<PAGE>
 
--------------------------------------------------------------------------------

                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 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, 1998


                                      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 0-23946



                      PEDIATRIC SERVICES OF AMERICA, INC.
            (Exact name of Registrant as specified in its charter)




                DELAWARE                                 58-1873345
     (State or other jurisdiction of                  (I.R.S. Employer
      incorporation or organization)                 Identification No.)



                  310 TECHNOLOGY PARKWAY, NORCROSS GA  30092
          (Address of principal executive offices, including zip code)



                                (770) 441-1580
             (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 [ ]



As of August 5, 1998 the Registrant had 7,147,014 shares of Common Stock, $0.01
par value, outstanding.

--------------------------------------------------------------------------------

                                  Page 1 of 20

                          Index of Exhibits on page 20
<PAGE>
 
                                   FORM 10-Q
                      PEDIATRIC SERVICES OF AMERICA, INC.
                                     INDEX

                                        


PART I    FINANCIAL INFORMATION                                      PAGE NUMBER


ITEM 1:   Financial Statements

          Condensed Consolidated Balance Sheets as of
               June 30, 1998 and September 30, 1997........................3

          Condensed Consolidated Statements of Operations for
               the three and nine months ended June 30, 1998 and 1997......5

          Condensed Consolidated Statements of Cash Flows for
               the nine months ended June 30, 1998 and 1997................6

          Notes to Condensed Consolidated Financial Statements.............7


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


PART II   OTHER INFORMATION


ITEM 5:   Other Information................................................17


ITEM 6:   Exhibits and Reports on Form 8-K.................................18


          Signatures.......................................................19


          Index of Exhibits................................................20

                                       2
<PAGE>
 
PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                      PEDIATRIC SERVICES OF AMERICA, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 (UNAUDITED)            (AUDITED)
                                                                   JUNE 30,            SEPTEMBER 30,
                                                                     1998                  1997   
                                                              ------------------    ------------------ 
<S>                                                           <C>                 <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................            $    272            $    501
  Accounts receivable, less allowances for doubtful accounts
     of $25,578 and $10,036, respectively...................              90,251              75,458
  Prepaid expenses..........................................                 778                 508
  Deferred income taxes.....................................               3,793               3,880  
  Income taxes receivable...................................               2,959                 --  
  Other current assets......................................               4,308               3,481  
                                                                        --------            --------  
Total current assets........................................             102,361              83,828   

Property and equipment:
  Home care equipment held for rental.......................              27,558              24,104
  Furniture and fixtures....................................              12,993               6,979
  Vehicles..................................................                 876                 731 
  Leasehold improvements....................................                 919                 581  
                                                                        --------            --------
                                                                          42,346              32,395
                                                                                                    
    Accumulated depreciation and amortization...............             (19,508)            (15,678)
                                                                        --------            --------
                                                                          22,838              16,717 
                                                                
Other assets:                                                     
   Goodwill, less accumulated amortization of $5,826
    and $3,695, respectively.................................             86,246              50,421
   Certificates of need, less accumulated amortization of                                            
    $437 and $279, respectively..............................              3,111               1,543
   Deferred financing fees, less accumulated amortization of                                        
    $382 and $192, respectively..............................              3,196                 632
   Non-compete agreements, less accumulated amortization
    of $836 and $719, respectively...........................                224                 321 
   Other.....................................................                476                 372                    
                                                                        --------            -------- 
Total assets................................................            $218,452            $153,834 
                                                                        ========            ======== 

</TABLE> 
See accompanying notes to condensed consolidated financial statements

                                       3
<PAGE>
 
                      PEDIATRIC SERVICES OF AMERICA, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                         (UNAUDITED)           (AUDITED) 
                                                                           JUNE 30,           SEPTEMBER 30,
                                                                             1998                 1997   
                                                                      ------------------    ----------------
<S>                                                                   <C>                   <C> 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..................................................           $ 10,915            $  6,302
  Accrued compensation..............................................              7,489               5,147
  Accrued insurance.................................................              3,049               2,393
  Other accrued liabilities.........................................              6,969               3,559
  Deferred revenue..................................................                885                 853
  Income taxes payable..............................................                 --               1,119 
  Current maturities of long-term obligations from related
    parties.........................................................              1,365               2,163
                                                                                                             
  Current maturities of long-term obligations.......................                682                  99 
                                                                               --------            --------
Total current liabilities...........................................             31,354              21,635 
                                                                               --------            -------- 
 
Long-term obligations from related parties, net of current
   maturities.......................................................              3,099               3,887
Long-term obligations, net of current maturities....................            105,088              61,125
Deferred income taxes...............................................              3,804               4,691
Minority interest in subsidiary.....................................                788                 816 
                                                                            
Stockholders' equity:
Preferred stock, $.01 par value, 2,000 shares authorized;  no
   shares issued and outstanding....................................                 --                  --
Common stock, $.01 par value, 80,000 shares authorized;
   7,146 shares at June 30, 1998 and 6,258 shares at
   September 30, 1997 issued and outstanding, respectively........                   71                  63
  Additional paid-in capital........................................             60,030              41,746
  Retained earnings.................................................             14,218              19,871
                                                                               --------            --------
Total stockholders' equity..........................................             74,319              61,680
                                                                               --------            -------- 
Total liabilities and stockholders' equity..........................           $218,452            $153,834
                                                                               ========            ========                 
</TABLE> 
See accompanying notes to condensed consolidated financial statements

                                       4
<PAGE>
 
                      PEDIATRIC SERVICES OF AMERICA, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED          NINE MONTHS ENDED
                                                                    JUNE 30,                    JUNE 30,
                                                                  (unaudited)                 (unaudited)
                                                          ----------------------------  ------------------------
                                                              1998           1997           1998           1997
                                                          -------------  -------------  -------------  ------------
<S>                                                       <C>            <C>            <C>            <C>
Net revenue.............................................        $78,480        $53,890       $219,518      $150,191

