UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                  Form 10-K
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                                 Act of 1934
    For the transition period from January 1, 1997 to September 30, 1997

                      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.)

          433 Hackensack Avenue
          Hackensack, New Jersey                    07601
          (Address of principal executive offices)  (Zip Code)

     Registrant's telephone number, including area code: (201) 488-8818

         Securities registered pursuant to Section 12(b) of the Act:
                                    None
         Securities registered pursuant to Section 12(g) of the Act:
                                    None


   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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
   the best of Registrant's knowledge, in definitive proxy or information
  statements incorporated by reference in Part III of this Form 10-K or any
                     amendment to this Form 10-K [    ].


The aggregate market value of the voting stock held by non-affiliates of the
                         Registrant: Not Applicable



                    Class                  Outstanding at February 10, 1998
            Common Stock  $.01 Par Value              100 shares

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         Cautionary Statements Regarding Forward Looking Statements

Certain  oral  statements made by management from time to  time  and  certain
statements  contained herein, including certain statements  in  "Management's
Discussion  and  Analysis of Financial Condition and Results  of  Operations"
such  as  statements  concerning  Medicare  and  Medicaid  programs  and  the
Company's  ability  to  meet its liquidity needs and control  costs;  certain
statements  contained  in "Business" such as statements concerning  strategy,
government   regulation,  Medicare  and  Medicaid  programs,   managed   care
initiatives,  and recent transactions and competition; certain statements  in
"Legal  Proceedings"  and  certain statements in the  Notes  to  Consolidated
Financial Statements, such as certain of the pro forma financial information;
and  other  statements  contained  herein  regarding  matters  that  are  not
historical  facts are forward looking statements (as such term is defined  in
the  Securities  Act of 1933) and because such statements involve  risks  and
uncertainties, actual results may differ materially from those  expressed  or
implied  by such forward looking statements. Factors that could cause  actual
results to differ materially include, but are not limited to, those discussed
below.

Certain  Financial Considerations. The Multicare Companies, Inc. ("Multicare"
or  the "Company") has substantial indebtedness and, as a result, significant
debt  service obligations. As of September 30, 1997, after giving  pro  forma
effect to the Merger (as defined under "The Tender Offer and Merger") and the
related  financing (as such item is defined in "Management's  Discussion  and
Analysis  of  Financial  Conditions  and Results  of  Operations  --  Certain
Transactions") and the use of proceeds therefrom, the Company would have  had
approximately  $751  million  of  long-term  indebtedness  which  would  have
represented 50% of its total capitalization. The degree to which the  Company
is  leveraged could have important consequences, including the following: (i)
the  Company's  ability  to obtain additional financing  in  the  future  for
working  capital,  capital expenditures, acquisitions  or  general  corporate
purposes  may  be impaired; (ii) a substantial portion of the Company's  cash
flow  from  operations  may  be dedicated to the  payment  of  principal  and
interest  on  its indebtedness, thereby reducing the funds available  to  the
Company for its operations; (iii) certain of the Company's borrowings are and
will  continue to be at variable rates of interest, which causes the  Company
to  be  vulnerable to increases in interest rates; and (iv)  certain  of  the
Company's  indebtedness  contains financial and other restrictive  covenants,
including  those  restricting the incurrence of additional indebtedness,  the
creation of liens, the payment of dividends, sales of assets and minimum  net
worth requirements. Failure by the Company to comply with such covenants  may
result  in  an event of default which, if not cured or waived, could  have  a
material adverse effect on the Company.

The  Company's  ability  to  make scheduled  payments  or  to  refinance  its
obligations  with  respect to its indebtedness depends on its  financial  and
operating  performance,  which, in turn, is subject  to  prevailing  economic
conditions  and to financial, business and other factors beyond its  control.
Although  the Company's cash flow from its operations has been sufficient  to
meet its debt service obligations in the past, there can be no assurance that
the Company's operating results will continue to be sufficient for payment of
the Company's indebtedness.

Risk  of  Adverse  Effect  of Healthcare Reform.  In  addition  to  extensive
existing government healthcare regulation, there are numerous initiatives  on
the  federal and state levels for comprehensive reforms affecting the payment
for  and  availability of healthcare services. It is not clear at  this  time
what  proposals, if any, will be adopted, or what effect such proposals would
have  on  the  Company's  business. Aspects of certain  of  these  healthcare
proposals,  such  as  reductions in funding  of  the  Medicare  and  Medicaid
programs,  potential changes in reimbursement regulations by the Health  Care
Financing  Administration ("HCFA"), enhanced pressure to  contain  healthcare
costs  by  Medicare, Medicaid and other payors and permitting  greater  state
flexibility  in  the administration of Medicaid, could adversely  affect  the
Company.  There  can  be  no  assurance that  currently  proposed  or  future
healthcare   legislation   or  other  changes  in   the   administration   or
interpretation  of governmental healthcare programs or regulations  will  not
have  a  material adverse effect on the Company. Concern about the  potential
effects of the proposed reform measures has contributed to the volatility  of
prices  of  securities  of  companies in healthcare and  related  industries,
including  the  Company, and may similarly affect the price of the  Company's
securities in the future. See "Business Governmental Regulation."

Regulation.  The  federal  government and all states  in  which  the  Company
operates  regulate various aspects of the Company's business. In  particular,
the  development  and  operation of eldercare centers and  the  provision  of
healthcare services are subject to federal, state and local laws relating  to
the  delivery  and adequacy of medical care, distribution of pharmaceuticals,
equipment, personnel, operating policies, fire prevention, rate-setting and

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compliance with building codes and environmental laws. Eldercare centers  are
subject  to  periodic  inspection by governmental and  other  authorities  to
assure continued compliance with various standards, their continued licensing
under  state law, certification under the Medicare and Medicaid programs  and
continued  participation  in  the  Veterans Administration  program  and  the
ability  to participate in other third party programs. The failure to  obtain
or  maintain any required regulatory approvals or licenses could prevent  the
Company  from  offering services or adversely affect its ability  to  receive
reimbursement  of  expenses and could result in the denial of  reimbursement,
the  imposition of fines, temporary suspension of admission of new  patients,
suspension  or  decertification  from  the  Medicaid  or  Medicare   program,
restrictions  on  the ability to acquire new facilities  or  expand  existing
facilities  and,  in extreme cases, revocation of the facility's  license  or
closure  of a facility. There can be no assurance that the facilities  owned,
leased  or managed by the Company, or the provision of services and  supplies
by  the  Company,  will  meet  or  continue  to  meet  the  requirements  for
participation  in  the  Medicaid  or Medicare  programs  or  state  licensing
authorities  will  not  adopt  changes or  new  interpretations  of  existing
regulations that would adversely affect the Company.

Many  states have adopted Certificate of Need or similar laws which generally
require  that  the appropriate state agency approve certain acquisitions  and
determine  that  a  need exists for certain bed additions, new  services  and
capital expenditures or other changes prior to beds and/or new services being
added   or  capital  expenditures  being  undertaken.  To  the  extent   that
Certificates of Need or other similar approvals are required for expansion of
Company  operations,  either  through center  acquisitions  or  expansion  or
provision of new services or other changes, such expansion could be adversely
affected  by  the  failure  or inability to obtain the  necessary  approvals,
changes in the standards applicable to such approvals and possible delays and
expenses  associated  with obtaining such approvals.  In  addition,  in  most
states  the  reduction  of  beds or the closure of a  facility  requires  the
approval  of the appropriate state regulatory agency and if the Company  were
to reduce beds or close a facility the Company could be adversely impacted by
a failure to obtain or a delay in obtaining such approval.

The  Company is also subject to federal and state laws which govern financial
and  other  arrangements  between  healthcare  providers.  These  laws  often
prohibit  certain direct and indirect payments or fee-splitting  arrangements
between  healthcare providers that are designed to induce  or  encourage  the
referral of patients to, or the recommendation of, a particular provider  for
medical  products  and  services.  These  laws  include  the  federal  "Stark
legislations"  which  prohibit,  with limited  exceptions,  the  referral  of
patients  for  certain  services, including home  health  services,  physical
therapy  and occupational therapy, by a physician to an entity in  which  the
physician has an ownership interest and the federal "anti-kickback law" which
prohibits, among other things, the offer, payment, solicitation or receipt of
any  form of remuneration in return for the referral of Medicare and Medicaid
patients  or  the purchasing, leasing, ordering or arranging for  any  goods,
facility  services or items for which payment can be made under Medicare  and
Medicaid. A violation of the federal "anti-kickback law" could result in  the
loss  of eligibility to participate in Medicare and Medicaid programs, or  in
the  imposition  of  civil  or criminal penalties.  The  federal  government,
private insurers and various state enforcement agencies have increased  their
scrutiny of providers, business practices and claims in an effort to identify
and  prosecute  fraudulent and abusive practices. In  addition,  the  federal
government has issued recent fraud alerts concerning nursing services, double
billing,  home  health  services and the provision  of  medical  supplies  to
nursing  facilities; accordingly, these areas may come under closer  scrutiny
by  the  government. See "Business -- Governmental Regulation."  Furthermore,
some  states  restrict certain business relationships between physicians  and
other  providers  of  healthcare  services.  Many  states  prohibit  business
corporations  from  providing, or holding themselves out as  a  provider  of,
medical  care. Possible sanctions for violation of any of these  restrictions
or  prohibitions include loss of licensure or eligibility to  participate  in
reimbursement programs and civil and criminal penalties. These laws vary from
state  to  state,  are often vague and have seldom been  interpreted  by  the
courts  or  regulatory agencies. From time to time, the  Company  has  sought
guidance  as to the interpretation of these laws; however, there  can  be  no
assurance  that  such  laws  will  ultimately  be  interpreted  in  a  manner
consistent with the practices of the Company.

In  the ordinary course of business, the Company's facilities receive notices
of  deficiencies  following  surveys  for  failure  to  comply  with  various
regulatory requirements. From time to time, survey deficiencies have resulted
in  various  penalties  against certain facilities  and  the  Company.  These
penalties  have included monetary fines, temporary bans on the  admission  of
new patients and the placement of restrictions on the Company's ability to

<PAGE> 2
obtain  or transfer certificates of need in certain states. There can  be  no
assurance that future surveys will not result in penalties or sanctions which
could have a material adverse effect on the Company.

Payment by Third Party Payors. For the years ended December 31, 1995 and 1996
and  the  nine  months  ended September 30, 1997, respectively,  the  Company
derived  approximately 41%, 40% and 43% of its net revenues from private  pay
and  other sources, 25%, 25% and 24% from Medicare and 34%, 35% and 33%  from
various  state Medicaid agencies. Both governmental and private  third  party
payors  have  employed cost containment measures designed to  limit  payments
made to healthcare providers such as the Company. Those measures include  the
adoption  of initial and continuing recipient eligibility criteria which  may
limit  payment  for services, the adoption of coverage and duration  criteria
which  limit  the services which will be reimbursed and the establishment  of
payment  ceilings  which set the maximum reimbursement that  a  provider  may
receive for services. Furthermore, government payment programs are subject to
statutory    and   regulatory   changes,   retroactive   rate    adjustments,
administrative rulings and government funding restrictions, all of which  may
materially  increase or decrease the rate of program payments to the  Company
for  its services. There can be no assurance that payments under governmental
and  private  third party payor programs 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. The  majority
of  the  third-party  payor balances are settled within two  or  three  years
following  the  provision of services. The Company's financial condition  and
results  of  operations may also be affected by the timing  of  reimbursement
payments  and rate adjustments from third-party payors. The Company has  from
time  to  time experienced delays in receiving reimbursement from third-party
payors. In addition, there can be no assurance that centers owned, leased  or
managed  by  the  Company, or the provision of services and supplies  by  the
Company,  now or in the future will initially meet or continue  to  meet  the
requirements  for  participation  in such  programs.  The  Company  could  be
adversely  affected  by  the continuing efforts of governmental  and  private
third  party  payors  to contain the amount of reimbursement  for  healthcare
services. In an attempt to limit the federal budget deficit, there have been,
and the Company expects that there will continue to be, a number of proposals
to  limit  Medicare  and Medicaid reimbursement for healthcare  services.  In
certain  states  there have been proposals to eliminate  the  distinction  in
Medicaid  payment  for  skilled  versus intermediate  care  services  and  to
establish a case mix prospective payment system pursuant to which the payment
to  a  facility for a patient is based upon the patient's condition and  need
for  services. The Company cannot at this time predict whether any  of  these
proposals  will  be adopted or, if adopted and implemented, what  effect,  if
any,  such  proposals will have on the Company. In addition, private  payors,
including  managed  care  payors, increasingly are demanding  discounted  fee
structures  or the assumption by healthcare providers of all or a portion  of
the financial risk through prepaid capitation arrangements. Efforts to impose
reduced  allowances, greater discounts and more stringent  cost  controls  by
government and other payors are expected to continue. See "Business  -Sources
of Revenue."

Managed  care  organizations and other third party payors have  continued  to
consolidate  in order to enhance their ability to influence the  delivery  of
healthcare services. Consequently, the healthcare needs of a large percentage
of  the United States population are increasingly served by a small number of
managed  care organizations. These organizations generally enter into service
agreements  with  a limited number of providers for needed services.  To  the
extent  such  organizations terminate the Company  as  a  preferred  provider
and/or engage the Company's competitors as a preferred or exclusive provider,
the Company's business could be materially adversely affected.

For  those  specialty medical services covered by the Medicare  program,  the
Company  is  reimbursed for its direct costs plus an allocation  of  indirect
costs  up  to a regional limit. As the Company expands its specialty  medical
services,  the  costs of care for these patients are expected to  exceed  the
regional  reimbursement limits. As a result, the Company  has  submitted  and
will  be required to submit further exception requests to recover the  excess
costs  from  Medicare.  There is no assurance the Company  will  be  able  to
recover  such excess costs under pending or any future requests. The  failure
to  recover  these  excess  costs in the future  will  adversely  affect  the
Company's  financial  position  and results of  operations.  The  Company  is
subject  to  periodic audits by the Medicare and Medicaid programs,  and  the
paying  agencies for these programs have various rights and remedies  against
the  Company if they assert that the Company has overcharged the programs  or
failed to comply with program requirements. Such

<PAGE> 3
payment  agencies could seek to require the Company to repay any  overcharges
or  amounts  billed  in  violations of program requirements,  or  could  make
deductions  from future amounts due to the Company. Such agencies could  also
impose fines, criminal penalties or program exclusions.

Geographic  Payor  Concentration. The Company's  operations  are  located  in
Connecticut,  Illinois, Massachusetts, New Jersey, Ohio, Pennsylvania,  Rhode
Island, Vermont, Virginia, West Virginia and Wisconsin. Any adverse change in
the  regulatory environment, the reimbursement rates paid under the  Medicaid
program  or in the supply and demand for services in the states in which  the
Company   operates,  and  particularly  in  Massachusetts,  New  Jersey   and
Pennsylvania, could have a material adverse effect on the Company.

Competition.  The  healthcare  industry is highly  competitive.  The  Company
competes  with a variety of other companies in providing eldercare  services.
Certain  competing companies have greater financial and other  resources  and
may  be  more  established in their respective communities than the  Company.
Competing companies may offer newer or different centers or services than the
Company  and  may  thereby  attract the Company's customers  who  are  either
presently  customers of its eldercare centers or are otherwise receiving  its
eldercare services. See "Business -- Competition."

Risks  Associated  with  Recent Acquisitions and  Acquisition  Strategy.  The
Company  has  completed several acquisitions of eldercare businesses.   There
can  be  no  assurance  that  the Company will be able  to  realize  expected
operating and economic efficiencies from its recent acquisitions or from  any
future  acquisitions or that such acquisitions will not adversely affect  the
Company's results of operations or financial condition.

Risks Associated with the Multicare Acquisition. As a result of the Merger 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.  The Company also  uses  Genesis'
clinical  administration  and  healthcare management  information  system  to
monitor  and measure clinical and patient outcome data. Certain problems  may
arise in implementing the Management Agreement; for example, difficulties may
be  encountered  by Genesis as a result of the loss of key personnel  of  the
Company,  the  integration of the Company's corporate, accounting,  financial
reporting and management information systems with Genesis' systems and strain
on  existing levels of its personnel managing both businesses.  There can  be
no  assurance  that  Genesis  will  be able  to  successfully  implement  the
Management  Agreement or manage the Company's operations; failure  to  do  so
effectively and on a timely basis could have a material adverse effect on the
Company's financial condition and results of operations.

The  Company  may in the future engage in transactions with Genesis  and  its
affiliates.  Mr.  Michael R. Walker, the Chairman  of  the  Board  and  Chief
Executive  Officer  of Genesis, has become the Chairman and  Chief  Executive
Officer  of  the  Company and Mr. George V. Hager, Jr., the  Chief  Financial
Officer of Genesis, has become the Chief Financial Officer of the Company. In
addition,  Mr. Walker, Mr. Hager and Mr. Richard R. Howard, President  and  a
member of the board of directors of Genesis, have become members of the board
of  directors  of the Company.  Based on the foregoing, Genesis  and  Messrs.
Walker,  Hager and Howard have substantial influence on the Company  and  the
outcome  of any matters submitted to the Company's stockholders for  approval
and are in positions that may result in conflicts of interest with respect to
transactions  involving the Company and Genesis.  Genesis and its  affiliates
will  provide healthcare and related services to the Company's customers  and
facilities  either directly or through contracts with the Company.  Conflicts
of interest may arise in connection with the negotiation of the terms of such
arrangements.

