporate general and
         administrative expenses excluding certain specified third party
         expenses. Management fees increased by $0.3 million or 2.9% to $9.7
         million for the three months ended June 30, 2000 from the similar
         period last year due to the increase in net revenues.

         Lease Expense. Lease expense for the three months ended June 30, 2000
         decreased $0.1 million from the same period last year to $3.2 million.
         Lease expense decreased since three leased facilities in Ohio were
         assigned to the buyer of the Ohio assets effective May 31, 2000.

         Depreciation and Amortization. Depreciation and amortization expense
         for the three months ended June 30, 2000 decreased $2.0 million or
         17.3% from the corresponding period in the prior year to $9.7 million.
         Effective September 30, 1999, the Company wrote-down impaired
         long-lived assets by $397.3 million. As a result of this write-down
         of long-lived assets, amortization of goodwill decreased by
         approximately $1.8 million for the three months ended June 30, 2000.
         Depreciation decreased by approximately $0.2 million due to the sale of
         the Ohio assets effective May 31, 2000.

         Interest Expense, net. Interest expense for the three months ended June
         30, 2000 increased $3.0 million or 18.2% to $19.6 million from the same
         period in the prior year. An increase of $3.7 million is due to an
         increase in the effective borrowing rate to 10.4% for the three months
         ended June 30, 2000 from 8.4% for the three months ended June 30, 1999.
         The primary reason for the borrowing rate increase was due to
         amendments to the Senior Credit Agreement prior to the Bankruptcy
         filing and increases in market rates of interest. Offsetting the
         increase was a $0.7 million reduction in interest due to a decrease in
         the average debt balance outstanding primarily due to the sale of the
         Ohio assets.

         Debt Restructuring, Reorganization, and Other Expense. During the
         quarter ended June 30, 2000, Multicare incurred and expensed fees of
         $4.5 million for legal, accounting and consulting services as well as
         bank and court fees in connection with debt restructuring negotiations
         and subsequent costs of reorganization cases with the Bankruptcy Court.
         Included in debt restructuring, reorganization and other expense was
         $1.0 million in bank charges and $3.5 million in legal and financial
         consultant expense. Also included in debt restructuring, reorganization
         and other expense was a $7.9 million loss on the sale of the Ohio
         assets.

         Income Tax Benefit. The income tax benefit increased by $6.7 million
         to $19.2 million for the three months ended June 30, 2000. The increase
         relates to the increase in operating losses offset by lower
         non-deductible goodwill amortization following the write-down
         previously discussed.

                                       13

<PAGE>
     Nine Months Ended June 30, 2000 Compared to Nine Months Ended June 30, 1999

         Net revenues. Net revenues for the nine months ended June 30, 2000
         increased $4.9 million from the same period last year to $485.4
         million. In the nine months ended June 30, 2000, an increase in same
         store average daily Medicare census resulted in an increase in revenue
         of approximately $7.8 million. Offsetting this increase was a $2.9
         million decrease relating to the impact of the sale of Ohio assets
         effective May 31, 2000.

         The Company's quality mix of private, Medicare and insurance patient
         days was 40.3% of patient days for the nine months ended June 30, 2000
         compared to 40.9% in the corresponding period last year. Occupancy
         rates were 91.1% for the nine months ended June 30, 2000 compared to
         90.5% in the corresponding period last year.

         Operating Expense. Operating expenses for the nine months ended June
         30, 2000 increased $20.9 million or 5.4% from the comparable period
         last year to $406.0 million. The increase resulted primarily from
         higher salaries, wages and benefits and overtime due to more
         competitive labor markets. In addition, in the June 30, 2000 quarter
         the Company recorded $1.0 million in expenses associated with the
         transition of its incentive compensation program from stock-based to
         cash-based. Offsetting these increases was a $2.4 million decrease
         relating to the impact of the sale of Ohio assets effective May 31,
         2000. Facility operating margins were 16.4% and 19.8% for the nine
         months ended June 30, 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 sales (as defined by the Management
         Agreement) and is responsible for Multicare's corporate general and
         administrative expenses other than certain specified third party
         expenses. Management fees increased by $0.4 million to $29.1 million
         for the nine months ended June 30, 2000 due to the increase in net
         revenues.