Costs and expenses:
  Operating salaries, wages and employee benefits.......         32,925         23,108         90,023        64,304
  Other operating costs.................................         34,478         19,993         89,945        56,483
  Corporate general and administrative..................          6,680          3,499         16,587         9,244
  Provision for doubtful accounts.......................         15,346          1,675         19,274         4,657 
  Depreciation and amortization.........................          2,259          1,583          6,403         4,480
                                                                  -----        ------        -------       ------- 
Total costs and expenses................................         91,688         49,858        222,232       139,168 
                                                                 ------         ------        -------       ------- 
Operating income (loss).................................        (13,208)         4,032         (2,714)       11,023 
Interest expense........................................          2,619            964          6,011         2,325  
                                                                -------         ------         ------        ------
Income (loss) before minority interest and income taxes.        (15,827)         3,068         (8,725)        8,698
Minority interest in (gain) loss of subsidiary..........              1             (4)            28            43  
                                                                -------         ------         ------        ------  
Income (loss) before income taxes.......................        (15,826)         3,064         (8,697)        8,741 
Income taxes............................................         (5,917)         1,225         (3,044)        3,513 
                                                                -------         ------        -------        ------  
Net income (loss).......................................        $(9,909)        $1,839        $(5,653)       $5,228
                                                                =======         ======        =======        ====== 
                                                             
BASIC SHARE DATA:
 Net income (loss) per common and common equivalent                                       
   share................................................         $(1.39)         $ .29         $(0.82)        $ .84
                                                                 =======        =======        =======       ======
 Weighted average common shares outstanding.............          7,145          6,269          6,908         6,258
                                                                 =======        =======        =======       ======
DILUTED SHARE DATA:
 Net income (loss)  per common and common                                         
   equivalent share.....................................         $(1.39)         $0.29         $(0.82)        $0.81     
                                                                 =======        =======        =======       ======
 Weighted average common shares outstanding.............          7,145          6,434          6,908         6,434
                                                                 =======        =======        =======       ======
</TABLE>

See accompanying notes to condensed consolidated financial statements

                                       5
<PAGE>
 
                      PEDIATRIC SERVICES OF AMERICA, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                      NINE MONTHS ENDED
                                                                                           JUNE 30,
                                                                                         (UNAUDITED)
                                                                                         ------------
                                                                                      1998          1997
                                                                                    -------        ------
<S>                                                                          <C>             <C>
OPERATING ACTIVITIES
  Net income (loss)........................................................          $ (5,653)   $  5,228
Adjustments to reconcile net income (loss) to net cash used in operating
 activities:
  Depreciation and amortization............................................             6,403       4,480
  Provision for doubtful accounts..........................................            19,274       4,657
  Amortization of deferred financing fees..................................               191          77
  Deferred income taxes....................................................              (242)         --
  Minority interest in loss of subsidiary..................................               (28)        (43)
Changes in operating assets and liabilities, net of effects from
 acquisitions of businesses:
  Accounts receivable......................................................           (32,569)    (20,656)
  Prepaid expenses and other current assets................................              (475)     (1,083)
  Accounts payable.........................................................             3,943      (1,344)
  Income taxes payable/receivable..........................................            (4,079)       (369)
  Accrued liabilities......................................................             5,600       2,708
                                                                                     --------     -------
Net cash used in operating activities......................................            (7,635)     (6,345)

INVESTING ACTIVITIES

  Purchases of property and equipment......................................            (7,977)     (5,134)
  Acquisitions of businesses...............................................           (24,415)    (10,683)
  Other, net...............................................................               (42)         (1)
                                                                                     --------     -------
Net cash used in investing activities......................................           (32,434)    (15,818)

FINANCING ACTIVITIES

  Principal payments on long-term debt.....................................           (87,057)     (1,729)
  Borrowings on long-term debt.............................................           129,500      24,314
  Deferred financing fees..................................................            (2,755)       (210)
  Proceeds from exercise of stock options..................................               152         158
                                                                                     --------     -------
Net cash provided by financing activities..................................            39,840      22,533
                                                                                     --------     -------
Increase (decrease) in cash and cash equivalents...........................              (229)        370
Cash and cash equivalents at beginning of year.............................               501         770
                                                                                     --------     -------
Cash and cash equivalents at end of period.................................          $    272    $  1,140
                                                                                     ========     =======
Supplemental disclosure of cash flow information
  Cash paid for interest...................................................          $  4,166    $  1,977
                                                                                     ========    ========

  Cash paid for income taxes...............................................          $  1,311    $  3,892
                                                                                     ========    ========
</TABLE>
See accompanying notes to condensed consolidated financial statements

                                       6
<PAGE>
 
PEDIATRIC SERVICES OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.   BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements of
     Pediatric Services of America, Inc. (the "Company") and its majority-owned
     subsidiaries have been prepared in accordance with generally accepted
     accounting principles for interim financial information and with the
     instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly,
     they do not include all information and notes required by generally
     accepted accounting principles for complete financial statements.  In the
     opinion of management, all adjustments (consisting only of normal recurring
     accruals) considered necessary for a fair presentation have been included.
     Results of operations for the three and nine month periods ended June 30,
     1998 are not necessarily indicative of the results to be expected for the
     entire fiscal year ending September 30, 1998.  These condensed consolidated
     financial statements should be read in conjunction with the Company's
     audited financial statements for the year ended September 30, 1997 included
     in the Company's Annual Report on Form 10-K for such year filed with the
     Securities and Exchange Commission.  Principal accounting policies are set
     forth in the Company's 1997 Annual Report.

2.   NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE

     In February 1997, the Financial Accounting Standards Board issued Statement
     of Financial Accounting Standards No. 128, Earnings Per Share ("Statement
     128").  Statement 128 replaced the previously reported primary and fully
     diluted earnings per share with basic and diluted earnings per share.
     Unlike primary earnings per share, basic earnings per share excludes any
     dilutive effects of options, warrants, and convertible securities.  Diluted
     earnings per share is very similar to the previously reported fully diluted
     earnings per share.  All earnings (loss) per share amounts for all periods
     have been presented, and where necessary, restated to conform to the
     Statement 128 requirements.  The dilutive effect of the weighted average
     number of options included in the diluted earnings per share is 165,844 and
     176,359 for the three and nine months ended June 30, 1997.  For the three
     and nine months ended June 30, 1998 the effect of the stock options were
     excluded from the calculation of weighted average shares outstanding for
     diluted loss per share as such amounts were antidilutive, respectively.