Genesis  is  in the business of providing healthcare and support services  to
the  elderly,  and  substantially all of its markets  are  contiguous  to  or
overlap  with  the Company's existing markets. Genesis may compete  with  the
Company in certain of these markets or in the provision of certain healthcare
services.  Although  directors  of the Company  who  are  also  directors  or
officers  of Genesis have certain fiduciary obligations to the Company  under
Delaware  law,  such directors and Genesis are in positions that  may  create
potential   conflicts   of  interest  with  respect   to   certain   business
opportunities  available to and certain transactions involving  the  Company.
Neither Genesis nor

<PAGE> 4
Messrs. Walker, Hager and Howard are obligated to present to the Company  any
particular  investment opportunity which comes to their  attention,  even  if
such opportunity is of a character which might be suitable for investment  by
the Company.

Adequacy  of Certain Insurance. The provision of healthcare services  entails
an  inherent  risk  of liability.  The Company maintains liability  insurance
providing coverage which it believes to be adequate. In addition, the Company
maintains   property,   business  interruption,  and  workers'   compensation
insurance covering all facilities in amounts deemed adequate by the  Company.
There  can  be no assurance that any future claims will not exceed applicable
insurance  coverage or that the Company will be able to continue its  present
insurance coverage on satisfactory terms, if at all.

<PAGE> 5
Item 1.   Business.

General

The  Multicare Companies, Inc. ("Multicare" or the "Company")  is  a  leading
provider of high quality eldercare and specialty medical services in selected
geographic  regions. Multicare's eldercare services include  skilled  nursing
care,  assisted  living,  Alzheimer's care  and  related  support  activities
traditionally  provided  in  eldercare facilities.  The  Company's  specialty
medical  services  consist  of (i) sub-acute care such  as  ventilator  care,
intravenous therapy, and various forms of coma, pain and wound management and
(ii)  rehabilitation  therapies  such as occupational,  physical  and  speech
therapy  and stroke and orthopedic rehabilitation. The Company also  provides
management  services  to  51  facilities  and  consulting  services   to   14
facilities.

Multicare  believes it is well-positioned in its markets because it  provides
high  quality care in concentrated geographic regions. As a result, Multicare
believes  it  has achieved high occupancy rates, a favorable  payor  mix  and
sustained total and same store growth in net revenues and operating  profits.
Multicare's  overall occupancy rate was approximately 92%  and  91%  for  the
years  ended December 31, 1995 and 1996, respectively, and 90% for  the  nine
month  period  ended  September 30, 1997. Multicare achieved  a  quality  mix
(defined  as  non-Medicaid revenues) of 66%, 65% and 67% of net revenues  for
the  years  ended December 31, 1995 and 1996 and the nine month period  ended
September 30, 1997, respectively.

As  of  September 30, 1997, Multicare operated 155 eldercare  facilities,  11
assisted living facilities and 2 outpatient rehabilitation centers (90 owned,
27  leased  and  51  managed)  in Connecticut, Illinois,  Massachusetts,  New
Jersey,  Ohio,  Pennsylvania, Rhode Island, Vermont, Virginia, West  Virginia
and  Wisconsin with 17,615 beds. In terms of beds, the Company is the largest
provider  of  eldercare  services  in  Massachusetts,  New  Jersey  and  West
Virginia.  In  addition,  the  Company is one of  the  largest  providers  of
eldercare services in Pennsylvania, Ohio and Wisconsin. The Company  believes
it  operates  high quality, attractive facilities, many of  which  are  newly
constructed; approximately one-third of the Company's beds are less than five
years old.

The Tender Offer and Merger

On October 9, 1997 Genesis ElderCare Acquisition Corp. ("Acquisition Corp."),
a  wholly-owned subsidiary of Genesis ElderCare Corp., a Delaware corporation
formed by Genesis Health Ventures, Inc. ("Genesis"), The Cypress Group  L.L.C
(together  with its affiliates, "Cypress"), TPG Partners II, L.P.,  (together
with  its  affiliates, "TPG") and Nazem, Inc. (together with  its  affiliates
"Nazem"),  acquired  99.65%  of  the shares of  common  stock  of  Multicare,
pursuant  to a tender offer commenced on June 20, 1997 (the "Tender  Offer").
On  October  10,  1997,  Genesis ElderCare Corp. completed  the  merger  (the
"Merger") of Acquisition Corp. with and into Multicare in accordance with the
Agreement  and Plan of Merger (the "Merger Agreement") dated as of  June  16,
1997 by and among Genesis ElderCare Corp., Acquisition Corp., Genesis and the
Company.  Upon  consummation of the Merger, Multicare became  a  wholly-owned
subsidiary of Genesis ElderCare Corp.

In  connection  with  the  Merger,  Multicare  and  Genesis  entered  into  a
management  agreement (the "Management Agreement") pursuant to which  Genesis
manages the Company'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) $1,991,666 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 $23,900,000 in any given year.
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 will  be
paid by Multicare. Genesis also entered into an asset purchase agreement (the
"Therapy  Sale  Agreement") with Multicare and certain  of  its  subsidiaries
pursuant  to  which  Genesis acquired all of the assets used  in  Multicare's
outpatient  and  inpatient  rehabilitation therapy business  for  $24,000,000
subject  to  adjustment (the "Therapy Sale") and a stock  purchase  agreement
(the  "Pharmacy  Sale  Agreement") with Multicare  and  certain  subsidiaries
pursuant  to which Genesis will acquire all of the outstanding capital  stock
and  limited  partnership interest of certain subsidiaries of Multicare  that
are engaged in the business of providing institutional pharmacy services to

<PAGE> 6
third  parties for $50,000,000, subject to adjustment (the "Pharmacy  Sale").
The  Company  expects  to complete the Pharmacy Sale in  the  first  calendar
quarter of 1998.

Patient Services

Basic Healthcare Services

Basic  healthcare  services  are  those  traditionally  provided  to  elderly
patients in eldercare facilities and assisted living residences with  respect
to daily living activities and general medical needs. The Company provides 24-
hour skilled nursing care by registered nurses, licensed practical nurses and
certified  nursing  aides  in  all of its skilled  nursing  facilities.  Each
eldercare  facility  is managed by an on-site licensed administrator  who  is
responsible for the overall operations of the facility, including quality  of
care. The medical needs of patients are supervised by a medical director  who
is a licensed physician. While treatment of patients is the responsibility of
patients'  attending  physicians who are not employed  by  the  Company,  the
medical director monitors all aspects of patient treatment. The Company  also
provides  a  broad  range  of  support services including  dietary  services,
therapeutic  recreational  activities,  social  services,  housekeeping   and
laundry   services,   pharmaceutical  and  medical   supplies   and   routine
rehabilitation therapy. Each eldercare facility offers a number of activities
designed  to  enhance  the  quality of life for  patients.  These  activities
include  entertainment  events,  musical productions,  arts  and  crafts  and
programs  encouraging community interaction with patients and visits  to  the
facility. The Company provides housing, personal care and support services as
well as certain routine nursing services in its assisted living residences.

The  Company  currently  provides specialized care for  Alzheimer's  patients
under  the  supervision  of  specially trained skilled  nursing,  therapeutic
recreation and social services personnel. The Company's Alzheimer's  programs
include music therapy, gross and fine motor activity, reality orientation and
cognitive  stimulation  designed to counter the hyperactivity,  memory  loss,
confusion and reduced learning ability experienced by Alzheimer's patients.

Specialty Medical Services

Specialty  medical  services are provided to patients with medically  complex
needs  who generally require more intensive treatment and a higher  level  of
skilled nursing care. These services typically generate higher profit margins
than basic healthcare services because the higher complexity of the patients'
medical  conditions  results  in a need for  increased  levels  of  care  and
ancillary services.

Sub-acute  Care. Sub-acute care includes services provided to  patients  with
medically  complex  conditions  who  require  ongoing  nursing  and   medical
supervision  and  access to specialized equipment and services,  but  do  not
require  many  of  the  other services provided by an  acute  care  hospital.
Services in this category include ventilator care, intravenous therapy, wound
care    management,   traumatic   brain   injury   care,   post-stroke    CVA
(cerebrovascular  accident)  care,  CAPD  (continuous  ambulatory  peritoneal
dialysis),  pain management, hospice care, and tracheotomy and  other  ostomy
care. The Company provides a range of sub-acute care services to patients  at
its  facilities. The Company plans to continue to expand its  sub-acute  care
capabilities by supplementing and expanding currently available services  and
by developing expertise in additional services.

Rehabilitation   Therapies.  The  Company  provides  rehabilitation   therapy
programs  at  substantially all of its facilities. To complement the  routine
rehabilitation  therapy  services provided to  its  eldercare  patients,  the
Company  has developed specialized rehabilitation therapy programs  to  serve
patients  with  complex care needs, such as motor vehicle and other  accident
victims,  persons  suffering from job-related injuries and disabilities,  and
joint-replacement   patients.  The  Company  employs  full   time   physical,
occupational,  and  speech therapists at a majority of  its  facilities.  The
Company also offers respiratory services at selected facilities. In addition,
Multicare operates two outpatient rehabilitation facilities in New Jersey and
Illinois.  Upon  consummation of the Merger, the Company  sold  its  contract
rehabilitation  therapy  business  to Genesis.  See  "The  Tender  Offer  and
Merger."

Institutional  Pharmacy  Services.  Multicare  operates  eight  institutional
pharmacies  which currently serve a total of approximately 30,000  beds.  The
pharmacies  provide eldercare healthcare facilities and other institutions  a
variety  of  products  and  services including prescription  drugs,  pharmacy
consulting, and enteral, urological and intravenous therapies.

<PAGE> 7
Concurrently with the consummation of the Merger, the Company agreed to  sell
its  pharmacy  business  to Genesis.  The Company  expects  to  complete  the
Pharmacy Sale in the first calendar quarter of 1998.

Operations

General. The day-to-day operations of each eldercare facility are managed  by
an  on-site  state licensed administrator who is responsible for the  overall
operation  of  the  facility,  including  quality  of  care,  marketing,  and
financial  performance.  The  administrator  is  assisted  by  an  array   of
professional and non-professional personnel (some of whom may be  independent
providers),  including  a  medical director, nurses and  nursing  assistants,
social  workers, therapists, dietary personnel, therapeutic recreation staff,
and  housekeeping,  laundry and maintenance personnel.  The  business  office
staff  at  each  facility  manage  the day-to-day  administrative  functions,
including data processing, accounts payable, accounts receivable, billing and
payroll.

Historically,  the  facilities operated by Multicare were divided  into  five
divisions,  each  supervised by a team including  a  divisional  director,  a
divisional  controller,  a  marketing  director,  an  operations  performance
director,  and  a  clinical services director. The  divisional  and  facility
personnel were supported by a corporate staff based at Multicare's New Jersey
headquarters.  Upon  consummation  of the Merger,  Genesis  and  the  Company
entered  into the Management Agreement pursuant to which Genesis manages  the
Company's  operations. Genesis is in the process of overlaying  its  existing
regional and business unit management over the existing regional and business
unit  management at Multicare. The Company believes that the  integration  of
Genesis  and  Multicare  management will be  facilitated  by  the  geographic
concentration   of  Multicare's  facilities,  the  proximity   of   Multicare
facilities to Genesis' existing markets, the quality of Multicare's unit  and
regional  management and Multicare's existing information systems which  will
allow  a  rational phase-in of Genesis' management. See "Certain Agreements--
Management Agreement."

Marketing.  Upon  completion  of the Merger, Genesis  manages  the  Company's
marketing  program. Marketing for eldercare centers will be  focused  at  the
local  level and will be conducted primarily by the center administrator  and
its  admissions  director  who  call on referral  sources  such  as  doctors,
hospitals,  hospital discharge planners, churches and various  organizations.
Genesis  management's  marketing objective for the  Company  is  to  maintain
public  awareness  of  the  eldercare center and its  capabilities.  Genesis'
management  will  take advantage of the Company's regional concentrations  in
its  marketing  efforts,  where appropriate, through  consolidated  marketing
programs which benefit more than one center.

The  Genesis  corporate  business development  department,  through  regional
managers,  will market the Company's sub-acute program directly to insurance,
managed  care  organizations and other third party payors. In  addition,  the
Genesis   marketing  department,  will  support  the  eldercare  centers   in
developing   promotional  materials  and  literature  focusing   on   Genesis
management's  philosophy  of  care, services provided  and  quality  clinical
standards.  See "Government Regulation" for a discussion of the  federal  and
state  laws  which limit financial and other arrangements between  healthcare
providers.

Genesis  has  consolidated  its  core  business,  and  will  consolidate  the
Company's  core  business,  under  the name Genesis  ElderCare.  The  Genesis
ElderCare  logo  and  trademark  have been featured  in  a  series  of  print
advertisements and publications serving many of the regional markets in which
the  Company  operates.  The  marketing of  Genesis  ElderCare  is  aimed  at
increasing  awareness among decision makers in key professional and  business
audiences.  Genesis is using and will continue to use advertising to  promote
the  Genesis  ElderCare  brand  name  in  trade,  professional  and  business
publications and to promote services directly to consumers.

Sources of Revenue

The  Company  derives its revenues from private pay sources,  state  Medicaid
programs  for indigent patients and the federal Medicare program for  certain
elderly  and disabled patients. The Company classifies payments from  persons
or  entities other than the government as private pay and other revenue.  The
private  pay  and  other revenue classification also includes  revenues  from
commercial  insurers, health maintenance organizations and other charge-based
payment  sources.  The Company's rates for private pay patients are typically
higher   than  rates  for  patients  eligible  for  assistance  under  state-
administered  reimbursement programs. The private pay rates  charged  by  the
Company are influenced primarily by the rates charged by

<PAGE> 8
other   providers  in  the  local  market  and  by  Medicaid   and   Medicare
reimbursement rates. Specialty medical services are usually reimbursed  under
casualty  and  health  insurance  coverages.  The  acuity  levels  for  these
insurance  patients  are generally higher and require  additional  staff  and
increased  utilization  of facility resources, resulting  in  higher  payment
rates.  Individual cases are either negotiated on a case by case  basis  with
the  insurer  or  the  rates  are prescribed through  managed  care  contract
provisions.

Medicare is a federally funded and administered health insurance program that
consists of Parts A and B. Participation in Part B is voluntary and is funded
in  part  through  the  payment of premiums. Subject to certain  limitations,
benefits under Part A include inpatient hospital services, skilled nursing in
a  skilled nursing facility and medical services such as physical, speech and
occupational  therapy, certain pharmaceuticals and medical supplies.  Part  B
provides coverage for physician services. Part B also reimburses for  medical
services with the exception of pharmaceutical services. Medicare benefits are
not available for intermediate and custodial levels of care including but not
limited  to  residence  in assisted living facilities; however,  medical  and
physician services furnished to such patients may be reimbursable under  Part
B.  Under the Part A reimbursement methodology, each skilled nursing facility
receives  an  interim  payment during the year which is adjusted  to  reflect
actual  allowable  direct  and  indirect  costs  of  services  based  on  the
submission  of  a cost report at the end of each year. Final settlements  are
subject  to an audit of the filed cost report whereby adjustments may  result
in  additional payments to the Company or in recoupments from the Company. As
the Company is reimbursed for its direct costs plus an allocation of indirect
costs  up  to  a regional limit, to the extent that the Company  expands  its
specialty medical services, the costs of care for these patients are expected
to  exceed  the regional reimbursement limits. As a result, the  Company  has
submitted  and  will  be  required to submit further  exception  requests  to
recover  the excess costs from Medicare. There can be no assurance  that  the
Company will be able to recover such excess costs under pending or any future
requests.  The  failure to recover these excess costs  in  the  future  would
adversely  affect the Company's financial position and results of operations.
For  services not billed through a facility, the Company's specialty  medical
operations bill Medicare, when appropriate, directly for nutritional  support
services, infusion therapy, certain medical supplies and equipment, physician
services  and  certain  therapy services as provided. Medicare  payments  for
these  services  may  be  based on reasonable cost  charges  or  a  fixed-fee
schedule  determined  by  Medicare. To date, adjustments  from  Medicare  and
Medicaid audits have not had a material adverse effect on the Company.  There
can  be no assurance that future adjustments will not have a material adverse
effect  on  the Company.  While speculation exists surrounding the impact  of
the  August 5, 1997 Balanced Budget Act of 1997 (the "Act") on the  long-term
care  industry,  principally  the establishment  of  a  Medicare  prospective
payment  system, the substantive details and timing of implementing any  such
prospective payment system are not known yet.  To date, the Company  has  not
experienced  any significant impact to its business as a consequence  of  the
adoption of the Act.  In the future the Company may choose to participate  in
the  Medicare+  Choice program established by the Act.  The Medicare+  Choice
program  provides  reimbursement under a new  Part  C  to  such  entities  as
coordinated  care  plans  including  HMO's,  PPO's  and  provider   sponsored
programs.   Under  the  Medicare+ Choice program, the coordinated  care  plan
would receive monthly payments for each person enrolled.