         Lease Expense. Lease expense was $9.8 and $9.7 million for the nine
         months ended June 30, 2000 and 1999, respectively, remaining relatively
         unchanged as the same number of facilities were leased for the majority
         of both periods.

         Depreciation and Amortization. Depreciation and amortization expense
         for the nine months ended June 30, 2000 decreased $5.5 million or 16.2%
         from the corresponding period in the prior year to $28.5 million.
         Effective September 30, 1999, the Company wrote-down impaired
         long-lived assets by $397.3 million. As a result of this write-down of
         long-lived assets, amortization of goodwill decreased by approximately
         $5.2 million for the nine months ended June 30, 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 nine months ended June
         30, 2000 increased $7.6 million or 15.4% to $56.5 million from the same
         period in the prior year. The increase is due to an increase in the
         effective borrowing rate to 9.8% for the nine months ended June 30,
         2000 from 8.4% for the nine months ended June 30, 1999. The primary
         reason for the borrowing rate increase was due to amendments to the
         Senior Credit Agreement prior to the Bankruptcy filing and increases in
         market rates of interest.

         Debt Restructuring, Reorganization, and Other Expense. During the nine
         months ended June 30, 2000, Multicare incurred and expensed fees of
         $6.6 million for legal, accounting and consulting services as well as
         bank and court fees in connection with debt restructuring negotiations
         and subsequent costs of reorganization cases with the Bankruptcy Court.
         Included in debt restructuring, reorganization and other expense was
         $1.3 million in bank charges and $5.3 million in legal and financial
         consultant expense. Also included in debt restructuring, reorganization
         and other expense was a $7.9 million loss on the sale of the Ohio
         assets.

         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 $13.5 million
         to $18.4 million for the nine months ended June 30, 2000. Of the
         increase $2.0 million relates to the tax benefit related to the
         cumulative effect of accounting change and $2.9 million related to the
         loss on sale of the Ohio assets. The remainder of the increase relates
         to the increase in operating losses offset by lower non-deductible
         goodwill amortization.

                                       14
<PAGE>
         Liquidity and Capital Resources

         General

         On June 22, 2000 (the "Petition Date"), the Company, the Company's
         immediate parent and substantially all of the Company's affiliates,
         filed voluntary petitions in the United States Bankruptcy Court for the
         District of Delaware under Title 11 of the United States Code, 11
         U.S.C. (S)(S) 101, et seq. (the "Bankruptcy Code"). While this action
         constituted a default under the Company's and such affiliates various
         financing arrangements, Section 362(a) of the Bankruptcy Code imposes
         an automatic stay that generally precludes creditors and other
         interested parties under such arrangements from taking any remedial
         action in response to any such resulting default without prior
         Bankruptcy Court approval. Among the orders entered by the Bankruptcy
         Court on June 23, 2000 were orders approving on an interim basis (a)
         the use of cash collateral by the Company and those of its affiliates
         which had filed petitions for reorganization under Chapter 11 of the
         Bankruptcy Code and (b) authorization for the Company to enter into an
         interim secured debtor-in-possession revolving credit facility with a
         group of banks led by Mellon Bank, N. A. and authorization for advances
         in the interim period of up to $30 million out of a possible $50
         million facility. On July 18, 2000, the Bankruptcy Court entered the
         Final Order approving the $50 million DIP Facility and permitting full
         usage thereunder. Usage under the DIP Facility is subject to a
         Borrowing Base which provides for maximum borrowings (subject to the
         $50 million commitment limit) by the Company of up to 90% of
         outstanding eligible accounts receivable and a real estate component.
         The DIP Facility matures on December 21, 2001 and advances thereunder
         accrue interest at either Prime plus 2.25% or the Eurodollar Rate plus
         3.75%. Proceeds of the DIP Facility are available for general working
         capital purposes. Through July 31, 2000, there has been no usage under
         the DIP Facility. The DIP Facility also provides for the issuance of up
         to $20 million in standby letters of credit. As of July 31, 2000 there
         was $3.7 million in letters of credit issued thereunder.