3.   INTEREST RATE SWAP AGREEMENT

     At June 30, 1998, the Company had one interest rate swap agreement with a
     commercial bank (the "Counter Party"), having a cumulative notional
     principal amount of $25 million.  The Company pays a fixed rate of 6.61%
     plus the applicable margin that varies from a minimum of 1.0% to a maximum
     of 1.75% and is based on the calculation of a leverage ratio.  The interest
     rate differential to be received or paid is recognized over the life of the
     agreement as an adjustment to interest expense.  The interest rate swap
     terminates in June 2002.  The Company is exposed to credit loss in the
     event of non-performance by the Counter Party to the interest rate swap
     agreement.  However, the Company does not anticipate such non-performance.

                                       7
<PAGE>
 
4.   ACQUISITIONS

     On October 31, 1997, the Company purchased the assets and assumed certain
     liabilities of Pediatric Physical Therapy, Inc. ("PPT"), a physical therapy
     company in St. Louis, Missouri, for a total purchase price of $50,000,
     consisting of $30,000 cash and $20,000 in the form of a note payable by the
     Company. The Company assumed approximately $200,000 in indebtedness.

     On November 7, 1997, the Company purchased substantially all of the assets
     of Intra-Care, Inc. ("IC"), a home infusion and pharmaceutical company in
     Little Falls, New Jersey, for a total purchase price of $7.5 million.  The
     purchase price consisted of $4.5 million in cash and $3.0 million in the
     form of shares of the Company's Common Stock.  The shares of Common Stock
     have been placed in escrow and will be released upon the satisfaction of
     certain conditions.  The parties agreed to an earnout formula based on the
     earnings for the 1998 calendar year, whereby IC is paid in cash if it meets
     or exceeds certain targets or IC repays the Company in Common Stock if it
     fails to meet certain targets.

     On November 11, 1997, one of the Company's consolidated subsidiaries,
     Insurance Medical Reporter, Inc. ("IMR"), purchased certain assets of
     American Insurance Examiners, Inc. ("AIE"), a paramedical testing company
     in Los Angeles, California, for a total cash purchase price of $1.2
     million.

     On November 21, 1997, the Company purchased substantially all of the assets
     of Kids and Nurses, Inc. ("KAN"), a company specializing in prescribed
     pediatrics extended care facilities.  The total purchase price was $2.5
     million consisting of shares of the Company's Common Stock.  A portion of
     the shares have been placed in escrow for a period of one year from the
     closing date and will be released upon the satisfaction of certain
     conditions.  At closing, the Company assumed and paid $750,000 of
     indebtedness.

     On December 1, 1997, the Company purchased substantially all of the assets
     of Cyber Home Medical Equipment Corp., Inc. ("CHM"), a home medical
     equipment company, in Rockville Center, New York, for a total purchase
     price of $1.25 million.  The purchase price consisted of $550,000 in cash,
     $300,000 in the form of a note payable by the Company and $400,000 in the
     form of shares of the Company's Common Stock.  The shares of Common Stock
     have been placed in an escrow account for the term of one year from
     December 1, 1997 and will be released upon the satisfaction of certain
     conditions.  The note will be paid quarterly over a three year period.

     On December 15, 1997, one of the Company's consolidated subsidiaries, IMR,
     purchased certain paramedical testing assets of ChoicePoint Services, Inc.
     ("PMI")  for $21.7 million consisting of $11.7 million in cash and $10.0
     million in the form of 495,050 shares of the Company's Common Stock.  The
     Company provided the seller with a one-year price protection upon
     disposition for the Company's Common Stock issued at closing.  See Item 2,
     "Liquidity and Capital Resources - Commitments" for further information.

     On December 29, 1997, the Company purchased all of the assets and assumed
     certain liabilities of Kid's Nurses, Inc. ("KN"), a pediatric nursing
     company in St. Louis, Missouri, for a total purchase price of $350,000.
     The purchase price consisted of $250,000 in cash, $50,000 in the form of a
     note payable by the Company and $50,000 in the form of shares of the
     Company's Common Stock.  The shares have been placed in an escrow account
     until December 29, 1998 and will be released upon the satisfaction of
     certain conditions.  The note will be paid annually over a two year period.

     On January 12, 1998, the Company purchased substantially all of the assets
     and assumed certain liabilities of Texas Air Supply Home Medical Equipment,
     Inc. ("TAS"), a home medical equipment and supply company in Ft. Worth,
     Texas, for a total purchase price of $1.0 million, consisting of $750,000

                                       8
<PAGE>
 
     cash and $250,000 in the form of shares of the Company's Common Stock.  The
     shares of Common Stock have been placed in escrow and will be released upon
     the satisfaction of certain conditions.  The Company paid at  closing
     $500,000 of indebtedness of TAS.

     On January 30, 1998, the Company purchased the stock of Pediatric Nursing
     Service, Inc. ("PNS"), a pediatric nursing company in Parsippany, New
     Jersey, for a total purchase price of $2.4 million, consisting of  $1.8
     million in cash and $600,000 in the form of 31,927 shares of the Company's
     Common Stock.  The shares of Common  Stock have been placed in escrow and
     will be released upon the satisfaction of certain conditions.  The Company
     granted the sellers a price protection upon disposition of the shares of
     Common Stock for a period of 30 days after they are released from escrow.

     On February 10, 1998, the Company purchased substantially all of the assets
     and assumed certain liabilities of Strictly Pediatrics, L.L.C. ("SP"), a
     home nursing and supply company in Austin, Texas, for a total purchase
     price of $15,000 in cash.  The Company assumed and paid approximately
     $129,000 of  indebtedness.

     On March 1, 1998 the Company purchased the stock of Medical Equipment &
     Supply, Inc. ("MES"), in Austin, Texas, for a total purchase price of $2.0
     million, consisting of $670,000 cash and $1.34 million in the form of
     69,247 shares of the Company's Common Stock.  The shares of Common Stock
     have been placed in escrow and will be released upon the satisfaction of
     certain conditions.  The Company granted the sellers a price protection
     upon disposition of the shares of Common Stock for a period of  30 days
     after they are released from escrow.