Medicaid  is  the state administered reimbursement program that  covers  both
skilled  nursing  facilities  and intermediate eldercare.  Although  Medicaid
programs  vary  from state to state, typically they provide for  payment  for
services  including nursing facility services, physician's services,  therapy
services  and prescription drugs, up to established ceilings, at rates  based
upon   cost  reimbursement  principles.  Reimbursement  rates  are  typically
determined by the state from cost reports filed annually by each facility, on
a  prospective  or retrospective basis. In a prospective system,  a  rate  is
calculated  from  historical data and updated using an inflation  index.  The
resulting  prospective  rate  is final, but in some  cases  may  be  adjusted
pursuant to an audit. In this type of payment system, facility cost increases
during  the  rate  year  do not affect payment levels  in  that  year.  In  a
retrospective  system, final rates are based on reimbursable costs  for  that
year.  An interim rate is calculated from previously filed cost reports,  and
may include an inflation factor to account for the time lag between the final
cost  report  settlement  and  the rate period. Consequently,  facility  cost
increases  during any year may affect revenues in that year.  Certain  states
are  scheduled  to convert, or have recently converted, from a  retrospective
system,  which generally recognizes only two or three levels of  care,  to  a
case  mix prospective pricing system, pursuant to which payment to a facility
for  patient  services directly considers the individual patient's  condition
and  need for services. The effect, if any, of such a payment system  on  the
Company is unclear.

<PAGE> 9
The  following table identifies Multicare's net revenues attributable to each
of  its  revenue sources for the years ended December 31, 1995 and 1996,  and
the nine months ended September 30, 1997.

<TABLE>
<CAPTION>
                    1995     1996     1997
<S>                 <C>      <C>      <C>

Private and other   41%      40%      43%
Medicaid            34%      35%      33%
Medicare            25%      25%      24%
Total               100%     100%     100%
</TABLE>

See "Cautionary Statements Regarding Forward Looking Statements."

Competition

The  Company  competes  with  a  variety  of  other  companies  in  providing
healthcare  services. Certain competing companies have greater financial  and
other  resources and may be more established in their respective  communities
than the Company. Competing companies may offer newer or different centers or
services than the Company and may thereby attract the Company's customers who
are  either  presently residents of its eldercare centers  or  are  otherwise
receiving its healthcare services.

The  Company  operates eldercare centers in 11 states. In  each  market,  the
Company's  eldercare  centers may compete for customers  with  rehabilitation
hospitals,  sub-acute  units of hospitals, skilled  or  intermediate  nursing
centers,  personal care or residential centers and assisted living facilities
which  offer  comparable services to those offered by the Company's  centers.
Certain  of these providers are operated by not-for-profit organizations  and
similar  businesses which can finance capital expenditures  on  a  tax-exempt
basis  or  receive charitable contributions unavailable to  the  Company.  In
competing  for  customers,  a  center's  local  reputation  is  of  paramount
importance.  Referrals typically come from acute care hospitals,  physicians,
religious   groups,   other  community  organizations,   health   maintenance
organizations  and  the  customer's  families  and  friends.  Members  of   a
customer's  family generally actively participate in selecting  an  eldercare
center.  Competition for sub-acute patients is intense among  hospitals  with
long-term  care  capability,  rehabilitation hospitals  and  other  specialty
providers  and is expected to remain so in the future. Important  competitive
factors  include  the  reputation  in the community,  services  offered,  the
appearance of a center and the cost of services.

The  Company competes in providing specialty medical services with a  variety
of different companies. Generally, this competition is national, regional and
local  in  nature.  The primary competitive factors in the specialty  medical
services  business are similar to those in the eldercare center business  and
include  reputation,  the  quality of clinical  services,  responsiveness  to
patient  needs,  and the ability to provide support in other  areas  such  as
third  party  reimbursements,  information  management  and  patient  record-
keeping.

The  Company believes that state regulations which require the issuance of  a
Certificate  of  Need  before a new eldercare center can  be  constructed  or
additional  beds can be added to an existing facility reduce the  possibility
of  overbuilding  and  promote  higher utilization  of  existing  facilities.
However,  a  relaxation,  expiration or elimination of  Certificate  of  Need
requirements could lead to an increase in competition. In addition,  as  cost
containment measures have reduced occupancy rates at acute care hospitals,  a
number  of  these hospitals have converted portions of their facilities  into
sub-acute units. Competition from acute care hospitals could adversely affect
the  Company and certain states in which the Company operates have considered
or are considering action that could facilitate such competition.

Government Regulation

The  federal government and all states in which the Company operates regulate
various  aspects  of  the  Company's business. The Company's  facilities  are
subject  to  certain federal statutes and regulations and  to  statutory  and
regulatory  licensing  and  other requirements imposed  by  state  and  local
authorities.

All  of  the  Company's facilities and programs, to the extent required,  are
licensed under applicable law and have any required Certificates of Need from
responsible  state authorities. Substantially all facilities  and  healthcare
services, or practitioners providing the services

<PAGE> 10
therein,  are  certified or approved as providers under one or  more  of  the
Medicaid,   Medicare   or   Veterans  Administration   programs.   Licensing,
certification  and  other  applicable standards  vary  from  jurisdiction  to
jurisdiction  and are revised periodically. State and local  agencies  survey
licensed  facilities on a regular basis to determine whether such  facilities
are  in  compliance  with  governmental operating and  health  standards  and
conditions  for  participation  in government  sponsored  third  party  payor
programs.  The  Company  believes  that its  facilities  are  in  substantial
compliance  with  the  various Medicare and Medicaid regulatory  requirements
applicable  to  them. However, in the ordinary course of  its  business,  the
Company  receives notices of deficiencies for failure to comply with  various
regulatory  requirements.  The  Company  reviews  such  notices   and   takes
appropriate  corrective action. In most cases, the Company and the  reviewing
agency  will  agree upon the measures to be taken to bring the facility  into
compliance  with  regulatory  requirements. In  some  cases  or  upon  repeat
violations, the reviewing agency may take various adverse actions  against  a
facility,  including  the  imposition  of  fines,  temporary  suspension   of
admission of new patients to the facility, suspension or decertification from
participation  in  the  Medicare  or  Medicaid  programs  and,   in   extreme
circumstances,  revocation  of  a  facility's  license.  These  actions   may
adversely affect the facilities' ability to continue to operate, the  ability
of the Company to provide certain services, and eligibility to participate in
the  Medicare,  Medicaid or Veterans Administration programs  or  to  receive
payments  from other payors. Additionally, actions taken against one facility
may  subject  other facilities under common control or ownership  to  adverse
measures,  including  loss  of  licensure or eligibility  to  participate  in
Medicare  and Medicaid programs. From time to time, survey deficiencies  have
resulted  in  various penalties against certain facilities and  the  Company.
These penalties have included monetary fines, temporary bans on the admission
of new patients and the placement of restrictions on the Company's ability to
obtain or transfer certificates of need in certain states. To date, no survey
deficiencies or any resulting penalties have had a material adverse effect on
the  Company's  operations, however, there can be no  assurance  that  future
surveys will not result in penalties or sanctions which could have a material
adverse effect on the Company.

Both  initial  and  continuing qualifications of  an  eldercare  facility  to
participate  in the Medicare and Medicaid programs depend upon  many  factors
including   accommodations,  equipment,  services,  patient   care,   safety,
personnel,  physical  environment,  and  adequate  policies,  procedures  and
controls.  Failure to comply with these standards could result in the  denial
of  reimbursement, the imposition of fines, temporary suspension of admission
of  new  patients,  the  issuance of a provisional license  for  a  facility,
suspension  or  decertification  from  the  Medicaid  or  Medicare   program,
restrictions  on  the ability to acquire new facilities  or  expand  existing
facilities  and,  in  extreme  cases, the  imposition  of  limitations  on  a
facility's license, the appointment of third-party temporary management for a
facility,  revocation  of the facility's license or closure  of  a  facility.
There can be no assurance that the facilities owned, leased or managed by the
Company, or the provision of services and supplies by the Company, will  meet
the  requirements for participation in the Medicaid or Medicare  programs  or
state licensing authorities.

Under the various Medicaid programs, the federal government supplements funds
provided  by  the participating states for medical assistance  to  "medically
indigent"  persons.  The programs are administered by  the  applicable  state
welfare  or  social  service agencies. Although Medicaid programs  vary  from
state  to state, traditionally they have provided for the payment of  certain
expenses,  up  to  established  limits, at  rates  based  generally  on  cost
reimbursement principles.

States  in  which the Company operates generally have adopted Certificate  of
Need  or  similar  laws which generally require that a state  agency  approve
certain  acquisitions and determine that the need for certain bed  additions,
new  services, and capital expenditures or other changes exists prior to  the
acquisition  or  addition  of beds or services, the implementation  of  other
changes,  or  the expenditure of capital. Certificate of Need legislation  is
currently  in  place in all states in which the Company operates,  except  in
Pennsylvania  where the existing Certificate of Need legislation  expired  on
December 18, 1996. A bill has been introduced in the Pennsylvania legislature
to  re-establish Certificate of Need requirements; however, the  Company  has
been  advised that there is little likelihood such bill will be  passed.  The
Pennsylvania  Department of Public Welfare has issued a policy  statement  to
the  effect  that generally it will not enter into a provider agreement  with
any eldercare facility which did not receive Certificate of Need approval for
the  beds at issue prior to the sunset of Pennsylvania's Certificate of  Need
law.  In addition, in most states the reduction of beds or the closure  of  a
facility  requires  the approval of the appropriate state  regulatory  agency
and, if the Company were to determine to reduce beds or close a facility, the
Company  could  be adversely affected by a failure to obtain or  a  delay  in
obtaining such approval.

<PAGE> 11
The  Company is also subject to federal and state laws which govern financial
and  other  arrangements  between  healthcare  providers.  These  laws  often
prohibit  certain direct and indirect payments or fee-splitting  arrangements
between  healthcare providers that are designed to induce  or  encourage  the
referral of patients to, or the recommendation of, a particular provider  for
medical  products  and  services.  These  laws  include  the  "anti-kickback"
provisions of the Medicare and Medicaid programs, which prohibit, among other
things, knowingly and willfully soliciting, receiving, offering or paying any
remuneration (including any kickback, bribe or rebate) directly or indirectly
in  return for or to induce the referral of an individual to a person for the
furnishing or arranging for the furnishing of any item or service  for  which
payment  may  be  made in whole or in part under Medicare or Medicaid.  These
laws  also  include  the  "Stark legislation" which prohibits,  with  limited
exceptions,  the  referral of patients by physicians  for  certain  services,
including home health services, physical therapy and occupational therapy, to
an entity in which the physician has an ownership interest. In addition, some
states  restrict certain business relationships between physicians and  other
providers  of healthcare services. Many states prohibit business corporations
from  providing,  or holding themselves out as a provider  of  medical  care.
Possible sanctions for violation of any of these restrictions or prohibitions
include  loss  of  licensure or eligibility to participate  in  reimbursement
programs  and  civil and criminal penalties. These laws vary  from  state  to
state,  are  often vague and have seldom been interpreted by  the  courts  or
regulatory agencies. From time to time, the Company has sought guidance as to
the  interpretation of these laws; however, there can be  no  assurance  that
such  laws  will  ultimately be interpreted in a manner consistent  with  the
practices  of  the Company. Although the Company has contractual arrangements
with  some  healthcare providers to which the Company pays fees for  services
rendered  or  products provided, the Company believes that its practices  are
not in violation of these laws. The Company cannot accurately predict whether
enforcement  activities will increase or the effect of any such  increase  on
its  business.  There  have also been a number of recent  federal  and  state
legislative  and  regulatory initiatives concerning reimbursement  under  the
Medicare  and  Medicaid programs. In particular, the federal  government  has
issued  fraud alerts concerning double billing, home health services and  the
provisions  of  medical supplies. Accordingly, it is anticipated  that  these
areas  may  come under closer scrutiny by the government. The Company  cannot
accurately predict the impact of any such initiatives.

There  are numerous legislative and executive initiatives at the federal  and
state  levels  for healthcare reform with a view toward, among other  things,
slowing the overall rate of growth in healthcare expenditures. The Company is
unable to predict the impact of healthcare reforms on the Company; however it
is  possible that such proposals could have a material adverse effect on  the
Company.

The  Company  is also subject to a wide variety of federal, state  and  local
environmental and occupational health and safety laws and regulations.  Among
the  types of regulatory requirements faced by health care providers are: air
and  water  quality  control  requirements;  waste  management  requirements;
specific  regulatory  requirements applicable  to  asbestos,  polychlorinated
biphenyls, and radioactive substances; requirements for providing  notice  to
employees and members of the public about hazardous materials and wastes; and
certain other requirements.

In its role as owner and/or operator of properties or facilities, the Company
may  be  subject to liability for investigating and remedying  any  hazardous
substances  that  have  come to be located on the  property,  including  such
substances  that  may  have  migrated off, or  emitted,  discharged,  leaked,
escaped  or  been transported from, the property. Ancillary to the  Company's
operations  are,  in  various  combinations,  the  handling,  use,   storage,
transportation,  disposal and/or discharge of hazardous,  infectious,  toxic,
radioactive,  flammable and other hazardous materials, wastes, pollutants  or
contaminants.  Such activities may result in damage to individuals,  property
or the environment; may interrupt operations and/or increase their costs; may
result  in  legal  liability, damages, injunctions or fines;  may  result  in
investigations,  administrative proceedings, penalties or other  governmental
agency  actions;  and  may  not be covered by  insurance.  There  can  be  no
assurance  that the Company will not encounter such risks in the future,  and
such  risks may have a material adverse effect on the operations or financial
condition of the Company.

Employees

As  of  September 30, 1997, Multicare employed approximately 15,500  persons.
Approximately 2,000 employees at 28 of Multicare's facilities are covered  by
collective bargaining agreements. The Company believes that it has  had  good
relationships with its employees and

<PAGE> 12
with  the  unions  that represent its employees, but it  cannot  predict  the
effect of continued union representation or organizational activities on  its
future operations.

The  healthcare  industry has at times experienced a  shortage  of  qualified
healthcare  personnel. The Company competes with other  healthcare  providers
and  with non-healthcare providers for both professional and non-professional
employees.  While  the Company has been able to retain  the  services  of  an
adequate  number of qualified personnel to staff its facilities appropriately
and  maintain  its standards of quality care, there can be no assurance  that
continued shortages will not in the future affect the ability of the  Company
to  attract and maintain an adequate staff of qualified healthcare personnel.
A  lack  of  qualified  personnel at a facility could result  in  significant
increases  in  labor  costs  at such facility or otherwise  adversely  affect
operations at such facility. Any of these developments could adversely affect
the Company's operating results or expansion plans.

Insurance

The  provision of healthcare services entails an inherent risk of  liability.
The  Company  maintains  liability  insurance  providing  coverage  which  it
believes  to be adequate. In addition, Multicare maintains property, business
interruption, and workers' compensation insurance covering all facilities  in
amounts  deemed  adequate by Multicare. There can be no  assurance  that  any
future  claims  will  not exceed applicable insurance coverage  or  that  the
Company  will  be  able  to  continue  its  present  insurance  coverage   on
satisfactory terms, if at all.

Item 2. Properties.

As  of  September 30, 1997, Multicare operated 155 eldercare  facilities,  11
assisted living facilities and 2 outpatient rehabilitation centers (90 owned,
27  leased and 51 managed). Twenty-seven of Multicare's facilities are leased
by the respective operating entities from third parties. The inability of the
Company  to make rental payments under these leases could result in  loss  of
the  leased property through eviction or other proceedings. Certain  facility
leases  do  not  provide for non disturbance from the mortgagee  of  the  fee
interest  in  the  property and consequently each such lease  is  subject  to
termination in the event that the mortgage is foreclosed following a  default
by the owner.

The  Company  considers its properties to be in good operating condition  and
suitable for the purposes for which they are being used.

The  following  table  summarizes  by  state  certain  information  regarding
Multicare's facilities and outpatient rehabilitation centers at September 30,
1997  (excluding  14  facilities with 1,668 beds at which Multicare  provides
quality assurance consulting services):
<TABLE>
<CAPTION>
                  Owned(1)       Leased (2)       Managed          Total
                Fac   Beds    Faci     Beds    Faci     Beds    Faci   Beds
                ili           liti             liti             liti
                ties          es               es               es
<S>             <C>   <C>      <C>   <C>       <C>     <C>     <C>    <C>

Massachusetts    8    1,118     5      742     37      2,459    50     4,319
New Jersey      13    1,425     8    1,294      4        659    25     3,378
Pennsylvania    16    1,805     -        -      3        654    19     2,459
West Virginia   17    1,503     4      326      1         62    22     1,891
Ohio            10      896     4      250      -          -    14     1,146
Connecticut      5      766     2      250      6        872    13     1,888
Illinois        10      876     1       92      -          -    11       968
Wisconsin        6      729     2      231      -          -     8       960
Rhode Island     3      373     -        -      -          -     3       373
Virginia         1       90     1       85      -          -     2       175
Vermont          1       58     -        -      -          -     1        58
                90    9,639    27    3,270     51      4,706   168    17,615
</TABLE>

(1)Includes seven facilities with 883 beds which are not wholly owned.
(2)In connection with the Merger, the Company acquired five of the facilities
   in  Massachusetts  and  a facility in Virginia that were  previously  leased
   under the Company's lease facility.

<PAGE> 13
Item 3. Legal Proceedings.

The  Company  is a party to claims and legal actions arising in the  ordinary
course of business. The Company does not believe that any litigation to which
Multicare  is  currently  a party, alone or in the  aggregate,  will  have  a
material adverse effect on the Company.  See "Cautionary Statements Regarding
Forward Looking Statements."

Item 4. Submission of Matters to a Vote of Security Holders.  None.