         Pursuant to the agreement, the Company and each of its affiliates named
         as borrowers or guarantors under the DIP Facility have granted to the
         lenders first priority liens and security interests (subject to valid,
         perfected, enforceable and nonavoidable liens of record existing
         immediately prior to the petition date and other carve-outs and
         exceptions as fully described in the DIP Facility) in all unencumbered
         pre- and post- petition property of the Company. The DIP Facility also
         has priority over the liens on all collateral pledged under the
         Pre-petition Senior Credit Facility dated as of October 9, 1997 as
         amended, which collateral includes, but is not limited to, all personal
         property, including bank accounts and investment property, accounts
         receivable, inventory, equipment, and general intangibles,
         substantially all fee owned real property, and the capital stock of
         Multicare and its borrower and guarantor subsidiaries.

         The DIP financing agreement limits, among other things, the Company's
         ability to incur additional indebtedness or contingent obligations, to
         permit additional liens, to make additional acquisitions, to sell or
         dispose of assets, to create or incur liens on assets, to pay dividends
         and to merge or consolidate with any other person. The DIP Facility
         contains customary representations, warranties and covenants, including
         certain financial covenants relating to minimum EBITDA, occupancy and
         DIP facility usage amounts and maximum capital expenditures. The breach
         of any such provisions, to the extent not waived or cured within any
         applicable grace or cure periods, could result in the Company's
         inability to obtain further advances under the DIP Facility and the
         potential exercise of remedies by the DIP Facility lenders which could
         materially impair the ability of the Company to successfully reorganize
         under Chapter 11.

         Under the Bankruptcy Code, actions to collect pre-petition indebtedness
         are enjoined and other contractual obligations generally may not be
         enforced against the Company. In addition, the Company may reject
         executory contracts and lease obligations. Parties affected by these
         rejections may file claims with the Bankruptcy Court in accordance with
         the reorganization process. If the Company is able to successfully
         reorganize, substantially all unsecured liabilities as of the petition
         date would be subject to modification under a plan of reorganization to
         be voted upon by all impaired classes of creditors and equity security
         holders and approved by the Bankruptcy Court.

         On June 23, 2000 the Bankruptcy Court entered an order authorizing the
         Debtors to pay certain pre-petition wages, salaries, benefits and other
         employee obligations, as well as to continue in place the Debtors'
         various employee compensation programs and procedures. On that date,
         the Bankruptcy Court also authorized the Debtors to pay, among other
         claims, the pre-petition claims of certain critical vendors and
         patients. All other unsecured pre-petition liabilities are classified
         in the consolidated balance sheet as liabilities subject to compromise.
         The Debtors intend to remain in possession of the management and
         operation of their properties and businesses and to pay the
         post-petition claims of their various vendors and providers in the
         ordinary course of business.


                                       15
<PAGE>


     A summary of the principal categories of claims classified as liabilities
     subject to compromise under the Chapter 11 cases follows (in thousands):

                                                                 As of June 30,
                                                                      2000
                                                                 --------------
                 Liabilities Subject to Compromise

                      Revolving credit and term loans               $424,110
                      Senior subordinated notes                      249,004
                      Revenue Bonds and Other Debt                    53,103
                      Deferred Management Fee Due to Genesis          36,577
                      Accrued interest                                30,179
                      Accounts payable and accrued liabilities        66,715
                                                                    --------
                                                                    $859,688


         A summary of the principal categories of reorganization items follows
(in thousands):

<TABLE>
<CAPTION>

                                                            For the Three Months        For the Nine Months
                                                                    Ended                       Ended
                                                                June 30, 2000              June 30, 2000
                                                                -------------              -------------
          Reorganization Items
<S>                                                                <C>                         <C>
               Legal, accounting and consulting fees               $3,514                      $5,324
               Bank Fees                                              950                       1,283
                                                                   ------                      ------
                                                                   $4,464                      $6,607

</TABLE>

         At June 30, 2000, the Company had working capital of $103.1 million as
         compared with net working capital of $0.8 million at September 30, 1999
         primarily because most current liabilities at September 30, 1999 are
         now classified as liabilities subject to compromise. There are no
         material capital commitments for capital expenditures as of the date of
         this filing.