     On June 5, 1998, the Company signed an agreement to put on deposit $1.0
     million to purchase substantially all of the assets of Transworld Home
     Health Care--Nursing Division, Inc. ("THHC"), a home nursing company with
     operations in New Jersey and Florida. On the closing date July 15, 1998 the
     total purchase price was $5.3 million, consisting of all cash.  At closing,
     $1.0 million of the purchase price was placed in escrow and will be
     released upon satisfaction of certain conditions.

     The purchase method of accounting was used to record each of the above
     acquisitions.  Accordingly, the purchase price was allocated to the assets
     acquired and liabilities assumed based on estimated fair values at the
     purchase dates.  Operating results for the acquired companies have been
     included in the Company's consolidated results of operations from the
     respective purchase dates.

     The acquisitions of PPT, IC, AIE, KAN, CHM, PMI, KN, TAS, PNS, SP, MES and
     THHC are not considered significant as defined by Regulation S-X Rule 1-
     02(w) and, therefore, the consolidated financial statements do not reflect
     pro forma financial information for these acquisitions.

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

     In connection with the "Safe Harbor" provisions of the Private Securities
     Litigation Reform Act of 1995, the Company hereby makes reference to
     certain risks as set forth under the heading "Risk Factors" in the
     Company's Registration Statement on Form S-4, as filed with the Securities
     and Exchange Commission on May 5, 1998 (Registration No. 333-51895).  Such
     cautionary statements identify important facts that could cause the
     Company's actual results to differ materially from those projected in
     forward looking statements made by or on behalf of the Company in this or
     any other section of this Form 10-Q.  The Company's business is subject to
     a number of risks, some of which are beyond the Company's control.  These
     risks include whether the Company will be able to resolve issues pertaining
     to the collectibility of its accounts receivable, pricing pressures
     (including changes in governmental reimbursement levels), the 

                                       9
<PAGE>
 
     impact of health care reform proposals, the effect of federal and state
     healthcare regulations, the highly competitive market, recent losses, the
     concentration of large payors and dependence on relationships with third
     parties.

     RESULTS OF OPERATIONS

     The historical condensed consolidated statements of operations of the
     Company for the three and nine month periods ended June 30, 1998 contained
     in this report and the following discussion thereof, include the effect of
     the Company's acquisitions of PPT, IC, AIE, KAN, CHM, PMI, KN, TAS, PNS,
     SP, and MES subsequent to the respective dates of acquisition.

     The following table is derived from the Company's unaudited condensed
     consolidated statements of operations for the periods indicated and
     presents results of operations as a percentage of net revenue and the
     percentage change in the dollar amounts of each item from the comparative
     prior period.

<TABLE>
<CAPTION>

                                                                                               PERIOD-TO-PERIOD
                                                                                                 PERCENTAGE OF
                                           PERCENTAGE OF NET REVENUE                          Increase (Decrease)
                                       ------------------------------------------     ---------------------------------
                                          THREE MONTHS         NINE MONTHS               THREE MONTHS     NINE MONTHS
                                             ENDED               ENDED                      ENDED            ENDED
                                            June 30,            June 30,                   June 30,         JUNE 30,
                                      ---------------------  --------------------     ----------------  ---------------
                                         1998       1997       1998       1997         1998  TO  1997    1998  TO  1997
                                      ----------  ---------  ---------  ---------     ----------------  ---------------
<S>                                   <C>         <C>        <C>        <C>           <C>               <C>

Net revenue.........................         100%       100%       100%       100%                45.6%            46.2%
Operating salaries, wages and
 employee benefits..................        42.0       42.9       41.0       42.8                 42.5             40.0
Other operating costs...............        43.9       37.1       41.0       37.6                 72.4             59.2
Corporate, general and
 administrative.....................         8.5        6.5        7.6        6.2                 90.9             79.4
Provision for doubtful accounts.....        19.6        3.1        8.8        3.1                815.9            313.8
Depreciation and amortization.......         2.8        2.9        2.9        3.0                 42.7             42.9
                                           -----       ----       ----       ----               ------           ------
Operating income (loss).............       (16.8)       7.5       (1.3)       7.3               (427.6)          (124.6)
Interest expense....................         3.3        1.8        2.7        1.5                171.8            158.6
                                           -----       ----       ----       ----               ------           ------
Income (loss) before income taxes
 and minority interest..............       (20.1)       5.7       (4.0)       5.8               (615.9)          (200.3)
Minority interest in (gain) loss of
 subsidiary.........................         0.0        0.0        0.0        0.0               (119.8)           (34.2)
                                           -----       ----       ----       ----               ------           ------
Income (loss) before income taxes...       (20.1)       5.7       (4.0)       5.8               (616.6)          (199.5)
Income taxes........................        (7.5)       2.3       (1.4)       2.3               (583.2)          (186.7)
                                           -----       ----       ----       ----               ------           ------
Net income (loss)...................       (12.6)%      3.4%      (2.6)%      3.5%              (638.8)%         (208.1)%
                                           =====       ====       ====       ====               ======           ======
</TABLE>

                                       10
<PAGE>
 
The following table sets forth for the periods indicated, the percentage of net
revenue represented by the following items:
<TABLE>
<CAPTION>
 
                                                                 THREE MONTHS             NINE MONTHS
                                                                    ENDED                    ENDED
                                                                   JUNE 30,                 JUNE 30,
----------------------------------------------------------------------------------------------------------
PEDIATRIC HOME HEALTH CARE:                                   1998         1997         1998         1997
                                                            --------     -------      --------     --------
<S>                                                         <C>          <C>         <C>           <C> 
   Nursing..........................................        $22,785      $19,075      $ 67,758     $ 47,255
                                                                                                           
   Respiratory Therapy Equipment....................          6,306        5,944        17,949       16,525
                                                                             
   Home Medical Equipment...........................            853          482         2,426        1,761
                                                                                                           
   Pharmacy and Other...............................          8,594        7,702        26,574       20,657
                                                            -------      -------      --------     --------
                                                                                                           
   Total Pediatric Home Health Care.................         38,538       33,203       114,707       86,198
                                                            -------      -------      --------     --------
                                                                                                           
ADULT HOME HEALTH CARE:                                                                                    
Nursing.............................................          4,292        4,485        13,117       17,482
                                                                                                           
Respiratory Therapy Equipment.......................          5,159        5,548        16,650       16,695
                                                                                                           