                                   Part II

Item  5.  Market  for  Registrant's Common  Equity  and  Related  Stockholder
Matters.

The  following  table indicates the high and low sale prices  per  share,  as
reported by the New York Stock Exchange:
<TABLE>
<CAPTION>
Calendar Year            High         Low
<S>                   <C>           <C>
1997
First Quarter         $  20 1/4     $ 17 3/4
Second Quarter           27 3/8       17 1/2
Third Quarter            27 13/16     27 1/16

1996
First Quarter            19 1/4       14 7/8
Second Quarter           20 7/8       17 1/2
Third Quarter            21 3/4       18
Fourth Quarter           22 3/8       17 3/4
</TABLE>

The  Company  has not paid any cash dividends on its Common Stock  since  its
inception.

<PAGE> 14

Item 6.  Selected Consolidated Financial Data
<TABLE>
<CAPION>
                                                           Nine Month Period
                             Years Ended December 31,     Ended September 30,  
                          1993     1994     1995     1996     1996     1997
<S>                       <C>      <C>      <C>      <C>      <C>      <C>
Statement of Operations
Data:
Net revenues              $162,384 $262,416 $353,048 $532,230 $386,890 $533,952
Expenses:
Operating expenses         123,819  198,427  265,185  400,897  291,494  406,173
Corporate, general 
and administrative           6,338   11,446   17,643   25,408   18,627   25,203
Depreciation and 
amortization                 6,292    9,358   13,171   22,344   16,048   21,620
Lease expense                  862    2,823    5,039   12,110    8,874   12,693
Interest expense, net       13,229   12,866   16,065   25,164   18,947   21,640
Debenture conversion 
expense (1)                    ---      ---      ---      ---      ---      785
Total Expenses             150,540  234,920  317,103  485,923  353,990  488,114
Income before income 
taxes and
extraordinary item          11,844   27,496   35,945   46,307   32,900   45,838
Income tax expense           4,727   10,454   13,798   17,570   12,505   17,087
Income before 
extraordinary item           7,117   17,042   22,147   28,737   20,395   28,751
Extraordinary item, net 
of tax benefit (2)           3,863    1,620    3,722    2,827    1,481      873
Net income                $  3,254 $ 15,422 $ 18,425 $ 25,910 $ 18,914 $ 27,878

Per common share data
(fully diluted):
Income before 
extraordinary item
per share                 $    .42 $    .71 $    .84 $    .99 $    .71 $    .85
Net income per share      $    .19 $    .64 $    .69 $    .90 $    .67 $    .82
Weighted average number 
of shares outstanding       16,962   23,967   26,513   33,172   32,748   36,832

Other Financial Data:
EBITDA (3)                $ 31,365 $ 49,720 $ 65,181 $ 93,815 $ 67,895 $ 89,883
EBITDAR (4)               $ 32,227 $ 52,543 $ 70,220 $105,925 $ 76,769 $102,576
Ratio of EBITDA to 
interest expense, net         2.4x     3.9x     4.1x     3.7x     3.6x     4.1x
Ratio of EBITDAR to 
interest expense, net,
plus lease expense            2.3x     3.3x     3.3x     2.8x     2.8x     3.0x
Ratio of earnings to 
fixed charges (5)             1.9x     2.9x     2.9x     2.5x     2.8x     2.8x
Capital expenditures      $ 18,730 $ 31,785 $ 39,917 $64,215  $ 49,510 $ 39,301

Operating Data:
Average number of
licensed beds                4,241    6,006    6,861   11,620   11,168   16,224
Occupancy                    90.4%    92.2%    91.7%    91.0%    91.7%    90.4%
Payor Mix:
Quality Mix (6)              56.0%    62.5%    66.3%    64.5%    64.3%    67.3%
Medicaid                     44.0%    37.5%    33.7%    35.5%    35.7%    32.7%
Balance Sheet Data:
Working capital           $ 15,158 $ 34,005 $ 55,542 $ 39,327 $ 69,135 $ 51,882
Total assets               162,255  308,755  470,958  761,667  659,096  823,133
Long-term debt, 
including current 
portion                    106,137  156,878  283,082  429,168  427,983  424,046
Stockholders' equity      $ 32,591 $100,105 $113,895 $207,935 $138,632 $263,174
</TABLE>

(1)  Represents a non-recurring charge relating to the early conversion of 
     $11.0 million of Multicare's 7% Convertible Debentures.
(2)  Multicare incurred extraordinary charges relating to the early 
     extinguishment of debt.
(3)  EBITDA represents earnings before interest expense, income taxes,
     depreciation and amortization, extraordinary items (net of tax benefit) 
     and debenture conversion expense.  EBITDA should not be considered an 
     alternative measure of Multicare's net income, operating performance, cash
     flow or liquidity.  It is included herein to provide additional 
     information related to Multicare's ability to service debt.
(4)  EBITDAR represents earnings before interest expense, income taxes,
     depreciation and amortization, extraordinary items (net of tax benefit),
     debenture conversion expense and lease expense.  EBITDAR should not be
     considered an alternative measure of Multicare's net income, operating
     performance, cash flow or liquidity.  It is included herein to provide
     additional information related to Multicare's ability to service debt.
(5)  For the purpose of computing the ratio to fixed charges, earnings consist
     of the sum of earnings before income taxes and extraordinary items (net of
     tax benefit) plus fixed charges.  Fixed charges consist of interest on all
     indebtedness, amortization of debt issuance costs and one-third of rental
     expense, which Multicare believes to be representative of the interest
     factor.  The definition of fixed charges used in this calculation differs
     from that used in the Consolidated Fixed Charge Coverage Ratio contained 
     in the Indenture.
(6)  Quality mix is defined as non-Medicaid patient revenues.

<PAGE 15>







<PAGE> 15
Item  7.  Management's  Discussion and Analysis of  Financial  Condition  and
Results of Operations.

Overview

Multicare  has experienced significant growth in the four-year  period  ended
December  31,  1996 and the nine months ended September 30,  1997,  primarily
through  acquisitions  of eldercare facilities and increased  utilization  of
specialty  medical  services.  It  has been Multicare's  strategy  to  expand
through   selective   acquisitions,  development  of  new   facilities   with
geographically  concentrated  operations, and  growth  of  specialty  medical
services.  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  physicians  with case management,  comprehensive  discharge
planning  and,  where  necessary,  home support  services,  to  provide  cost
effective  care  management  to  achieve superior  outcomes  and  return  the
Company's  customers  to  the community. Genesis'  management  believes  that
achieving improved customer outcomes will result in increased utilization  of
specialty  medical  services and a broader base of repeat  customers  in  the
Company's  network.  Moreover, the Company believes that this  strategy  will
lead  to continued high levels of occupancy of available beds, a high quality
payor  mix  and  same  store  growth in net revenues  and  EBITDAR.  Genesis'
management  also  will focus on the revenue and cost opportunities  presented
through the further integration of the Company's recent acquisitions.  It  is
contemplated that the Company will do little, if any, new acquisitions or new
construction  after the Merger; accordingly, capital expenditures  after  the
Merger should decrease significantly from historical levels.

Summarized below are the recent significant acquisitions completed in 1996:

-  In  February 1996, the Company acquired the outstanding capital  stock  of
Concord  Health Group, Inc., a long-term care provider through  15  long-term
care  facilities  with approximately 2,600 beds and ancillary  businesses  in
Pennsylvania.

-  In  December  1996,  the  Company acquired The A.D.S  Group,  which  owns,
operates  or  manages  over 50 long-term care and assisted-living  facilities
with over 4,200 licensed beds, principally in Massachusetts.

The Tender Offer and Merger

On October 9, 1997 Genesis ElderCare Acquisition Corp. ("Acquisition Corp."),
a  wholly-owned subsidiary of Genesis ElderCare Corp., a Delaware corporation
formed  by  Genesis, The Cypress Group L.L.C (together with  its  affiliates,
"Cypress"), TPG Partners II, L.P., (together with its affiliates, "TPG")  and
Nazem,  Inc. (together with its affiliates "Nazem"), acquired 99.65%  of  the
shares of common stock of Multicare, pursuant to a tender offer commenced  on
June  20,  1997 (the "Tender Offer"). On October 10, 1997, Genesis  ElderCare
Corp. completed the merger (the "Merger") of Acquisition Corp. with and  into
Multicare  in  accordance with the Agreement and Plan of Merger (the  "Merger
Agreement")  dated as of June 16, 1997 by and among Genesis ElderCare  Corp.,
Acquisition  Corp., Genesis and Multicare. Upon consummation of  the  Merger,
Multicare  became  a  wholly-owned  subsidiary  of  Genesis  ElderCare  Corp.
Multicare  is  in  the business of providing eldercare and specialty  medical
services in selected geographic regions.

In  connection  with  the  Merger,  Multicare  and  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) $1,991,666 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 $23,900,000 million  in  any
given  year.  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. Genesis also entered  into  an  asset
purchase agreement (the "Therapy Sale Agreement") with Multicare and  certain
of its subsidiaries pursuant to which Genesis acquired all of the assets used
in  Multicare's outpatient and inpatient rehabilitation therapy business  for
$24,000,000

<PAGE> 16
subject  to  adjustment (the "Therapy Sale") and a stock  purchase  agreement
(the  "Pharmacy  Sale  Agreement") with Multicare  and  certain  subsidiaries
pursuant  to which Genesis will acquire all of the outstanding capital  stock
and  limited  partnership interest of certain subsidiaries of Multicare  that
are  engaged in the business of providing institutional pharmacy services  to
third  parties for $50,000,000, subject to adjustment (the "Pharmacy  Sale").
The  Company  expects  to complete the Pharmacy Sale in  the  first  calendar
quarter of 1998.

Genesis   ElderCare   Corp.  (the  "Multicare  Parent")  paid   approximately
$1,492,000,000  to (i) purchase the shares pursuant to the Tender  Offer  and
the  Merger, (ii) pay fees and expenses to be incurred in connection with the
completion  of  the  Tender Offer, Merger and the financing  transactions  in
connection with therewith, (iii) refinance certain indebtedness of  Multicare
and  (iv)  make certain cash payments to employees. Of the funds required  to
finance   the   foregoing,  approximately  $745,000,000  were  furnished   to
Acquisition Corp. as capital contributions by the Multicare Parent  from  the
sale by Genesis ElderCare Corp. of its Common Stock ("Genesis Eldercare Corp.
Common  Stock") to Cypress, TPG, Nazem and Genesis. Cypress,  TPG  and  Nazem
purchased shares of Genesis ElderCare Corp. Common Stock for a purchase price
of  $210,000,000,  $199,500,000 and $10,500,000,  respectively,  and  Genesis
purchased shares of Genesis ElderCare Corp. Common Stock for a purchase price
of $325,000,000 in consideration for approximately 44% of the Common Stock of
the  Multicare  Parent.  The balance of the funds necessary  to  finance  the
foregoing came from (i) the proceeds of loans from a syndicate of lenders  in
the  aggregate amount of $525,000,000 and (ii) $250,000,000 from the sale  of
9%  Senior  Subordinated Notes due 2007 (the "9% Notes") sold by  Acquisition
Corp. on August 11, 1997.

Results of Operations

The Company has changed its fiscal year end to September 30 from December 31.

Nine  month  period  ended September 30, 1997 compared to nine  month  period
ended September 30, 1996

Net  Revenues.   Net revenues for the nine month period ended  September  30,
1997 increased 38% or $147.1 million from the same period last year to $534.0
million.

Of  the  net revenues increase for the nine months ended September 30,  1997,
24%  is  attributable  to the inclusion of results for the  Company's  recent
acquisitions.  The internal growth rate of revenues amounted to  14%  in  the
nine  months  ended  September 30, 1997, resulting mainly from  increases  in
payor  rates and changes in census mix, development and opening of additional
beds, and growth in specialty medical service revenues.

The Company's quality mix of private, Medicare and insurance revenues was 67%
of  net revenues for the nine months ended September 30, 1997 compared to 64%
in  the similar periods of 1996. Occupancy rates were 90% for the nine months
ended September 30, 1997 compared to 92% in the similar period of 1996.

Operating Expense and Margins.  Operating expenses for the nine months  ended
September 30, 1997 increased 39% or $114.7 million from the comparable period
in  1996  to $406.2 million. The increases in operating expenses reflect  the
inclusion  of  results  for the recent acquisitions of  $69.6  million.   The
remainder of the increase resulted primarily from higher salaries, wages  and
benefits  and  the  expanded utilization of salaried therapists  and  nursing
staffing  levels to support higher patient acuities and more complex  product
lines such as subacute and Alzheimers care.

Operating  margins  before interest were 13% of net  revenues  for  the  nine
months  ended  September 30, 1997 and 1996.  Income before  interest,  taxes,
depreciation,  amortization  and  lease expense  (EBITDAR)  before  debenture
conversion expense was 19% and 20% of net revenues for the nine month periods
ended September 30, 1997 and 1996, respectively.

Corporate,  General  and  Administrative  Expense.   Corporate,  general  and
administrative  expense  remained  consistent  at  approximately  5%  of  net
revenues  for the nine month periods ended September 30, 1997 and  1996.  The
expenses  include  resources  devoted to  operations,  finance,  legal,  risk
management,  and  information  systems in  order  to  support  the  Company's
operations.

<PAGE> 17
Lease  Expense.  Lease expense for the nine months ended September  30,  1997
increased  43%  or  $3.8  million from the same period  last  year  to  $12.7
million.  The increases were primarily due to the inclusion of lease  expense
relating to a recent acquisition.

Depreciation and Amortization Expense.  Depreciation and amortization expense
for  the  nine  months ended September 30, 1997 increased 35% from  the  same
period  in  1996 to $21.6 million.  The increases were primarily due  to  the
inclusion of results for recent acquisitions.

Interest  Expense,  net.   Net interest expense for  the  nine  months  ended
September  30,  1997  increased 14% from the same period  in  1996  to  $21.6
million.   This  is  primarily  a result of increased  borrowings  under  the
Company's  credit  facility  in  connection  with  the  financing  of  recent
acquisitions.  These increases have been offset by decreases relating to  the
conversion  of  the  Company's  convertible debt  and  the  purchase  of  the
Company's senior notes.

Debenture  Conversion  Expense.  Debenture conversion expense  for  the  nine
months  ended September 30, 1997 relates to the premium paid in January  1997
to convert $11 million of convertible debentures into common stock.

Year ended December 31, 1996 compared to year ended December 31, 1995

Net  Revenues. Net revenues increased 51% or $179.2 million to $532.2 million
in 1996 from the year ended December 31, 1995.

Of the 1996 revenues increase, 37% is primarily attributable to the inclusion
of  results for the recent acquisitions. The internal growth rate of revenues
amounted  to 14% in 1996, resulting mainly from increases in payor rates  and
changes in census mix, development and opening of additional beds, and growth
in specialty medical service revenues.

Multicare's  quality mix of non-Medicaid patient revenues was  65%  and  66%,
respectively,  in 1996 and 1995. The 1996 percentages reflect the  impact  of
certain  of Multicare's recent acquisitions which historically have generated
lower   revenues  in  these  areas.  Occupancy  rates  were  91%   and   92%,
respectively, for 1996 and 1995.

Operating  Expenses and Margins. Operating expenses increased 53%  or  $142.8
million  to  $413.0  million in 1996 from the year ended December  31,  1995.
Operating margins were 13% in 1996 and 15% in 1995. The decrease in operating
margin  in  1996  is due primarily to an increase in lease  expense  of  $7.1
million  relating to new operating leases. EBITDAR margins were 20%  in  1996
and 1995.

The  increases in operating expenses in 1996 reflect the inclusion of results
for  the  recent  acquisitions  of $100.2 million.  The  remaining  increases
resulted  primarily from higher salaries, wages, and benefits ($23.4 million)
for  cost  of  living  increases  and the expanded  utilization  of  salaried
therapists  and staffing levels to support higher patient acuities  and  more
complex product lines.

Corporate,  General  and  Administrative  Expenses.  Corporate,  general  and
administrative expenses remained consistent at 5% of net revenues in 1996 and
1995.  The expenses include resources devoted to operations, finance,  legal,
risk management, and information systems to support Multicare's operations.

Depreciation  and  Amortization. Depreciation and amortization  increased  by
$9.2  million in 1996 from 1995. The increases related primarily to inclusion
of depreciation and amortization for the recently acquired entities and to  a
lesser extent, amortization of debt issuance costs and other assets.

Other  Income (Expense). Net other expense increased 57% or $9.1  million  in
1996  to  $25.2  million,  primarily as a result  of  interest  expense  from
increased   borrowings  under  Multicare's  various  credit   agreements   in
connection with the financing of recent acquisitions.

<PAGE> 18
Extraordinary item. Multicare incurred extraordinary charges of $2.8  million
and   $3.7  million  in  1996  and  1995,  respectively,  relating   to   the
restructuring  of its bank credit facilities and the purchase of  Multicare's
12.5% Senior Subordinated Notes ("12.5% Notes").

Liquidity and Capital Resources

The  Company maintains adequate working capital from operating cash flows and
lines  of  credit  for continuing operations, debt service,  and  anticipated
capital expenditures.  At September 30, 1997, the Company had working capital
of $51.8 million, compared to $39.3 million at December 31, 1996.