         Cash flow provided by operations was $14.0 million for the nine months
         ended June 30, 2000 compared to cash flow used in operations of $23.1
         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 $30.8 million. Net accounts receivable were $109.3
         million and $113.6 million at June 30, 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 $43.8 million primarily
         as a result of increased accrued interest and amounts owed Genesis
         which were not paid. Accrued interest was $30.2 million as of June 30,
         2000. Genesis is Multicare's primary provider of pharmacy,
         rehabilitation therapy and hospitality services.



                                       16
<PAGE>
         Cash flows provided by investing activities in fiscal year 2000 include
         the proceeds from the sale of Ohio assets effective May 31, 2000.
         Multicare sold all of its Ohio operations which included 14 eldercare
         centers with 1,128 beds, for a $7.9 million loss. The net proceeds of
         the disposition of $33.0 million are classified as cash flow provided
         by investing and are applied against the Company's term loans and
         revolving credit facility. Cash flows provided by investing activities
         in fiscal year 2000 also include the deferred management fees due to
         Genesis of $9.7 million as a source of cash. Capital expenditures of
         $6.8 million for the nine months ended June 30, 2000 are principally
         for routine maintenance and renovation.

         The Company has experienced 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 and the timing of funding new
         policies. Rising costs of eldercare malpractice litigation involving
         nursing care operators and losses stemming from these malpractice
         lawsuits has caused many insurance providers to raise the cost of
         insurance premiums or refuse to write insurance policies for nursing
         homes. Accordingly, the costs of general and professional liability and
         property insurance premiums have increased. In addition, as a result of
         Genesis' 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 "Senior 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, and increased the interest rates
         applying to the Term Loans and the Revolving Facility (defined below).

         The Senior Credit Facility consists 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 Senior Credit Facility consists of:

         o        an original six year term loan maturing in September 2003 with
                  an outstanding balance of $132.2 million at June 30, 2000 (the
                  "Tranche A Term Facility");

         o        an original seven year term loan maturing in September 2004
                  with an outstanding balance of $138.3 million at June 30, 2000
                  (the "Tranche B Term Facility");

         o        an original eight year term loan maturing in June 2005 with an
                  outstanding balance of $45.9 million at June 30, 2000 (the
                  "Tranche C Term Facility") and;

         o        a Revolving Facility, with an outstanding balance of $107.7
                  million at June 30, 2000 becomes payable in full on September
                  30, 2003.

         Effective May 31, 2000, the assets of 14 eldercare centers in Ohio were
         sold for approximately $36 million in cash. The net proceeds of $33.0
         million were applied against the Company's outstanding Senior Credit
         Facility on a pro rata basis in accordance with the relative aggregate
         principal amount thereof held by each applicable lender.

         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 certain Multicare subsidiaries' real
         property were also granted. Loans under the Senior Credit Facility
         bear, at Multicare's 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.

         On March 29, 2000 the Company elected not to make interest payments due
         under the Senior Credit Agreement. The Company's Senior Lenders granted
         a forbearance period until May 19, 2000 while discussions on an overall
         restructuring took place. The Company entered into a second forbearance
         period which was to expire on June 30, 2000. Under the forbearance
         agreement, the Senior Lenders, subject to certain conditions, refrained
         from accelerating the Senior Loans or exercising other remedies against
         the Company. During the forbearance periods, Multicare did not make
         scheduled interest and principal payments under its Senior Credit
         Agreement.