Home Medical Equipment..............................          1,549        1,385         4,620        4,088
                                                                                                           
Pharmacy and Other..................................          5,265        2,469        14,926        6,605
                                                            -------      -------      --------     --------
                                                                                                           
         Total Adult Home Health Care...............         16,265       13,887        49,313       44,870
                                                            -------      -------      --------     --------
                                                                                                           
         Total Medical Testing Services.............         23,677        6,800        55,498       19,123
                                                            -------      -------      --------     --------
         Total Net Revenue..........................        $78,480      $53,890      $219,518     $150,191
                                                            =======      =======      ========     ======== 
                                                            
</TABLE>

THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997.
------------------------------------------------------------------------------

     Net Revenues:  Net revenue increased $24.6 million, or 46%, to $78.5
million in the three months ended June 30, 1998 from $53.9 million in the same
period in the prior year.  The Company's acquisitions accounted for
approximately $22.9 million of the increase in net revenue and internal growth
accounted for the remaining $1.7 million.  For branch offices that have been
under the Company's management for more than one year, the internal growth in
net revenue was 3% for the three months ended June 30, 1998.  Of the $24.6
million increase in net revenue in the third quarter of fiscal 1998, pediatric
health care net revenue accounted for $5.3 million.  Increased pediatric health
care net revenue for the three months ended June 30, 1998 was attributable to
the Company's acquisitions which accounted for approximately $4.1 million and
the remaining to marketing efforts which resulted in an increase in patients
served rather than any significant increase in rates charged.  The net increase
in adult health care (young adult and geriatric patients) net revenue accounted
for $2.4 million of the total increase in net revenue for the three months ended
June 30, 1998.  Increased adult net revenue for the three months ended June 30,
1998 was attributable to the Company's acquisitions which accounted for
approximately $3.8 million, partially offset by a decline in internal revenue
for adult patients of $1.3 million.  Net revenue for paramedical testing
services accounted for $16.9 million of the increase in net revenue for the
quarter, primarily due to the acquisition of PMI which added $15.0 million.  In
the three months ended June 30, 1998, the Company derived approximately 71% of
its net revenues from commercial insurers and other private payors, 23% from
Medicaid and 6% from Medicare.

     Operating Salaries, Wages and Employee Benefits:  Operating salaries, wages
     -----------------------------------------------                            
and employee benefits consist primarily of branch office employee costs which
increased $9.8 million, or 43%, to $32.9 million in the three months ended June
30, 1998 from $23.1 million in the same period in the prior year.  The increase
was due to various factors including the Company's acquisitions which added
approximately $8.7 million.  As a result of acquisitions completed by the
Company, particularly the December 1997 acquisition of PMI, the 

                                       11
<PAGE>
 
Company's historical results of operations are not necessarily indicative of
future results. Due to the nature of its operations, PMI has a lower operating
salaries, wages and employee benefits component as compared to the Company's
home healthcare operations. As a percentage of net revenue, operating salaries,
wages and employee benefits for the three months ended June 30, 1998 decreased
to 42% from 43% in the comparable period of the prior year.

     Other Operating Costs:  
     ---------------------                                                  
Other operating costs include medical supplies, branch office rents, utilities,
vehicle expenses, independent contractor payments and cost of sales. The cost of
sales consists primarily of the cost of pharmacy products sold. Other operating
costs increased $14.5 million, or 72%, to $34.5 million in the three months
ended June 30, 1998 from $20.0 million in the comparable period in 1997. Of the
increase $6.9 million relates to the PMI acquisition in the medical testing
business. Due to the nature of its operations, PMI has a higher other operating
cost component as compared to the Company's home healthcare operations. The
remaining $7.6 million is primarily due to growth in the business. As a
percentage of net revenue, other operating costs for the three months ended June
30, 1998 increased to 44% from 37% in the comparable period of the prior year.

     Corporate, General and Administrative Costs:  
     -------------------------------------------                         
Corporate, general and administrative costs increased $3.2 million, or 91%, to
$6.7 million for the three months ended June 30, 1998 from $3.5 million in the
same period in the prior year. The increase was primarily due to the acquisition
of PMI and growth of the business. As a percentage of net revenue, corporate,
general and administrative costs for the three months ended June 30,1998
increased to 9% from 7% in the comparable period of the prior year.

     Provision for Doubtful Accounts:  
     -------------------------------                                           
Provision for doubtful accounts consists of the amount of billed revenue that
management estimates to be uncollectible. During the three months ended June 30,
1998, the Company's provision for doubtful accounts increased approximately
$13.7 million, or 816%, to $15.4 million from $1.7 million in the same period in
1997. The increase in the three months ended June 30, 1998 is primarily
attributable to management's ongoing assessment of the collectibility of
accounts receivable which was revised to reflect: (1) continued difficulties in
the health care reimbursement environment, (2) lagging collection on certain
receivables primarily resulting from the implementation of a new billing and
collection system which diverted the Company's resources from pursuing older
receivable balances, (3) problems identified during the quarter related
primarily to certain billings generated during the implementation phase of the
new billing and collection system, (4) collection experience on certain
receivables of acquired businesses and (5) the unfavorable outcome of certain
receivables under appeal. Due to the above mentioned environmental and process
changes the Company's Management reassessed its methodology for estimating its
allowance for doubtful accounts resulting in the increase in the provision and a
decrease in days sales outstanding to 103 days in the fiscal 1998 period from
111 days in the prior year period. See "Liquidity and Capital Resources".

     Depreciation and Amortization Expenses:  
     --------------------------------------                                
Depreciation and amortization expenses increased $0.7 million, or 43%, to $2.3
million in the three months ended June 30, 1998 from $1.6 million in the same
period in 1997. The increase was primarily due to capital expenditures for the
purchase of rental and computer equipment and the amortization of goodwill from
the Company's acquisitions. As a percentage of the Company's total net revenue,
depreciation and amortization costs were comparable for the three months ended
June 30, 1998 and 1997.

     Interest Expense:  
     ----------------                                                       
Interest expense increased $1.6 million, or 172%, to $2.6 million in the three
months ended June 30, 1998 from $1.0 million in the same period in the prior
year. The increase was primarily the result of a $60.2 million increase in the
Company's average debt outstanding at June 30, 1998 compared to the same period
in the prior year. The increase was also due to an increase in interest rates
related to the issuance of
                                       12
<PAGE>
 
10% Senior Subordinated Notes due 2008, and the Company's credit facility. See
"Liquidity and Capital Resources".