Cash  flow  from  operations  was $37.0 million for  the  nine  months  ended
September 30, 1997 compared to cash from operations of $19.0 million  in  the
comparable  period  of  1996.  This increase is due,  in  part,  to  improved
collections  of accounts receivable and the inclusion of results  for  recent
acquisitions.   Net accounts receivable were $119.5 million at September  30,
1997  compared to $102.2 million at December 31, 1996.  The increase  in  net
accounts   receivable  is  attributable  to  the  recent  acquisitions,   the
utilization  of specialty medical services for higher acuity level  patients,
and  the  timing of third-party interim and settlement payments.  Legislative
and  regulatory action and government budgetary constraints could change  the
timing  of  payments  and reimbursement rates of the  Medicare  and  Medicaid
programs  in the future.  These changes could have a material adverse  effect
on the Company's future operating results and cash flows.

The  Company anticipates its capital requirements for the construction of new
facilities  and  the  expansion  and renovation  of  existing  facilities  to
approximate  $30  million  over  the next twelve  months  based  on  existing
construction commitments and plans.

In  January  1997  the  Company purchased $6.5 million of  its  12.5%  Senior
Subordinated  Notes.  In addition, in the nine month period  ended  September
30, 1997 $26.5 million of the Company's Convertible Debentures were converted
into common stock.

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 Facilities"), 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 "Long Term Credit Agreement") dated  as  of
October  14, 1997.  The Senior Facilities are being used for the  purpose  of
(i)  refinancing  certain  short term facilities in the  aggregate  principal
amount of $431.6 million which were funded on October 9, 1997 to acquire  the
Shares  in the Tender Offer, refinance certain indebtedness of Multicare  and
pay  fees and expenses related to the transactions, (ii) funding interest and
principal  payments on such facilities and on certain remaining  indebtedness
and (iii) funding working capital and general corporate purposes.

The  Senior Facilities consist of: (1) a $200 million six year term loan (the
"Tranche  A  Term Facility"); (2) a $150 million seven year  term  loan  (the
"Tranche B Term Facility"); (3) a $50 million term loan maturing on  June  1,
2005  (the  "Tranche C Term Facility"); (4) a $125 million six year revolving
credit facility (the "Revolving Credit Facility"); and (5) one or more  Swing
Loans  (collectively,  the  "Swing  Loan  Facility")  in  integral  principal
multiples  of  $500,000  up to an aggregate unpaid principal  amount  of  $10
million.  The Tranche A Term Facility, Tranche B Term Facility and Tranche  C
Term   Facility  are  subject  to  amortization  in  quarterly  installments,
commencing  at the end of the first calendar quarter after the  date  of  the
consummation  of  the  Merger  (the "Closing Date").   The  Revolving  Credit
Facility  will  mature six years after the Closing Date.   All  net  proceeds
received  by  Multicare  from  (i) the sale of assets  of  Multicare  or  its
subsidiaries other than sales in the ordinary course of business  (and  other
than  the  sales of Multicare's rehabilitation therapy business and  pharmacy
business to the extent that there are amounts outstanding under the Revolving
Credit  Facility)  and (ii) any sale of common stock or  debt  securities  of
Multicare  in  respect  of  common  stock will  be  applied  as  a  mandatory
prepayment.  Fifty percent of Excess Cash Flow must be applied to the  Senior
Facilities and shall be payable annually.

<PAGE> 19
The  Senior  Facilities are secured by a first priority security interest  in
all  of  the  (i) stock of Multicare, (ii) stock, partnership  interests  and
other  equity  of all of Multicare's present and future direct  and  indirect
subsidiaries and (iii) intercompany notes among Genesis ElderCare  Corp.  and
any   subsidiaries  or  among  any  subsidiaries.   Loans  under  the  Senior
Facilities bear, at Multicare's option, interest at the per annum Prime  Rate
as  announced  by the Administrative Agent, or the applicable  Adjusted  LIBO
Rate.  Loans under the Tranche A Term Facility bear interest at a rate  equal
to  LIBO  Rate  plus  a margin up to 2.5%; loans under  the  Tranche  B  Term
Facility  bear  interest at a rate equal to LIBO Rate plus  a  margin  up  to
2.75%; loans under the Tranche C Term Facility bear interest at a rate  equal
to  LIBO  Rate  plus  a margin up to 3.0%; loans under the  Revolving  Credit
Facility bear interest at a rate equal to LIBO Rate plus a margin up to 2.5%;
and  loans  under  the Swing Loan Facility bear interest at  the  Prime  Rate
unless  otherwise  agreed  to  by the parties.  Subject  to  meeting  certain
financial covenants, the above-referenced interest rates will be reduced.

The  Long  Term Credit Agreement contains a number of covenants  that,  among
other  things,  restrict  the ability of Multicare and  its  subsidiaries  to
dispose of assets, incur additional indebtedness, make loans and investments,
pay  dividends,  engage  in  mergers  or consolidations,  engage  in  certain
transactions  with  affiliates and change control of  capital  stock,  prepay
debt,  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.  In addition, the Long  Term  Credit  Agreement
requires  that Multicare and its affiliates maintain the Management Agreement
as well as comply with certain financial covenants.

On  August 11, 1997, Acquisition Corp. sold $250 million principal amount  of
9%  Notes  which were issued pursuant to the Indenture.  The  9%  Notes  bear
interest  at  9%  per  annum from August 11, 1997,  payable  semiannually  on
February 1 and August 1 of each year, commencing on February 1, 1998.

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  create  dividend  and  other  restrictions  affecting   its
subsidiaries.

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

On  October  9,  1997,  Multicare,  Genesis  and  Genesis  ElderCare  Network
Services,  Inc.,  a   wholly-owned subsidiary  of  Genesis,  entered  into  a
management  agreement (the "Management Agreement") pursuant to which  Genesis
manages Multicare's operations.  The Management Agreement has a term of  five
years  with  automatic renewals for two years unless either party  terminates
the  Management  Agreement. Genesis will be paid a  fee  of  six  percent  of
Multicare's  net  revenues  for its services under the  Management  Agreement
provided  that payment of such fee in respect of any month in excess  of  the
greater of (i) $1.9 million and (ii) four percent of Multicare's consolidated
net  revenues  for  such month, shall be subordinate to the  satisfaction  of
Multicare's  senior  and subordinate debt covenants; and  provided,  further,
that  payment  of such fee shall be no less than $23.9 million in  any  given
year.  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.

<PAGE> 20
On  October 10, 1997, Genesis entered into the Therapy Sale pursuant to which
Genesis  acquired  all  of  the  assets used in  Multicare's  outpatient  and
inpatient  rehabilitation  therapy  business  for  $24  million,  subject  to
adjustment.

On October 10, 1997, Genesis and one of its wholly-owned subsidiaries entered
into  the  Pharmacy Sale pursuant to which Genesis will acquire  all  of  the
outstanding  capital  stock  and  limited partnership  interests  of  certain
subsidiaries  of  Multicare  that are engaged in the  business  of  providing
institutional pharmacy services to third parties for $50 million, subject  to
adjustment  (the  "Pharmacy  Sale").  The Company  expects  to  complete  the
Pharmacy Sale in the first calendar quarter of 1998.

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 two 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).

In  February  1998  ETT also made one construction loan a subsidiary  of  the
Company  to fund construction of an assisted living facility being  developed
by the Company.  The note bears interest at a fixed annual rate of 10.5%, and
will mature on the third anniversary of the loan, 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 of such  third
anniversary (or at the end of any extension period, if applicable).

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

The  Company  enters  into interest rate swap agreements to  manage  interest
costs  and  risks  associated with changing interest  rates.   Subsequent  to
September  30,  1997 the Company entered into swap agreements  with  notional
principal  amounts  totaling $100,000.  These agreements effectively  convert
underlying variable-rate debt based on LIBOR into fixed-rate debt whereby the
Company  makes quarterly payments at a weighted average fixed rate  of  5.65%
and receives quarterly payments at a floating rate based on three month LIBOR
(approximately 5.78% at February 10, 1998).

Legislative and regulatory action and government budgetary constraints  could
change  the  timing of payments and reimbursement rates of the  Medicare  and
Medicaid programs in the future.  These changes could have a material adverse
effect on the Company's future operating results and cash flows.

There  are numerous legislative and executive initiatives at the federal  and
state  levels  for  comprehensive  reforms  affecting  the  payment  for  and
availability   of   healthcare   services,  including   without   limitation,
discussions  at  the  federal  level concerning  budget  reductions  and  the
implementation of prospective payment systems for the Medicare  and  Medicaid
programs.   The Company is unable to predict the impact of healthcare  reform
proposals  on the Company; however, it is possible that such proposals  could
have a material adverse effect on the Company.

<PAGE> 21
Any  changes  in  reimbursement levels under Medicaid and  Medicare  and  any
changes  in applicable government regulations could significantly affect  the
profitability  of the Company. Various cost containment measures  adopted  by
governmental  pay  sources  have  begun to limit  the  scope  and  amount  of
reimbursable  healthcare expenses.  Additional measures,  including  measures
that have already been proposed in states in which the Company operates,  may
be  adopted in the future as federal and state governments attempt to control
escalating  healthcare  costs.   There can be  no  assurance  that  currently
proposed   or  future  healthcare  legislation  or  other  changes   in   the
administration or interpretation of governmental healthcare programs will not
have a material adverse effect on the Company.  In particular, changes to the
Medicare  reimbursement  program  that have been  proposed  could  materially
adversely affect the Company's revenues derived from ancillary services.  See
"Government Regulation."

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.

The  healthcare industry is labor intensive.  Wages and other  labor  related
costs  are  especially sensitive to inflation.  In addition,  suppliers  pass
along  rising  costs to Multicare in the form of higher prices.   When  faced
with  increases in operating costs, Multicare has increased its  charges  for
services.   The  Company's operations could be adversely affected  if  it  is
unable to recover future cost increases or experiences significant delays  in
increasing rates of reimbursement of its labor and other costs from  Medicaid
and Medicare revenue sources.

Item 8. Financial Statements and Supplementary Data.

<PAGE> 22
                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                                                 Page

Consolidated Financial Statements
Independent Auditors' Report                                      24
Consolidated Balance Sheets as of December 31, 1996
  and September 30, 1997                                          25
Consolidated Statements of Operations for the years ended
  December 31, 1995 and 1996 and the nine month period
  ended September 30, 1996 (unaudited) and 1997                   26
Consolidated Statements of Stockholders' Equity for the
  years ended December 31, 1995 and 1996 and the nine
  month period ended September 30, 1997                           27
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1996 and the nine month period
  ended September 30, 1996 (unaudited) and 1997                   28
Notes to Consolidated Financial Statements                        29-41

<PAGE> 23

The Board of Directors
The Multicare Companies, Inc.

We have audited the accompanying consolidated balance sheets of The Multicare
Companies,  Inc. and subsidiaries as of December 31, 1996 and  September  30,
1997,  and  the  related consolidated statements of operations, stockholders'
equity,  and  cash  flows  each of the years in  the  two-year  period  ended
December  31,  1996 and for the nine month period ended September  30,  1997.
These  consolidated  financial  statements  are  the  responsibility  of  the
Company's  management. Our responsibility is to express an opinion  on  these
consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance with generally  accepted  auditing
standards.  Those  standards require that we plan and perform  the  audit  to
obtain  reasonable assurance about whether the financial statements are  free
of  material  misstatement. An audit includes examining,  on  a  test  basis,
evidence  supporting the amounts and disclosures in the financial statements.
An   audit  also  includes  assessing  the  accounting  principles  used  and
significant  estimates made by management, as well as evaluating the  overall
financial  statement  presentation. We believe  that  our  audits  provide  a
reasonable basis for our opinion.

In  our  opinion,  the consolidated financial statements  referred  to  above
present  fairly,  in  all material respects, the financial  position  of  The
Multicare  Companies,  Inc. and subsidiaries as  of  December  31,  1996  and
September 30, 1997, and the results of their operations and their cash  flows
for  each of the years in the two-year period ended December 31, 1996 and for
the  nine  month period ended September 30, 1997 in conformity with generally
accepted accounting principles.



KPMG Peat Marwick LLP

Philadelphia, Pennsylvania
February 4, 1998

<PAGE> 24
<TABLE>
           The Multicare Companies, Inc. and Subsidiaries

                   Consolidated Balance Sheets

                (In thousands, except share data)


<CAPTION>
                                             December  September
                                             31,       30,
                                             1996      1997
<S>                                       <C>         <C>

       ASSETS
Current assets:
Cash and cash equivalents                  $ 1,150      2,118
Accounts receivable, net of allowance
for doubtful accounts of $11,531 and
$11,069 in 1996 and 1997, respectively      102,234   119,522
Prepaid expenses and other current           14,586    21,808
assets
Deferred taxes                                3,833     2,806
Total current assets                        121,803   146,254

Property, plant and equipment:
Land, buildings and improvements            386,870   417,021
Equipment, furniture and fixtures            58,963    71,419
Construction in progress                     43,373    34,856
                                            489,206   523,296
Less accumulated depreciation and            46,187    62,496
amortization
                                            443,019   460,800

Goodwill, net                               157,298   171,324
Debt issuance costs, net                      4,017     2,768
Other assets                                 35,530    41,987
                                          $ 761,667   823,133
 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                          $  26,948    28,863
Accrued liabilities                          54,707    64,944
Current portion of long-term debt               821       625
Total current liabilities                    82,476    94,432

Long-term debt                              428,347   423,421
Deferred taxes                               42,909    42,106
Stockholders' equity:
Preferred stock, par value $.01,
7,000,000 shares authorized, none              
issued                                          ---       ---
Common stock, par value $.01,
70,000,000 shares authorized,
30,133,535 and 31,731,963 issued and           
outstanding in 1996 and 1997,
respectively                                    301       317
Additional paid-in capital                  143,513   170,858
Retained earnings                            64,121    91,999
Total stockholders' equity                  207,935   263,174
                                          $ 761,667   823,133
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE> 25
<TABLE>
        THE MULTICARE COMPANIES, INC. AND SUBSIDIARIES

            Consolidated Statements of Operations

            (In thousands, except per share data)

<CAPTION>
                                                           Nine month
                                        Years ended        period ended
                                        December 31,       September
                                                           30,
                                        1995      1996     1996       1997
                                                           (Unaudited)
<S>                                    <C>        <C>       <C>        <C>
Net revenues                           $353,048   532,230   386,890    533,952

Expenses:
Operating expenses:
Salaries, wages and benefits            171,471   258,404   189,146    255,762
Other operating expenses                 93,714   142,493   102,348    150,411
Corporate, general and administrative
expense                                  17,643    25,408    18,627     25,203
Lease expense                             5,039    12,110     8,874     12,693
Depreciation and amortization expense    13,171    22,344    16,048     21,620
Interest expense, net                    16,065    25,164    18,947     21,640
Debenture conversion expense                ---       ---       ---        785
Total expenses                          317,103   485,923   353,990    488,114

Income before income taxes and
extraordinary item                       35,945    46,307    32,900     45,838

Income tax expense                       13,798    17,570    12,505     17,087
Income before extraordinary item         22,147    28,737    20,395     28,751
Extraordinary item - loss on
extinguishment of  debt, net of tax
benefit                                   3,722     2,827     1,481        873

Net income                             $ 18,425    25,910    18,914     27,878

Income per common and common
equivalent share data:
Income before
extraordinary item                     $    .84      1.02       .74        .89

Net income                             $    .69       .92       .69        .87

 Weighted average
number of common and common
equivalent shares outstanding            26,513    28,062    27,506     32,172

Income per common share assuming full
dilution:
Income before
extraordinary item                     $    .84       .99       .71        .85

Net income                             $    .69       .90       .67        .82
Weighted average number of
common shares outstanding assuming
full dilution                            26,513    33,172    32,748     36,832
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE> 26
<TABLE>
         The Multicare Companies, Inc. and Subsidiaries

         Consolidated Statements of Stockholders' Equity

             Years Ended December 31, 1995 and 1996
       and the nine month period ended September 30, 1997

                         (In thousands)

<CAPTION>
                         Common
                         Stock                                   Total
                      Shar    Amou     Paid-In      Retained    Stockholders'
                      es      nt       Capital      Earnings    Equity
<S>                   <C>      <C>     <C>         <C>           <C>
Balances, December
31, 1994              17,662   $ 177   $ 80,054    $  19,874     $ 100,105
Exercise of stock
options (including        19     ---        304          ---           304
tax benefit)
Proceeds from
issuance of              ---     ---        373          ---           373
put options
Contingent stock
purchase                 ---     ---    (5,312)          ---       (5,312)
commitment
Net income               ---     ---        ---       18,425        18,425
Balances, December
31, 1995              17,681     177     75,419       38,299       113,895
Exercise of stock
options (including
tax benefit)              21     ---        347          ---           347
Shares issued under
stock purchase plan       30     ---        442          ---           442
Contingent stock
purchase commitment      ---     ---      5,312          ---         5,312
Stock split            8,847      88        ---         (88)           ---
Issuance of common
stock in connection
with public offering   3,000      30     51,982                     52,012
Issuance of stock in
acquisition              555       6     10,011                     10,017
Net income               ---     ---        ---       25,910        25,910
Balances, December
31, 1996              30,134     301     143,513      64,121       207,935
Exercise of stock
options (including        21     ---         277         ---           277
tax benefit)
Debt conversion        1,530      15      26,087         ---        26,102
Shares issued under
stock purchase plan       45       1         773         ---           774
Contingent stock
purchase commitment
and other                  1     ---         208         ---           208
Net income               ---     ---         ---      27,878        27,878
Balances, September
30, 1997              31,731     317     170,858      91,999       263,174
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE> 27
<TABLE>