                                       17
<PAGE>

         The Senior Lenders 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 is no longer entitled to
         elect a LIBOR 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 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, change control of capital
         stock, and 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. The Company is in default under the Senior
         Credit Facility and has not made any scheduled interest payments since
         March 29, 2000.

         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. The Company is in
         default under the Indenture.

         Merger and Other Transactions

         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
         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).

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<PAGE>

         ETT is obligated to purchase and lease back 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 Balanced Budget Act and the Balanced Budget Refinement Act, has
         resulted in continuing change in the Medicare and Medicaid
         reimbursement programs which has adversely impacted the Company. 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 these 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 the Company.

         Anticipated Impact of Healthcare Reform

         The majority of the Multicare eldercare centers began implementation of
         PPS on January 1, 1999. On July 31, 2000, The Health Care Finance
         Administration ("HCFA") issued final rules for PPS. The final rule
         continues the current PPS methodology, as amended by the Balanced
         Budget Refinement Act of 1999 ("BBRA"). Effective April 1, 2000, 15 of
         the 44 RUG III (Resource Utilization Groups) payment categories were
         increased by 20% until the later of October 1, 2000, or the
         implementation of a refined RUG system. This final rule extends the 20%
         add-on for the 15 RUG III categories until at least September 20, 2001.
         Additionally, the final rule formalizes the BBRA requirement for a 4%
         across the board increase in the Federal per diem payment rates,
         exclusive of the 20% add-on. The final rule also announces the annual
         update factor at 2.161%, which is equivalent to the market basket
         increase less one percentage point, as mandated by current law. The
         actual impact of the July 31, 2000 final rule on our earnings in
         future periods will depend on many variables which can not be
         quantified at this time, including the effect of regulatory changes,
         patient acuity, patient length of stay, Medicare census, referral
         patterns, ability to reduce costs and growth of ancillary business.

         Year 2000 Compliance

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

         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.



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         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.




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<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 was not required to maintain
         interest rate hedging agreements. In the quarter ended June 30, 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.

On June 22, 2000, the Company and certain of its affiliates filed voluntary
petitions with the United States Bankruptcy Court for the District of Delaware
to reorganize their capital structure under Chapter 11 of the United States
Bankruptcy Code. As a result of the Chapter 11 cases, no principal or interest
payments will be made on certain indebtedness incurred by the Company prior to
June 22, 2000, including, among others, the Senior Credit Facility, and the
Senior Subordinated Notes, until a plan of reorganization defining the payment
terms has been approved by the Bankruptcy Court. Additional information
regarding the Chapter 11 cases is set forth elsewhere in this Form 10-Q,
including Note 2 to the Condensed Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

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     Revolving Credit and Guaranty Agreement, dated as of
                           June 22, 2000, among The Multicare Companies, Inc., a
                           debtor and a Debtor-in-Possession under Chapter 11 of
                           the bankruptcy code as borrower and Mellon Bank, N.A.
                           as Administrative Agent and Arranger, First Union
                           National Bank, as Syndication Agent; and Goldman
                           Sachs Credit Partners, L.P., as Documentation Agent.

(b)      Reports on Form 8-K.

              On July 7, 2000, the Company filed a Report on Form 8-K reporting
              that the Multicare Companies, Inc. and certain affiliates filed
              voluntary petitions for relief under chapter 11 of title 11 of the
              United States Code with the United States Bankruptcy Court for the
              District of Delaware and are being jointly administered for
              procedural purposes in the Bankruptcy Court under Case Nos.
              00-2494 through 00-2690. On the same date, Genesis Health
              Ventures, Inc., 43.6% owner of Multicare, and certain of its
              direct and indirect affiliates also filed voluntary petitions for
              relief under chapter 11 of the Bankruptcy Code with the Bankruptcy
              Court and are being jointly administered for procedural purposes
              in the Bankruptcy Court under Case Nos. 00-2691 through 00-2842.



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                                   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: August 21, 2000                      /S/ George V. Hager, Jr.
                                       -------------------------------
                                       George V. Hager, Jr.
                                       Executive Vice President
                                          and Chief Financial Officer




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