     Income Tax Expense:  Income tax expense (benefit) decreased $7.1 million,
     ------------------                                                       
or 583% to $(5.9) million in the three months ended June 30, 1998 from $1.2
million in the same period in the prior year.  The Company has recorded an
overall net operating loss for the quarter.  The Company expects to realize a
refund through carryback claims of approximately $0.9 million.

NINE MONTHS ENDED JUNE 30, 1998 COMPARED TO NINE MONTHS ENDED JUNE 30, 1997.

     Net Revenues:  Net revenue increased $69.3 million, or 46% to $219.5
     ------------                                                        
million in the nine months ended June 30, 1998 from $150.2 million in the same
period in the prior year.  The Company's acquisitions accounted for
approximately $56.2 million of the increase in net revenue and internal growth
accounted for the remaining $13.1 million. For branch offices that have been
under the Company's management for more than one year, the internal growth in
net revenue was 9% for the nine months ended June 30, 1998.  Of the $69.3
million increase in net revenue for the nine months ended June 30, 1998,
pediatric health care net revenue accounted for $28.5 million.  Increased
pediatric health care net revenue for the nine months ended June 30, 1998 was
attributable to the Company's acquisitions which accounted for approximately
$13.4 million and the remainder to marketing efforts which resulted in an
increase in patients served rather than any significant increase in rates
charged. Adult health care net revenue accounted for $4.4 million of the
increase in net revenue for the nine months ended June 30, 1998.  Increased
adult health care net revenue for the nine months ended June 30, 1998 was
attributable to the Company's acquisitions which accounted for approximately
$11.1 million. This amount was partially offset by a decline in internal revenue
for adult patients of $6.7 million.  Paramedical testing services net revenue
accounted for $36.4 million of the increase in net revenue for the nine month
period,  primarily due to the acquisition of PMI which added $31.7 million.  The
Company derived approximately 70% of its net revenues from commercial insurers
and other private payors, 23% from Medicaid and 7% from Medicare.

     Operating Salaries, Wages and Employee Benefits:  Operating salaries, wages
     -----------------------------------------------                            
and employee benefits consist primarily of branch office employee costs.
Operating salaries, wages and employee benefits increased $25.7 million, or 40%
to $90.0 million in the nine months ended June 30, 1998 from $64.3 million in
the same period in the prior year.  The increase was primarily due to the
Company's acquisitions which added approximately $20.6 million.  As a result of
acquisitions completed by the Company, particularly the December 1997
acquisition of PMI, the Company's historical results of operations are not
necessarily indicative of future results.  Due to the nature of its operations,
PMI has a lower operating salaries, wages and employee benefits component as
compared to the Company's home healthcare operations. As a percentage of net
revenue, operating salaries, wages and employee benefits for the nine months
ended June 30, 1998 decreased to 41% from 43%.

     Other Operating Costs:  Other operating costs include medical supplies,
     ---------------------                                                  
branch office rents, utilities, vehicle expenses, independent contractor
payments and cost of sales.  The cost of sales consists primarily of the costs
of pharmacy products sold.  Other operating costs increased $33.4 million or 59%
to $89.9 million in the nine months ended June 30, 1998 from $56.5 million in
the comparable period in 1997.  Of the increase, $16.2 million relates to the
PMI acquisition in the medical testing business. Due to the nature of its
operations, PMI has a higher other operating costs component as compared to the
Company's home healthcare operations.  The remaining $17.2 million is primarily
due to growth in the business.  As a percentage of net revenue, other operating
costs for the nine months ended June 30, 1998 increased to 41% from 38% in the
comparable period of  the prior year.

                                       13
<PAGE>
 
     Corporate, General and Administrative Costs:  Corporate, general and
     -------------------------------------------                         
administrative costs increased $7.4 million, or 80%, to $16.6 million in the
nine months ended June 30, 1998 from $9.2 million in the same period in the
prior year.  The increase was primarily due to the acquisition of PMI and growth
of the business.  As a percentage of net revenue corporate, general and
administrative costs for the nine months ended June 30, 1998, increased to 8%
from 6% in the comparable period of the prior year.

     Provision for Doubtful Accounts:  Provision for doubtful accounts consists
     -------------------------------                                           
of the amount of billed revenue that management estimates to be uncollectible.
During the nine months ended June 30, 1998, the Company's provision for doubtful
accounts increased approximately $14.6 million, or 314%, to $19.3 million from
$4.7 million in the same period in 1997. The increase in the three months ended
June 30, 1998 is primarily attributable to management's ongoing assessment of
the collectibility of accounts receivable which was revised to reflect:  (1)
continued difficulties in the health care reimbursement environment, (2) lagging
collection on certain receivables primarily resulting from the implementation of
a new billing and collection system which diverted the Company's resources from
pursuing older receivable balances, (3) problems identified during the quarter
related primarily to certain billings generated during the implementation phase
of the new billing and collection system, (4) collection experience on certain
receivables of acquired businesses and (5) the unfavorable outcome of certain
receivables under appeal.  Due to the above mentioned environmental and process
changes the Company's Management reassessed its methodology for estimating its
allowance for doubtful accounts resulting in the increase in the provision and a
decrease in days sales outstanding to 103 days in the fiscal 1998 period from
111 days in the prior year period.  See "Liquidity and Capital Resources".

     Depreciation and Amortization Expenses:  Depreciation and amortization
     --------------------------------------                                
expenses increased $1.9 million, or 43%, to $6.4 million in the nine months
ended June 30, 1998 from $4.5 million in the same period in 1997.  The increase
was primarily due to capital expenditures for the purchase of rental and
computer equipment and the amortization of goodwill from the Company's
acquisitions.  As a percentage of the Company's total net revenue, depreciation
and amortization costs were comparable for the nine months ended June 30, 1998
and 1997.

     Interest Expense:  Interest expense  increased $3.7 million, or 159%, to
     ----------------                                                        
$6.0 million in the nine months ended June 30, 1998 from $2.3 million in the
same period in the prior year.  The increase was primarily the result of $50.4
million increase in the Company's average debt outstanding at June 30, 1998
compared to the same period in the prior year.  The increase was also due to an
increase in interest rates related to the issuance of 10% Senior Subordinated
Notes due 2008, and the Company's credit facility.  See "Liquidity and Capital
Resources".