           The Multicare Companies, Inc. and Subsidiaries

               Consolidated Statements of Cash Flows

                           (In thousands)
<CAPTION>
                                                              Nine month
                                     Years ended             period ended
                                     December 31,            September 30,
                                   1995        1996        1996         1997
                                                       (Unaudited)
<S>                              <C>        <C>        <C>          <C>
Cash flows from operating
activities:
Net income                        $ 18,425  $ 25,910   $  18,914     $ 27,878
Adjustments to reconcile net
income to net cash provided by
operating activities:
Extraordinary item                   6,101     4,711       2,469        1,456
Depreciation and amortization       13,204    22,029      15,811       21,332
Provision for doubtful accoun ts     3,483     4,760       3,475        3,521
Changes in assets and
liabilities:
Deferred taxes                       (445)   (1,208)       1,725          ---
Accounts receivable               (25,104)  (13,967)    (14,798)     (19,717)
Prepaid expenses and other
current assets                     (1,479)   (2,528)     (3,344)      (7,001)
Accounts payable and accrued
liabilities                        (3,174)    10,566     (5,255)        9,579
Net cash provided by operating
activities                          11,011    50,273      18,997       37,048

Cash flows from investing
activities:
Net marketable securities
(acquired) sold                       (200)      202         202          ---
Assets and operations acquired     (63,415)  (193,067)   (122,940)    (22,568)
Capital expenditures               (39,917)   (64,215)    (49,510)    (39,301)
Proceeds from sale-leaseback         12,522      ---         ---          ---
Proceeds from repayment of
construction advances                11,000      ---         ---       13,100
Other assets                        (1,072)    (5,531)    (2,207)     (9,465)
Net cash used in investing
activities                         (81,082)  (262,611)   (174,455)   (58,234)

Cash flows from financing
activities:
Proceeds from issuance of common
stock                                  ---      52,012         70        ---
Proceeds from exercise of stock
options and stock purchase plan        245         717        441      1,075
Proceeds from issuance of put
options                                373        ---         ---        184
Proceeds from long-term debt       278,154     562,981    218,200    112,400
Payments of long-term debt       (208,358)   (402,848)   (62,874)    (91,310)
Debt issuance costs                (4,431)     (3,295)    (2,407)      (195)
Net cash provided by financing
activities                          65,983     209,567    153,430     22,154

Increase (decrease) in cash and
cash equivalents                   (4,088)     (2,771)    (2,028)        968

Cash and cash equivalents at
beginning of period                  8,009       3,921      3,921      1,150

Cash and cash equivalents at end  $  3,921   $   1,150   $  1,893   $  2,118
of period

Supplemental disclosure of non
cash investing and financing
activities:
Fair value of assets and
operations acquired                134,323     213,873    149,748     24,937
Debt and liabilities assumed in
connection with assets and
operations acquired                 70,908      10,789     26,808      2,369
Stock issued in connection with
assets and operations acquired         ---      10,017        ---        ---
                                  $ 63,415   $ 193,067   $122,940   $ 22,568
</TABLE>
See accompanying notes to consolidated financial statements.

<PAGE> 28

               The Multicare Companies, Inc. and Subsidiaries

                 Notes to Consolidated Financial Statements

                   Years Ended December 31, 1995 and 1996
             and the nine month period ended September 30, 1997
               (In thousands, except share and per share data)

The Multicare Companies, Inc. and Subsidiaries ("Multicare" or the "Company")
own,  operate  and manage skilled nursing facilities which provide  long-term
care and specialty medical services in selected geographic regions within the
eastern  and  midwestern  United States. In addition,  the  Company  operates
assisted-living   facilities,  institutional   pharmacies,   medical   supply
companies,  outpatient rehabilitation centers and other ancillary  healthcare
businesses.

(1)Organization and Basis of Presentation

  The Multicare Companies, Inc. was organized in March 1992. The consolidated
  financial  statements include the accounts of the Company and its  majority
  owned  and controlled subsidiaries. Investments in affiliates that are  not
  majority owned are reported using the equity method.

  All  significant intercompany transactions and accounts of the Company have
  been eliminated.

  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.

  Multicare changed its fiscal year end to September 30 from December 31.

(2)Summary of Significant Accounting Policies

  (a) Cash Equivalents

   Cash  equivalents  consist  of  highly liquid  instruments  with  original
maturities of three months or less.

  (b) Financial Instruments

  The  carrying  amounts of cash, marketable securities,  and  other  current
  assets and current liabilities approximate fair value due to the short term
  maturity  of these instruments. The fair value of the Company's  long  term
  debt is estimated based on quoted market prices or current rates offered to
  the Company for similar instruments with the same remaining maturities.

  (c) Debt Issuance Costs

  Debt   issuance  costs  are  amortized  on  a  straight-line  basis   which
  approximates the effective interest rate over periods of four to ten years.

  (d) Goodwill

  Goodwill  resulting  from  acquisitions  accounted  for  as  purchases   is
  amortized on a straight-line basis over periods of fifteen to forty  years.
  At  December  31, 1996, and September 30, 1997 accumulated amortization  of
  goodwill was $4,636, and $7,745, respectively.

<PAGE> 29
  Goodwill  is  reviewed  for  impairment whenever  events  or  circumstances
  provide evidence that support that the carrying amount of goodwill may  not
  be  recoverable.  The Company assesses the recoverability  of  goodwill  by
  determining  whether  the  amortization of the  goodwill  balance  will  be
  recovered through projected undiscounted future cash flows.

  (e) Other Assets

  At  December 31, 1996, and September 30, 1997 other assets include  $1,331,
  and $1,393 representing amounts due from stockholders.

  Direct  costs  incurred  to  develop and implement  new  specialty  medical
  services at certain facilities are deferred during the start-up period  and
  amortized on a straight-line basis over five years.

  At   December  31,  1996  and   September  30,  1997  investments  in  non-
  consolidated  affiliates included in other assets amounted to  $19,913  and
  $20,287,   respectively.  Results  of  operations  relating  to  the   non-
  consolidated  affiliates were insignificant to the  Company's  consolidated
  financial statements in 1996, and the nine month period ended September 30,
  1997.

  (f) Net Revenues

  Net revenues primarily consist of services paid for by patients and amounts
  for  services provided that are reimbursable by certain third-party payors.
  Medicare  and  Medicaid  revenues are determined by  various  rate  setting
  formulas  and  regulations. Net revenues are recorded  net  of  contractual
  allowances.  Final determinations of amounts paid by Medicaid and  Medicare
  are  subject  to  review or audit. In the opinion of  management,  adequate
  provision  has  been  made for any adjustment that may  result  from  these
  reviews  or  audits. To the extent that final determination may  result  in
  amounts  which  vary  from management estimates, future  earnings  will  be
  charged or credited.

  (g) Property, Plant and Equipment

  Land,  buildings  and improvements, equipment, furniture and  fixtures  are
  stated  at  cost. Depreciation of buildings and improvements is  calculated
  using the straight-line method over their estimated useful lives that range
  from  twenty  to forty years. Depreciation of equipment and  furniture  and
  fixtures  is calculated using the straight-line method over their estimated
  useful  lives that range from five to ten years. Depreciation  expense  was
  $10,875,  $17,724, and $15,969, respectively for the years  ended  December
  31, 1995 and 1996 and the nine month period ended September 30, 1997.

  (h) Income Taxes

  The Company follows the asset and liability method of accounting for income
  taxes.  Under  this  method,  deferred  tax  assets  and  liabilities   are
  recognized  for  the  future tax consequences attributable  to  differences
  between  financial  statement  carrying  amounts  of  existing  assets  and
  liabilities and their respective tax bases.

  (i) Net Income Per Share

  The  computation  of primary earnings per share is based  on  the  weighted
  average  number of outstanding shares during the period and includes,  when
  their  effect is dilutive, common stock equivalents consisting  of  certain
  shares  subject  to  stock  options.  Fully  diluted  earnings  per   share
  additionally   assumes   the  conversion  of  the   Company's   Convertible
  Subordinated  Debentures.  Net income used  in  the  computation  of  fully
  diluted earnings

<PAGE> 30
  per share was determined on the assumption that the convertible debentures
  were  converted  and  net income was adjusted for the amounts  representing
  interest and amortization of debt issuance costs, net of tax effect.

  (j) Stock Split

  In  May 1996, the Company effected a three-for-two stock split in the  form
  of a 50% stock dividend. In 1996, stockholders' equity has been adjusted to
  give recognition to the stock split by reclassifying from retained earnings
  to  common  stock the par value of the additional shares arising  from  the
  stock split. All references to

  average  number of shares outstanding, stock options, and per share amounts
  have been restated to reflect the stock split.

(3)Tender Offer and Merger and Acquisitions

  On  October  9,  1997  Genesis  ElderCare Acquisition  Corp.  ("Acquisition
  Corp."),  a wholly-owned subsidiary of Genesis ElderCare Corp., a  Delaware
  corporation  formed  by  Genesis  Health Ventures,  Inc.  ("Genesis"),  The
  Cypress Group L.L.C (together with its affiliates, "Cypress"), TPG Partners
  II,  L.P.,  (together with its affiliates, "TPG") and Nazem, Inc. (together
  with its affiliates "Nazem"), acquired 99.65% of the shares of common stock
  of  Multicare, pursuant to a tender offer commenced on June 20,  1997  (the
  "Tender Offer"). On October 10, 1997, Genesis ElderCare Corp. completed the
  merger  (the  "Merger")  of Acquisition Corp. with and  into  Multicare  in
  accordance  with the Agreement and Plan of Merger (the "Merger  Agreement")
  dated as of June 16, 1997 by and among Genesis ElderCare Corp., Acquisition
  Corp.,  Genesis  and Multicare. Upon consummation of the Merger,  Multicare
  became a wholly-owned subsidiary of Genesis ElderCare Corp.

  In  connection  with  the  Merger, Multicare and  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) $1,992 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 $23,900 in any given  year.
  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. Genesis also  entered  into  an  asset
  purchase  agreement  (the  "Therapy Sale  Agreement")  with  Multicare  and
  certain of its subsidiaries pursuant to which Genesis acquired all  of  the
  assets  used in Multicare's outpatient and inpatient rehabilitation therapy
  business for $24,000 subject to adjustment (the "Therapy Sale") and a stock
  purchase  agreement  (the  "Pharmacy Sale Agreement")  with  Multicare  and
  certain  subsidiaries pursuant to which Genesis will  acquire  all  of  the
  outstanding  capital  stock  and limited partnership  interest  of  certain
  subsidiaries  of  Multicare that are engaged in the business  of  providing
  institutional  pharmacy services to third parties for $50,000,  subject  to
  adjustment  (the  "Pharmacy Sale"). The Company  expects  to  complete  the
  Pharmacy Sale in the first calendar quarter of 1998.

  Genesis   Eldercare  Corp.  (the  "Multicare  Parent")  paid  approximately
  $1,492,000 to (i) purchase the Shares pursuant to the Tender Offer and  the
  Merger,  (ii) pay fees and expenses to be incurred in connection  with  the
  completion  of  the Tender Offer, Merger and the financing transactions  in
  connection   with  therewith,  (iii)  refinance  certain  indebtedness   of
  Multicare  and (iv) make certain cash payments to employees. Of  the  funds
  required to finance the foregoing, approximately $745,000 were furnished to
  Acquisition Corp. as capital contributions by the Multicare Parent from the
  sale by Genesis ElderCare Corp. of its Common Stock ("Genesis
  ElderCare Corp. Common Stock") to Cypress, TPG, Nazem and Genesis. Cypress,
  TPG and Nazem purchased

<PAGE> 31
  shares  of  Genesis  ElderCare Corp. Common Stock for a purchase  price  of
  $210,000, $199,500 and $10,500, respectively, and Genesis purchased  shares
  of Genesis ElderCare Corp. Common Stock for a purchase price of $325,000 in
  consideration  for approximately 44% of the Common Stock of  the  Multicare
  Parent.  The  balance of the funds necessary to finance the foregoing  came
  from (i) the proceeds of loans from a syndicate of lenders in the aggregate
  amount   of  $525,000  and  (ii)  $250,000  from  the  sale  of  9%  Senior
  Subordinated Notes due 2007 (the "9% Notes") sold by Acquisition  Corp.  on
  August 11, 1997.

  In connection with the Merger, Genesis, Cypress, TPG and Nazem entered into
  an  agreement  (the  "Put/Call Agreement") pursuant to which,  among  other
  things, Genesis will have the option, on the terms and conditions set forth
  in  the Put/Call Agreement to purchase (the "Call") Genesis ElderCare Corp.
  Common  Stock held by Cypress, TPG and Nazem commencing on October 9,  2001
  and for a period of 270 days thereafter, at a price determined pursuant  to
  the  terms of the Put/Call Agreement. Cypress, TPG and Nazem will have  the
  option, on the terms and conditions set forth in the Put/Call Agreement, to
  require Genesis to purchase (the "Put") such Genesis ElderCare Corp. Common
  Stock  commencing  on  October  9, 2002  and  for  a  period  of  one  year
  thereafter, at a price determined pursuant to the Put/Call Agreement.

  The  prices  determined for the Put and Call are based on  a  formula  that
  calculates  the  equity value attributable to Cypress', TPG's  and  Nazem's
  Genesis  ElderCare  Corp.  Common Stock, plus  a  portion  of  the  Genesis
  pharmacy  business  (the "Calculated Equity Value"). The Calculated  Equity
  Value will be determined based upon a multiple of Genesis ElderCare Corp.'s
  earnings  before  interest, taxes, depreciation,  amortization  and  rental
  expenses,  as  adjusted ("EBITDAR") after deduction of certain liabilities,
  plus a portion of the EBITDAR related to the Genesis pharmacy business. The
  multiple  to be applied to EBITDAR will depend on whether the  Put  or  the
  Call  is  being exercised. Any payment to Cypress, TPG or Nazem  under  the
  Call  or  the  Put  may be in the form of cash or Genesis common  stock  at
  Genesis' option.

  Upon exercise of the Call, Cypress, TPG and Nazem will receive at a minimum
  their  original  investment  plus  a 25%  compound  annual  return  thereon
  regardless of the Calculated Equity Value. Any additional Calculated Equity
  Value  attributable to Cypress', TPG's or Nazem's Genesis  ElderCare  Corp.
  Common  Stock  will be determined on the basis set forth  in  the  Put/Call
  Agreement  which provides generally for additional Calculated Equity  Value
  of Genesis ElderCare Corp. to be divided based upon the proportionate share
  of the capital contributions of the stockholders to Genesis ElderCare Corp.
  Upon exercise of the Put by Cypress, TPG or Nazem, there will be no minimum
  return  to Cypress, or TPG or Nazem; any payment to Cypress, TPG  or  Nazem
  will  be  limited  to Cypress', TPG's, or Nazem's share of  the  Calculated
  Equity  Value  based upon a formula set forth in the terms of the  Put/Call
  Agreement  which  provides  generally for the preferential  return  of  the
  stockholders' capital contributions (subject to certain priorities), a  25%
  compound annual return on Cypress', TPG's and Nazem's capital contributions
  and  the  remaining Calculated Equity Value to be divided  based  upon  the
  proportionate  share  of the capital contributions of the  stockholders  to
  Genesis ElderCare Corp.

  Cypress',  TPG's and Nazem's rights to exercise the Put will be accelerated
  upon  an event of bankruptcy of Genesis, a change of control of Genesis  or
  an extraordinary dividend or distribution or the occurrence of the leverage
  recapitalization of Genesis. Upon an event of acceleration or  the  failure
  by  Genesis  to satisfy its obligations upon exercise of the Put,  Cypress,
  TPG  and Nazem will have the right to terminate the Stockholders' Agreement
  and  Management Agreement and to control the sale or liquidation of Genesis
  ElderCare Corp. In the event of such sale, the proceeds from such sale will
  be distributed among the parties as contemplated by the formula for the Put
  option  exercise  price  and Cypress, TPG and Nazem  will  retain  a  claim
  against  Genesis for the difference, if any, between the proceeds  of  such
  sale and the put option exercise price.

  In  December 1996, the Company completed the acquisition of The A.D.S Group
  (A.D.S).  The  Company  paid  approximately  $10,000,  repaid  or   assumed
  approximately  $29,800 in debt, financed $51,000 through a lease  facility,
  and  issued  554,973 shares of its common stock for A.D.S.  Total  goodwill
  approximated $30,700.

<PAGE> 32
  In  February 1996, the Company completed the acquisition of Concord  Health
  Group,  Inc. (Concord). The Company acquired the outstanding capital  stock
  and  warrants  of  Concord for approximately $75,000 including  transaction
  costs, repaid approximately $41,000 of debt, and assumed historical debt of
  approximately $4,000. Total goodwill approximated $61,000.

  All  acquisitions  have  been accounted for using the  purchase  method  of
  accounting and, accordingly, the consolidated financial statements  reflect
  the results of operations of each facility from the date of acquisition.

  The  following  1996  unaudited pro forma financial  information  has  been
  prepared  as if the Concord and A.D.S acquisitions had been consummated  on
  January 1, 1996. The 1997 unaudited pro forma information has been prepared
  as  if  the  Merger and the Pharmacy Sale had been completed on January  1,
  1997.  The pro forma financial information does not necessarily reflect the
  results  of  operations  that  would have  occurred  had  the  transactions
  occurred at the beginning of the respective periods presented and is  based
  on  preliminary  allocations of the purchase price to property,  plant  and
  equipment and goodwill that are subject to change.
<TABLE>
<CAPTION>
                                        December      Septemb
                                        31,           er 30,
                                        1996          1997
                                            (unaudited)
   <S>                                <C>          <C>
   Net revenues                       $ 599,022    $   479,885
   Income (loss) before                  
   extraordinary item                    29,095       (10,032)
   Net income (loss)                  $  26,267       (10,905)
   Total assets                                      1,720,000
   Total debt                                          771,407
   Total equity                                    $   745,000
</TABLE>
(4)Income Taxes

  The  provision for income taxes, exclusive of income taxes related  to  the
  extraordinary items, consists of the following:

<TABLE>
<CAPTION>
                          December 31,          September
                                                30,
                          1995       1996       1997
   <S>                 <C>        <C>         <C>
   Federal:
   Current             $  11,092  $ 13,554     $  15,029
   Deferred                 (35)     1,275           133
   State:
   Current                 2,876     2,695         1,908
   Deferred                (135)        46            17
                       $  13,798  $ 17,570     $  17,087
</TABLE>
  The  difference  between the Company's effective tax rate and  the  Federal
  statutory tax rate of 35% is primarily attributable to state taxes.

<PAGE> 33
  The tax effects of temporary differences giving rise to deferred tax assets
  and liabilities are as follows:
<TABLE>
<CAPTION>
                                       December  September
                                       31,       30,
                                       1996      1997
   <S>                              <C>        <C>
   Deferred tax assets:
   Accounts receivable              $  1,642   $  1,311
   Employee benefits and               2,191      1,495
   compensated absences
                                    $  3,833   $  2,806

   Deferred tax liabilities:
   Property, plant and equipment    $ 42,033   $ 41,254
   Other                                 876        852
                                    $ 42,909   $ 42,106
</TABLE>

  Cash  paid  for income taxes was $12,910, $14,555 and $6,580 in  the  years
  ended December 1995 and 1996 and the nine month period ended September  30,
  1997, respectively.

(5)Financing Obligations

  A summary of long-term debt is as follows:
<TABLE>
<CAPTION
                                            December     September
                                            31,          30,
<S>                                      <C>          <C>
Bank credit facility, with interest at
approximately 7% in 1996 and 1997        $  276,429   $  305,129
Convertible debentures, due 2003, with
interest at 7%, convertible at $17.33       
per share                                    86,250       59,744
Senior subordinated notes, due 2002,
net of unamortized original issue
discount of $682 and $524 in 1996 and       
1997, respectively, with interest at
12.5%                                        29,719       23,377
Mortgages and other debt, including
unamortized premium of $3,412 and
$3,110 in 1996 and 1997, respectively,
payable in varying monthly or quarterly
installments with interest at rates         
between 6% and 12%. These loans mature
between 1999 and 2033                        26,135       26,164
Revenue bonds, rates ranging from 7% to
10%, with maturities between 2004 and
2015, net of unamortized discount of        
$431 and $391 in 1996 and 1997,
respectively                                 10,635        9,632
                                            429,168      424,046
Less current portion                            821          625
                                         $  428,347   $  423,421
</TABLE>
  In  October  1997,  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  Facilities"),  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  "Long
  Term  Credit  Agreement")  dated  as  of  October  14,  1997.   The  Senior
  Facilities are being used for the purpose of (i) refinancing certain  short
  term  facilities in the aggregate principal amount of $431.6 million  which
  were  funded on October 9, 1997 to acquire the Shares in the Tender  Offer,
  refinance  certain indebtedness of Multicare (including the Company's  bank
  credit  and  lease  facilities with NationsBank,  N.A.,  the  Company's  7%
  Convertible Subordinated Debentures, and the Company's 12.5%

<PAGE> 34
  Senior  Subordinated  Notes)  and pay fees  and  expenses  related  to  the
  transactions,  (ii)  funding  interest  and  principal  payments  on   such
  facilities and on certain remaining indebtedness and (iii) funding  working
  capital and general corporate purposes.

  The  Senior  Facilities consist of: (1) a $200 million six year  term  loan
  (the  "Tranche A Term Facility"); (2) a $150 million seven year  term  loan
  (the  "Tranche B Term Facility"); (3) a $50 million term loan  maturing  on
  June  1, 2005 (the "Tranche C Term Facility"); (4) a $125 million six  year
  revolving credit facility (the "Revolving Credit Facility"); and (5) one or
  more  Swing  Loans  (collectively, the "Swing Loan Facility")  in  integral
  principal multiples of $500,000 up to an aggregate unpaid principal  amount
  of  $10 million.  The Tranche A Term Facility, Tranche B Term Facility  and
  Tranche   C   Term  Facility  are  subject  to  amortization  in  quarterly
  installments, commencing at the end of the first calendar quarter after the
  date of the consummation of the Merger (the "Closing Date").  The Revolving
  Credit  Facility  will mature six years after the Closing  Date.   All  net
  proceeds received by Multicare from (i) the sale of assets of Multicare  or
  its  subsidiaries other than sales in the ordinary course of business  (and
  other  than  the sales of Multicare's rehabilitation therapy  business  and
  pharmacy  business  to the extent that there are amounts outstanding  under
  the  Revolving Credit Facility) and (ii) any sale of common stock  or  debt
  securities  of Multicare in respect of common stock will be  applied  as  a
  mandatory prepayment.  Fifty percent of Excess Cash Flow must be applied to
  the Senior Facilities and shall be payable annually.

  The Senior Facilities are secured by a first priority security interest  in
  all  of  the (i) stock of Multicare, (ii) stock, partnership interests  and
  other  equity of all of Multicare's present and future direct and  indirect
  subsidiaries and (iii) intercompany notes among Parent and any subsidiaries
  or  among  any  subsidiaries.  Loans under the Senior Facilities  bear,  at
  Multicare's  option, interest at the per annum Prime Rate as  announced  by
  the Administrative Agent, or the applicable Adjusted LIBO Rate. Loans under
  the Tranche A Term Facility bear interest at a rate equal to LIBO Rate plus
  a  margin up to 2.5%; loans under the Tranche B Term Facility bear interest
  at  a  rate  equal to LIBO Rate plus a margin up to 2.75%; loans under  the
  Tranche C Term Facility bear interest at a rate equal to LIBO Rate  plus  a
  margin  up to 3.0%; loans under the Revolving Credit Facility bear interest
  at  a rate equal to LIBO Rate plus a margin up to 2.5%; and loans under the
  Swing Loan Facility bear interest at the Prime Rate unless otherwise agreed
  to  by  the  parties.  Subject to meeting certain financial covenants,  the
  above-referenced interest rates will be reduced.

  The  Long Term Credit Agreement contains a number of covenants that,  among
  other  things,  restrict the ability of Multicare and its  subsidiaries  to
  dispose   of  assets,  incur  additional  indebtedness,  make   loans   and
  investments, pay dividends, engage in mergers or consolidations, engage  in
  certain  transactions with affiliates and change control of capital  stock,
  prepay  debt, 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. In addition, the Long Term Credit Agreement
  requires   that  Multicare  and  its  affiliates  maintain  the  Management
  Agreement as well as comply with certain financial covenants.

  On August 11, 1997, Acquisition Corp. sold $250 million principal amount of
  Notes which were issued pursuant to the Indenture.  The Notes bear interest
  at  9%  per annum from August 11, 1997, payable semiannually on February  1
  and August 1 of each year, commencing on February 1, 1998.

<PAGE> 35
  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  create  dividend  and  other
  restrictions affecting its subsidiaries.

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

  In  1997 the Company purchased $6,500 principal amount of its 12.5%  Senior
  Subordinated Notes ("12.5% Notes"), resulting in an extraordinary charge of
  $873,  net  of  tax of $583, relating to the premiums paid  above  recorded
  values  and  the  write-off  of  debt issuance  costs  and  original  issue
  discounts.

  In  1995 and 1996 the Company recorded extraordinary charges of $3,722  and
  $2,827 respectively, net of tax amounts of $2,379 and $1,884, respectively,
  relating to the restructuring of its credit agreements and the purchase  of
  its  12.5%  Notes.   The  charges are comprised of the  write-off  of  debt
  issuance  costs  and  original issue discounts, prepayment  penalties,  and
  premiums paid above recorded values.

  In  1996  the Company entered into a $350,000 credit facility and a $60,000
  lease facility with NationsBank, N.A., as agent.

  In  March 1995, the Company completed an offshore offering and a concurrent
  private  placement  in  the  United States of $86,250  of  its  Convertible
  Debentures due 2003. The Convertible Debentures are convertible at a  price
  of $17.33 per share. The net proceeds approximated $83,300 of which $23,000
  was used to repay amounts outstanding under the Company's credit agreement,
  with  the  remainder  utilized  for general corporate  purposes.  In  1997,
  $26,506  of  Convertible Debentures were converted into common  stock.   In
  connection  with  the  early  conversion of a portion  of  the  Convertible
  Debentures, the Company recorded a charge of $785 relating to premiums paid
  upon conversion.

  The  fair  value  of the Company's debt, based on quoted market  prices  or
  current  rates  for  similar  instruments  with  the  same  maturities  was
  approximately $432,398 and $462,393 at December 31, 1996 and September  30,
  1997, respectively.

  The Company is subject to various financial and restrictive covenants under
  its  credit facility and other indebtedness and is in compliance with  such
  covenants  at  September  30,  1997.  The Company  is  in  compliance  with
  covenants on its Senior Facilities and 9% Notes.

<PAGE> 36
  The  aggregate  maturities  of long-term debt for  the  five  years  ending
  September  30,  2002  and  thereafter as adjusted for  the  borrowings  and
  repayments in connection with the Merger are as follows:
<TABLE>
                     <S>         <C>
                     1998        $  20,220
                     1999           30,647
                     2000           34,699
                     2001           38,743
                     2002           42,811
                     Thereafter    601,824
                                   768,944

                     Discount      (1,345)
                     Premium         3,808
                                 $ 771,407
</TABLE>
  Interest expense of $1,605, $2,773 and $1,816 was capitalized in the  years
  ended  December 31, 1995 and 1996 and the nine month period ended September
  30,  1997,  respectively, in connection with new construction and  facility
  renovations and expansions.

  Cash  paid for interest was $17,704, $25,762 and $22,817 in the years ended
  December  31,  1995 and 1996 and the nine month period ended September  30,
  1997, respectively.

(6)Accrued Liabilities

  At  December 31, 1996 and September 30, 1997 accrued liabilities consist of
  the following:
<TABLE>
<CAPTION>
                                        1996       1997
          <S>                       <C>        <C>
          Salaries and wages        $ 19,469   $  26,291
          Deposits from patients       3,386       3,106
          Interest                     4,742       3,705
          Insurance                    7,079      10,456
          Other                       20,031      21,386
                                    $ 54,707   $  64,944
</TABLE>
(7)  Commitments and Contingencies

  The  Company has operating leases on certain of its facilities and offices.
  Three of such leases are with entities that are owned wholly or in part  by
  certain  stockholders of the Company. Minimum rental commitments under  all
  noncancelable leases at September 30, 1997 as adjusted for refinancing  its
  lease facility in connection with the Merger are as follows:
<TABLE>
              <S>               <C>
              1998              $    13,505
              1999                   13,233
              2000                   12,827
              2001                   12,758
              2002                   12,688
              Thereafter             60,966
                                $   125,977
</TABLE>

<PAGE> 37

(7)Commitments and Contingencies, Continued.

  Letters  of  credit ensure the Company's performance or  payment  to  third
  parties in accordance with specified terms and conditions. At September 30,
  1997, letters of credit outstanding amounted to $1,750.

  The  Company  has  guaranteed  $13,100  of  indebtedness  to  others.   The
  Company's  exposure  to credit loss in the event of nonperformance  by  the
  other  party  to the financial instrument for guarantees, loan  commitments
  and  letters  of  credit  is  represented by the  dollar  amount  of  those
  instruments.   The  Company  uses  the  same  credit  policies  in   making
  commitments  and  conditional obligations as it does for  on-balance  sheet
  financial instruments.  The Company does not anticipate any material losses
  as a result of these commitments.

  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 two 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).

  In February 1998 ETT also made one construction loan to a subsidiary of the
  Company to fund construction of an assisted living facility being developed
  by  the  Company.  The note bears interest at a fixed annual rate of 10.5%,
  and  will mature on the third anniversary of the loan, 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
  of  such  third  anniversary (or at the end of  any  extension  period,  if
  applicable).

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

  Included   in  the  accompanying  consolidated  financial  statements   are
  management  fees and interest income from related parties of  $1,689,  $123
  and  $92 for the years ended December 31, 1995 and 1996 and the nine  month
  period ended September 30, 1997, respectively.

  There are numerous legislative and executive initiatives at the federal and
  state  levels  for  comprehensive reforms affecting  the  payment  for  and
  availability   of   healthcare  services,  including  without   limitation,
  discussions  at  the  federal level concerning budget  reductions  and  the
  implementation of prospective payment systems for the Medicare and Medicaid
  programs.  The Company is unable to predict the impact of healthcare reform
  proposals on the Company; however, it is possible that such proposals could
  have   a   material  adverse  effect  on  the  Company.   Any  changes   in
  reimbursement  levels  under  Medicaid and  Medicare  and  any  changes  in
  applicable   government   regulations  could   significantly   affect   the
  profitability of the Company. Various cost

<PAGE> 38

(7)Commitments and Contingencies, Continued.

  containment  measures  adopted by governmental pay sources  have  begun  to
  limit the scope and amount of reimbursable healthcare expenses.  Additional
  measures,  including measures that have already been proposed in states  in
  which  the  Company operates, may be adopted in the future as  federal  and
  state  governments attempt to control escalating healthcare  costs.   There
  can   be   no  assurance  that  currently  proposed  or  future  healthcare
  legislation  or  other changes in the administration or  interpretation  of
  governmental healthcare programs will not have a material adverse effect on
  the  Company.  In particular, changes to the Medicare reimbursement program
  that  have  been proposed could materially adversely affect  the  Company's
  revenues derived from ancillary services.

  The  healthcare industry is labor intensive. Wages and other labor  related
  costs  are  especially sensitive to inflation. In addition, suppliers  pass
  along  rising costs to the Company in the form of higher prices. When faced
  with  increases in operating costs, the Company has increased  its  charges
  for services. The Company's operations could be adversely affected if it is
  unable  to recover future cost increases or experiences significant  delays
  in  increasing  rates of reimbursement of its labor and  other  costs  from
  Medicaid and Medicare revenue sources.

  The Company is from time to time subject to claims and suits arising in the
  ordinary  course  of business. In the opinion of management,  the  ultimate
  resolution of pending legal proceedings will not have a material effect  on
  the Company's consolidated financial statements.

(8)Capital Stock and Stock Plans

  In  May  1996,  the  Company increased the number of authorized  shares  of
  preferred  and  common stock for the purpose of effecting  a  three-for-two
  stock  split  in  the form of a 50% stock dividend. In  October  1996,  the
  Company  completed  a  public offering of 3,000,000 shares  of  its  common
  stock, resulting in net proceeds of $52,000. The proceeds from the offering
  were  used  to repay a portion of outstanding bank indebtedness  under  the
  Company's  credit agreement which was incurred to finance  certain  of  the
  Company's acquisitions.

  The Company's 1993 Stock Option Plan and Non-Employee Director Stock Option
  Plan  (Plans) provided for the issuance of options to directors,  officers,
  key  employees  and  consultants of the Company. The  aggregate  number  of
  shares authorized for issuance under the Plans was 5,390,000. Options  were
  issued  at  market  value  on the date of the grant,  vested  ratably  over
  maximum periods of five years, and expired ten years from the date  of  the
  grant.

  In   connection  with  the  Merger,  the  unexercisable  portion  of   each
  outstanding  stock option became immediately exercisable in  full  and  was
  canceled  in exchange for the right to receive an amount in cash  equal  to
  the  product of (i) the number of shares previously subject to such  option
  and  (ii) the excess, if any, of the tender offer price of $28.00 per share
  over the exercise price per share previously subject to such options.