     Income Tax Expense:  Income tax expense (benefit) decreased $6.5 million,
     ------------------                                                       
or 187%, to $(3.0) million in the nine months ended June 30, 1998 from $3.5
million in the same period in the prior year.  The Company has recorded an
overall net operating loss for the year to date. The Company expects to realize
a refund through carryback claims of approximately $0.9 million.

LIQUIDITY AND CAPITAL RESOURCES

     ACCOUNTS RECEIVABLE:  The Company's operating cash flows are affected
significantly by changes in accounts receivable, which have grown substantially
over time largely as a result of the Company's net revenue growth.  For the nine
months ended June 30, 1998 and 1997, the Company's cash flows from operations
were affected by increases in accounts receivable balances of $32.6 million and
$20.7 million, respectively.  The Company's DSO was 103 days and 111 days as of
June 30, 1998 and June 30, 1997, respectively, based on the net revenue for the
last quarter of the period. The decrease in DSO is primarily 

                                       14
<PAGE>
 
attributable to the increase in the allowance for doubtful accounts. The Company
has taken measures intended to further improve DSO by hiring additional
experienced reimbursement personnel, enhancements to the billing and collection
system, improving training programs, engaging an outside consulting firm to
assess the billing and collection functions and provide recommendations for
process improvements, as well as further utilization of the new billing and
collection system to include the integration of locations not currently on the
system.

     PROPERTY AND EQUIPMENT:  The Company's investments in property and
equipment are attributable largely to purchases of medical equipment that is
rented to patients, and to computer equipment related to the Company's new
medical billing and collection system, and the new medical testing billing,
ordering and management systems.  Capital expenditures for computer equipment
have been substantially completed.

     ACQUISITIONS:  Acquisitions to date have been financed with a combination
of borrowings under the Credit Agreement, shares of Common Stock of the Company
and seller notes. The Company's cash investments in the acquisition of
businesses were $24.4 million and $10.7 million respectively, for the nine
months ended June 30, 1998 and 1997.

     LONG TERM DEBT:  On April 16, 1998, the Company issued, in a private
placement, $75 million aggregate principal amount of 10% Senior Subordinated
Notes due 2008, which were subsequently replaced on May 12, 1998, with $75
million aggregate principal amount of 10% Senior Subordinated Notes due 2008,
Series A, registered with the Securities and Exchange Commission (the "Notes").
After paying issuance costs of approximately $2.7 million, the Company received
proceeds of $72.3 million, which were used to repay a portion of the
indebtedness outstanding under its revolving credit facility.  Interest on the
Notes accrues from the date of issuance, and is payable semi-annually on April
15 and October 15 of each year, commencing October 15, 1998.  The Notes are
redeemable for cash at any time on or after April 15, 2003, at the option of the
Company, in whole or in part, at certain redemption prices, plus accrued and
unpaid interest to the date of redemption.  In addition, at any time prior to
April 15, 2001, the Company may redeem up to 25% of the aggregate principal
amount of the Notes at a set redemption amount with the net proceeds from one or
more public offerings of Common Stock of the Company.  The Notes place certain
restrictions on the incurrence of additional indebtedness, the creation of
liens, sales of assets, mergers and consolidations and payment of dividends,
among other things.

     CREDIT AGREEMENT:   In August 1997, the Company increased the amount of
financing available under the Credit Agreement from $60.0 million to $100.0
million, consisting of a $95.0 million revolving loan (Credit Facility) with a
$5.0 million swingline loan credit subfacility. The Credit Agreement was amended
April 16, 1998, effective upon the issuance of the Notes, changing the
commitment fees and the financial ratio requirements.

     As of July 31, 1998, the Company provided notice to its lenders, as
required under the terms of the Credit Agreement, of a breach of certain
financial covenants contained in the Credit Agreement.  As a result, the Credit
Agreement was further amended on August 13, 1998 ("Amendment No. 2"), waving the
default under the credit agreement, amending the financial covenants applicable
after August 13, 1998, placing a limitation on aggregate borrowings for working
capital purposes and prohibiting the Company from borrowing for acquisitions
until February 1999 without the approval of the lenders and stipulating that the
Company must meet certain financial criteria as defined in Amendment No. 2
before borrowing for acquisitions.  In addition, Amendment No. 2 reduces total
borrowings allowed under the Credit Agreement from $100.0 million to $75.0
million, changes commitment fees and applicable margins and allows the lenders
to appoint an independent consultant to review the billing and collection
system, processes and controls.   The Amendment No. 2 also granted the Company a
waiver to permit the Company to comply with its contractual obligations under
the PMI 

                                       15
<PAGE>
 
acquisition and to repurchase at the market price the shares issued in the PMI
transaction, and gave lender approval for the purchase by the Company of a home
health agency in Georgia. See discussion under "Commitments".

     The Security Agreement executed in connection with Amendment No. 2 grants
to the lenders under the Credit Agreement, subject to certain permitted liens
and exceptions, a collateral interest in substantially all of the assets of the
Company.

     Under the amended Credit Facility, commitment fees ranging from 0.300% to
0.500% per annum is charged on the average daily unused portion of the loan
facility.  The Company's current leverage ratio will result in an increase in
the effective interest rate on borrowings under the Credit Agreement.  At the
Company's option, borrowings under the revolving facility bear interest at (1)
LIBOR plus an applicable margin that varies from a minimum of 1.375% to a
maximum of 3.000% and is based on the calculation of a leverage ratio, or (2)
the base rate plus the applicable margin.  At the Company's option, borrowings
under the swingline loan credit subfacility bear interest at either (1) a Quoted
Rate established by the lender or (2) the prime rate.  At June 30, 1998, the
Company's applicable margin was 1.625%, and the interest rates under this
facility at June 30, 1998 ranged from 7.175% to 7.315%.  Outstanding borrowings
under this facility at June 30,1998 were approximately $30.0 million.

     The Company anticipates that the available lines of credit under the Credit
Agreement, and cash flow generated from operations should be adequate to enable
the company to continue to fund its operations, capital expenditures,
anticipated internal growth, and planned acquisitions.

     At June 30, 1998, total borrowings under the Notes and the Credit Agreement
were approximately $105.0 million.

     INTEREST RATE SWAP AGREEMENT:  At June 30, 1998, the Company had one
interest rate swap agreement with a commercial bank (the "Counter Party"),
having a cumulative notional principal amount of $25.0 million.  The Company
pays a fixed rate of  6.61% plus the applicable margin that varies from a
minimum of 1.0% to a  maximum of 1.75% and is based on the calculation of a
leverage ratio.  The interest rate swap terminates in June 2002.  The Company is
exposed to credit loss in the event of non-performance by the Counter Party to
the interest rate swap agreement.  However, the Company does not anticipate such
non-performance.

     COMMITMENTS:  A portion of the consideration paid by the Company for PMI
consisted of 495,050 shares of the Company's Common Stock issued at $20.20 per
share (the "Shares"), for a total share value of $10.0 million.  Pursuant to the
terms of the PMI acquisition, as amended, the Company agreed to provide
ChoicePoint protection for a specified time period against a decrease in the
value of any of the Shares subsequently sold by ChoicePoint in the marketplace,
or any Shares tendered to the Company in a private sale at the current market
price.  Under the terms of the agreement, the Company must reimburse ChoicePoint
in cash for the difference between $20.20 and the sale price of any Shares
actually sold by ChoicePoint for less than $20.20 prior to December 15, 1998,
and must purchase any Shares tendered by ChoicePoint at the current market 
price. Pursuant to the terms of Amendment No.2 to the Credit Agreement, the
lenders agreed to permit the Company to repurchase all of the shares at the
market price at the time of purchase, and to pay the contractual protection
obligation, for a total of $10.0 million, the amount of the original
consideration represented by the Shares at closing. ChoicePoint and the Company
have agreed to complete the transaction on or prior to August 21, 1998.

                                       16
<PAGE>
 
YEAR 2000 COMPLIANCE

     As the year 2000 approaches, an issue impacting all companies has emerged
regarding how existing application software programs and operating systems can
accommodate this date value.  Management does not anticipate that the Company
will incur significant operating expenses or will be required to invest heavily
in computer system improvements relating to the uncertainties associated with
the year 2000 because the Company's current systems, and the systems presently
in the final stages of implementation, are believed to be year 2000 compliant.
The Company anticipates that testing of its systems will begin in the first
quarter of fiscal 1999.

     In addition, the Company conducts business electronically with certain
external parties, including payors and vendors.  Management does not know at
this time what, if any, impact year 2000 compliance may have on its payor and
vendor sources and the impact, if any, on the Company if such payors are not
fully compliant.  Management is contacting external parties with which it
interacts to determine year 2000 compliance issues and when its payors or
vendors expect to be year 2000 compliant.

QUARTERLY OPERATING RESULTS AND SEASONALITY

     The Company's quarterly results may vary significantly depending primarily
on factors such as rehospitalizations of patients, the timing of new branch
office openings and pricing pressures due to legislative and regulatory
initiatives to contain health care costs.  As a result of the above factors, the
Company's operating results for any particular quarter may not be indicative of
the results for the full fiscal year.  In addition, the Company's future
operating results could differ materially from those previously achieved or
projected in forward looking statements made by or on behalf of the Company.

PART II - OTHER INFORMATION

ITEM 5.   OTHER INFORMATION.

          The Securities and Exchange Commission has made recent changes to the
          proxy rules in Regulation 14A under the Securities Exchange Act of
          1934, as amended, including Rule 14a-4 and Rule 14a-5.  Stockholders
          are entitled to submit proposals on matters appropriate for
          stockholder action consistent with the rules and regulations of the
          Securities and Exchange Commission and with the Company's Bylaws.  Any
          such proposal for the 1999 Annual Meeting of stockholders must comply
          with applicable regulations and be received by the Company at its
          executive offices in Norcross, Georgia, as follows:

               (i)  to be eligible for inclusion in the Company's proxy
               materials and form of proxy, it must be received no later than
               November 1, 1998; or

               (ii)  to be eligible to be presented from the floor for vote at
               the meeting (but not intended for inclusion in the Company's
               proxy materials), it must be received no later than sixty (60)
               days nor more than ninety (90) days prior to the meeting;
               provided, however, that in the event that less than seventy (70)
               days notice or prior public disclosure of the date of the meeting
               is given or made to stockholders, notice by the stockholder to be
               timely must be so received not later than close of business on
               the 10th day following the day on which 

                                       17
<PAGE>
 
               such notice of the date of the annual meeting was mailed or such
               public disclosure was made.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

      (A)  EXHIBITS
           --------

           The following exhibits are filed with or incorporated by reference in
           this report. Where such filing is made by incorporation by reference
           to a previously filed registration statement or report, such
           registration statement or report is identified in parentheses. The
           Company will furnish any exhibit upon request to Pediatric Services
           of America, Inc., 310 Technology Parkway, Norcross, Georgia 30092.
           There is a charge of $.50 per page to cover expenses for copying and
           mailing.

           10.16  Amendment No. 2 to Credit Agreement
           10.17  Security Agreement
           27  Financial Data Schedule

      (b)  Reports on Form 8-K
           -------------------

      On July 29, 1998, the Registrant filed a report on Form 8-K under Item 5,
indicating the expected results of this third quarter report. See "Item 2.
Management's Discussion and Analysis and Results of Operations".

                                       18
<PAGE>
 
SIGNATURES

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



                                      PEDIATRIC SERVICES OF AMERICA, INC.
                                              (REGISTRANT)



Date:  August 14, 1998              By:     /s/ Stephen M. Mengert
                                          ---------------------------------    
                                              Stephen M. Mengert
                                              Senior Vice President,
                                              Chief Financial Officer,
                                              Treasurer and Secretary
                                              (Duly authorized officer and
                                              Principal Financial Officer)

                                       19
<PAGE>
 
                               INDEX OF EXHIBITS

                                                                        PAGE NO.
                                                                        --------

     10.16    Amendment No. 2 to Credit Agreement........................  21
     10.17    Security Agreement.........................................  32
     27       Financial Data Schedule....................................  52

                                       20