  The  Company  has  adopted the disclosure-only provisions of  Statement  of
  Financial  Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
  Compensation", and applies APB Opinion No. 25 in accounting for  its  Plans
  and,  accordingly, has not recognized compensation cost  for  stock  option
  plans  and  stock purchase plans in its consolidated financial  statements.
  Had the Company determined compensation cost based on the

<PAGE> 39

(8)Capital Stock and Stock Plans, Continued.

  fair  value  at the grant date consistent with the provisions of  SFAS  No.
  123,  the  Company's net income would have been changed to  the  pro  forma
  amounts indicated below:
<TABLE>
<CAPTION>
                                               December 31,        September
                                                                   30,
                                             1995       1996        1997
   <S>                                     <C>        <C>         <C>
   Net income--as reported                 $ 18,425   $ 25,910    $  27,878
   Net income--pro forma                     17,530     24,181       24,628
   Net income per share--as reported -
   fully diluted                                .69        .90          .82
   Net income per share--pro forma -
   fully diluted                                .66        .85          .73
</TABLE>
  The  fair  value  of the stock options granted in 1995, 1996  and  1997  is
  estimated  at grant date using the Black-Scholes option-pricing model  with
  the following weighted average assumptions:
<TABLE>
<CAPTION>
                                   December 31,  September
                                   1995 and      30,
                                   1996          1997
   <S>                             <C>           <C>
   Dividend yield                  0%            0%
   Expected volatility             38.4%         36.8%
   Risk-free interest rate         6.5%          5.5%
   Expected life                   9.9 years     9.8 years
</TABLE>
  Presented below is a summary of the stock option plans for the years  ended
  December 31, 1995, 1996 and the nine month period ended September 30, 1997:
<TABLE>
<CAPTION>
                          1995                  1996             1997
                        Weighted             Weighted           Weighted
                        Average              Average            Average
                        Exercise             Exercise           Exercise
                     Shares   Price       Shares    Price   Shares   Price
  <S>               <C>        <C>     <C>         <C>      <C>        <C>
  Options
  outstanding at
  beginning of
  year              1,772,778  $10.74  2,441,364   $11.46   3,167,237  $13.03
  Granted             750,828   13.10    828,746    17.60     664,500   18.37
  Exercised          (27,969)    8.73   (24,789)    11.05    (22,562)   12.65
  Forfeited/expired  (54,273)   12.15   (78,084)    13.10   (127,989)   13.64
  Options
  outstanding at
  end of year       2,441,364  $11.46  3,167,237   $13.03   3,681,186  $13.97

  Weighted-average
  grant-date fair
  value of options            
  granted                      $ 8.23              $11.06              $10.77
</TABLE>
  The following table summarizes information for stock options outstanding at
  September 30, 1997:
<TABLE>
<CAPTION>
                              Weighte d    Weighted                 Weighted
                   Number     Avg.         Avg.                     Avg.
Range of Exercise  Outstand   Contractual  Exercise    Number       Exercise
Prices             ing        Life         Price       Exercisable  Price
<C>               <C>           <C>       <C>         <C>           <C>

$6.67-$10.83        257,251     6.0       $    7.77     228,000     $   7.81
$11.17-$14.67     2,020,372     6.8           11.96   1,290,429        11.87
$16.00-$22.25     1,403,563     9.0           18.00     162,424        17.16
                  3,681,186     7.6       $   13.97   1,680,853     $  11.83
</TABLE>
<PAGE> 40
  The  Company's  Employee  Stock Purchase Plan (ESPP)  was  adopted  by  the
  Company's Board of Directors in 1995 and approved by shareholders in  1996.
  The  ESPP  permitted  employees of the Company to  purchase  the  Company's
  common stock at a price equal to the lesser of 85% of the fair market value
  of  the  common stock on the first or last day of each quarter. There  were
  1,200,000  shares  authorized for issuance under the ESPP.   In  1996,  the
  Company  adopted  the  Directors Retainer and Meeting Fee  Plan  (Directors
  Plan)  under  which a director who is not an employee of  the  Company  may
  elect  to  receive payment of all or any portion of his or her annual  cash
  retainer and meeting fees either in cash or shares of the Company's  common
  stock. The number of shares payable is determined by the fair market  value
  of  a  share  on  the date payment is due. The aggregate number  of  shares
  authorized for issuance under the Directors Plan was 75,000.  In connection
  with the Merger, the ESPP and Directors Plan were terminated.

(9)  Quarterly Results of Operations (Unaudited)
<TABLE>
<CAPTION>
                                Year ended December 31, 1996(2)
                               First       Second     Third      Fourth
                               Quarter(1)  Quarter    Quarter    Quarter(1)
   <S>                      <C>          <C>         <C>         <C>

   Net revenues             $  120,057   $  131,889  $  134,944  $  145,340
   Income before
   extraordinary item            6,197        6,780       7,418       8,342
   Net income                    4,716        6,780       7,418       6,996
   Income per common
   share assuming
   full dilution:
   Income before
   extraordinary item              .23          .24         .26         .27
   Net income               $      .18   $      .24   $     .26   $     .23
</TABLE>
<TABLE>
<CAPTION>
                                     Nine month period ended
                                      September 30, 1997
                               First         Second         Third
                               Quarter(1)    Quarter        Quarter
   <S>                      <C>            <C>             <C>

   Net revenues             $  168,792     $  179,164      $  185,996
   Income before
   extraordinary item            8,760         10,181           9,810
   Net income                    7,887         10,181           9,810
   Income per common
   share assuming
   full dilution:
   Income before
   extraordinary item              .27            .30             .28
   Net income               $      .24     $      .30      $      .28
</TABLE>
(1) The Company incurred extraordinary charges related to extinguishment of
 debt.
(2) Income per share has been adjusted for a 50% stock dividend in May 1996.

<PAGE> 41

Item 10.  Directors and Executive Officers of the Company.

The  following  table sets forth certain information regarding  each  of  the
directors  and  executive  officers of the  Company.   Each  was  elected  in
connection with the Merger:
<TABLE>
Name                  Age     Position
<S>                     <C>   <C>
Michael R. Walker       49    Chairman, Chief Executive Officer and Director
George V. Hager, Jr.    41    Senior Vice President, Chief Financial Officer
                              and Director
James L. Singleton      42    Vice President, Assistant Secretary and Director
James G. Coulter        37    Vice President, Assistant Secretary and Director
Jonathan J. Coslet      33    Director
Richard R. Howard       48    Director
Karl I. Peterson        27    Director
William L. Spiegel      35    Director
James A. Stern          47    Director
</TABLE>
Michael R. Walker is the Chairman of the Board, Chief Executive Officer and a
director of the Company. Mr. Walker is the founder of Genesis and has  served
as  Chairman  and Chief Executive Officer of Genesis since its  inception  in
1985.  In 1981, Mr. Walker co-founded Health Group Care Centers ("HGCC").  At
HGCC, he served as Chief Financial Officer and, later, as President and Chief
Operating  Officer.  Prior  to  its sale in  1985,  HGCC  operated  eldercare
facilities  with  4,500 nursing beds in 12 states. From  1978  to  1981,  Mr.
Walker  was the Vice President and Treasurer of AID Healthcare Centers,  Inc.
("AID"). AID, which owned and operated 20 nursing centers, was co-founded  in
1977  by  Mr.  Walker  as  the nursing home division of  Hospital  Affiliates
International.  Mr.  Walker holds a Master of Business Administration  degree
from Temple University and a Bachelor of Arts in Business Administration from
Franklin and Marshall College. Mr. Walker serves on the Board of Directors of
Renal  Treatment  Centers,  Inc. and on the Board of  Trustees  of  Universal
Health Realty & Income Trust.

George  V.  Hager, Jr. is the Senior Vice President, Chief Financial  Officer
and  a  director  of  the Company. Mr. Hager has served as  the  Senior  Vice
President  and  Chief Financial Officer of Genesis since February  1994.  Mr.
Hager  joined  Genesis  in July 1992 as Vice President  and  Chief  Financial
Officer. Prior thereto, Mr. Hager was the partner in charge of the healthcare
practice  for  KPMG  Peat Marwick LLP in the Philadelphia office.  Mr.  Hager
began  his career at KPMG Peat Marwick LLP in 1979 and has over 15  years  of
experience in the healthcare industry. Mr. Hager received a Bachelor of  Arts
degree  in Economics from Dickinson College in 1978 and a Master of  Business
Administration  degree from Rutgers Graduate School of Management.  He  is  a
certified  public  accountant  and a member  of  the  American  Institute  of
Certified  Public Accountants and Pennsylvania Institute of Certified  Public
Accountants.

James L. Singleton is a Vice President, Assistant Secretary and a director of
the  Company.  Mr.  Singleton has been a Vice Chairman of Cypress  since  its
formation in April 1994. Prior to joining Cypress, he was a Managing Director
in  the Merchant Banking Group of Lehman Brothers Inc. Mr. Singleton holds  a
Master  of  Business  Administration degree from the  University  of  Chicago
Graduate  School  of  Business  and  a Bachelor  of  Arts  degree  from  Yale
University.  Mr.  Singleton serves on the Board of  Directors  of  Able  Body
Corporation, Cinemark USA, Inc., L.P. Thebault Company and Williams Scotsman,
Inc.

James  G. Coulter is a Vice President, Assistant Secretary and a director  of
the  Company.  Mr. Coulter was a founding partner of TPG in  1992.  Prior  to
forming TPG, Mr. Coulter was a Vice President of Keystone, Inc., the personal
investment vehicle of Fort Worth, Texas-based investor, Robert M.  Bass.  Mr.
Coulter  holds  a  Master  of Business Administration  degree  from  Stanford
University and a Bachelor of Arts degree from Dartmouth College. Mr.  Coulter
is  Co-Chairman of the Board of Beringer Wine Estates. He also serves on  the
Board  of  Directors of America West Airlines, Inc., Virgin Cinemas  Limited,
Paradyne Partners, L.P. and Del Monte Corp. Mr. Coulter is also an officer of
the general partner of Colony Investors and Newbridge Investment Partners.

<PAGE> 42

Jonathan  J.  Coslet  is a director of the Company. Mr.  Coslet  has  been  a
partner  of  TPG  since 1993. Prior to joining TPG, Mr.  Coslet  was  in  the
Investment  Banking Department of Donaldson, Lufkin & Jenrette,  specializing
in  leveraged acquisitions and high-yield finance. Mr. Coslet holds a  Master
of  Business Administration degree from Harvard Business School, where he was
a  Baker  Scholar  and  a Loeb Fellow, and a Bachelor of  Science  degree  in
Economics  from  the  University of Pennsylvania Wharton School.  Mr.  Coslet
serves on the Board of Directors of PPOM, L.P.

Richard  R. Howard is a director of the Company. Mr. Howard has served  as  a
director of Genesis since its inception and as Chief Operating Officer  since
June  1986. Mr. Howard joined Genesis in September 1985 as Vice President  of
Development. Mr. Howard's background in healthcare includes two years as  the
Chief  Financial Officer of HGCC. Mr. Howard's experience also includes  over
ten  years  with Fidelity Bank, Philadelphia, Pennsylvania and one year  with
Equibank,  Pittsburgh,  Pennsylvania.  Mr.  Howard  is  a  graduate  of   the
University  of Pennsylvania Wharton School, where he received a  Bachelor  of
Science degree in Economics in 1971.

Karl  I.  Peterson is a director of the Company. Mr. Peterson has  served  as
Vice  President of TPG since 1995. Prior to joining TPG, Mr. Peterson was  in
the  Mergers  and Acquisitions Department and the Leveraged Buyout  Group  of
Goldman, Sachs & Co. Mr. Peterson holds a Bachelor of Business Administration
degree in Finance from the University of Notre Dame.

William  L.  Spiegel  is a director of the Company. Mr. Spiegel  has  been  a
Principal  of  Cypress since its formation in April 1994.  Prior  to  joining
Cypress,  Mr.  Spiegel was with Lehman Brothers Inc. where he worked  in  the
Merchant Banking Group. Mr. Spiegel holds a Master of Business Administration
degree  from the University of Chicago Graduate School of Business, a  Master
of  Arts  degree in Economics from the University of Western  Ontario  and  a
Bachelor of Science degree in Economics from The London School of Economics.

James  A. Stern is a director of the Company. Mr. Stern has been Chairman  of
Cypress  since  its  formation in April 1994. Prior to joining  Cypress,  Mr.
Stern  spent  his entire career with Lehman Brothers Inc., most  recently  as
head  of the Merchant Banking Group. He served as head of Lehman's High Yield
and Primary Capital Markets Groups, and was co-head of Investment Banking. In
addition,  Mr. Stern was a member of Lehman's Operating Committee. Mr.  Stern
holds a Master of Business Administration degree from Harvard Business School
and a Bachelor of Science degree from Tufts University where he is a trustee.
Mr. Stern is a director of Amtrol Inc., Cinemark USA, Inc., Lear Corporation,
Noel Group, Inc. and R.P. Scherer Corporation.

<PAGE> 43

Item 11. Executive Compensation.
<TABLE>
                         SUMMARY COMPENSATION TABLE
<CAPTION>
                                                      LONG-TERM
                                                      COMPENSATION
                                                      AWARDS (1)
                                                      Number of
                                                      Securities
                          ANNUAL COMPENSATION         Underlying   All
                                                      (2)          Other
Name and Principal      Year     Salary      Bonus    Options      Compensation
Position
<S>                     <C>      <C>          <C>         <C>      <C>
Moshael J. Straus(3)    (4)1997  $ 450,000    $ 562,500   110,000  $ 133,315(5)
Chairman of the Board      1996    600,000      750,000    93,750    100,808(5)
of Directors               1995    600,000      600,000   170,900    149,433(5)
and Co-Chief Executive
Officer

Daniel E. Straus(3)     (4)1997    450,000      562,500   110,000    100,531(5)
President, Co-Chief        1996    600,000      750,000    93,750    133,171(5)
Executive Officer          1995    600,000      600,000   170,900    174,396(5)
and Director

Stephen R. Baker(3)     (4)1997    225,000      133,605    60,000        ---
Executive Vice             1996    300,000      178,125    23,438        ---
President, Chief           1995    250,000      125,000    42,162        ---
Operating Officer and
Director

Susan S. Bailis(6)      (4)1997    186,154       93,750       ---        ---
Senior Vice President,     1996      8,111        8,111    97,500        ---
ADS/Multicare              1995        ---          ---       ---        ---

Mark R. Nesselroad(7)   (4)1997    150,000       75,000    25,000        ---
Senior Vice President,     1996    164,000       55,070     4,500        ---
Acquisitions               1995     12,500          ---    22,500        ---
Construction &
Development

Keith F. Helmer(8)      (4)1997    168,974       52,500    10,000        ---
Vice President,            1996        ---          ---       ---        ---
Operations                 1995        ---          ---       ---        ---
</TABLE>


(1) The Company did not grant any long term incentive plan payouts ("LTIPs")
    to any of the executive officer named in this table nor does the Company
    maintain any LTIPs.  Excludes perquisites and other personal benefits,
    securities or property, the aggregate amount of which received by any named
    person did not exceed the lesser of $50,000 or 10% of the total annual 
    salary and bonus for such officer as well as certain incidental personal 
    benefits to executive officers of the Company resulting from expenses 
    incurred by the Company in interacting with the financial community and 
    identifying potential acquisition targets.
(2) Options adjusted for three-for-two stock split in May 1996.
(3) Executive officers terminated on October 10, 1997 in connection with 
    Merger.
(4) Represents amounts earned from January 1, 1997 through September 30, 1997.
(5) Amounts paid in connection with obtaining term life insurance to fund a
    stock purchase right from the other Co-Chief Executive Officer in 
    connection with an agreement among the Company and each of the Co-Chief 
    Executive Officers.
(6) Ms. Bailis joined the Company in December 1996.
(7) Mr. Nesselroad joined the Company in December 1995.
(8) Mr. Helmer joined the Company in January 1997.


Stock Option Grants

The following table sets forth as to each of the individuals named in the
Summary Compensation Table the following information with respect to stock
option grants during the period from January 1, 1997 through September 30,
1997 ("Fiscal 1997") and the potential realizable value of such option
grants: (i) the number of shares of Common Stock underlying options granted
during Fiscal 1997, (ii) the percentage that such options represent of all
options granted to employees during Fiscal 1997, (iii) the exercise price,
(iv) the expiration date and (v) grant date present value.

<PAGE> 43
<TABLE>
                     OPTION(1) GRANTS DURING FISCAL 1997
                   AND ASSUMED POTENTIAL REALIZABLE VALUE
<CAPTION>

                   Number
                   of             % of
                   Underlying     Total                              Grant Date
                   Options        Grated     Exercise    Expiration   Present
Name               Granted        in 1997     Price       Date         Value
<S>                 <C>           <C>       <C>        <C>            <C>
Moshael J. Straus   110,000       18%       $ 19.50     2/4/2007      $ 935,000
Daniel  E. Straus   110,000       18%         19.50     2/4/2007        935,000
Stephen R. Baker     60,000       10%         19.50     2/4/2007        510,000
Mark R. Nesselroad   25,000        4%         19.50     2/4/2007        212,500
Keith F. Helmer      10,000        2%         19.50    1/31/2007         85,000
</TABLE>
(1) There were no SARs granted in 1997.
(2) The Company calculated the grant date present value at the Tender  Offer
    price of $28.00 per share.
(3) Options vest at a rate of 33 1/3% per year over a three year period  and
    expire ten years from the date of grant.

Ten Year Option Repricings
The  following  table sets forth the information noted for all repricings  of
all  options  held by any executive officer of the Company in  the  Company's
last 10 complete fiscal years.
<TABLE>
                         OPTION REPRICING TABLE (1)
<CAPTION>
                                                                   Length
                        Securities  Market                         of Original
                        Underlying  Price of  Exercise             Option Term
                        Options     Stock at  Price at   New       Remaining
                        Repriced    Time of   Time of    Exercise  at Date of
Name        Date        or Amended  Pricing   Repricing  Price     Repricing
<S>         <C>         <C>       <C>        <C>       <C>     <C>     
Stephen R.  August 17,
Baker       1993(2)     90,000    $ 7.33(3)  $ 7.39    $ 6.67  9 years 7 months
</TABLE>
 (1) Options and per share amounts adjusted for three-for two stock split in
     May 1996.
 (2) Stephen R. Baker was originally granted options to purchase 90,000 shares
     of Common Stock on April 1, 1993 at an exercise price of $7.39 per share.
     Subsequently, coinciding with the Company's 1993 initial public offering of
     its Common Stock at $6.67 per share, Mr. Baker's options were amended such
     that the exercise price would equal that of the Company's 1993 initial
     public offering price.
 (3) This represents the closing price of the Common Stock on August 19, 1993
     which was the first day the Common Stock was traded on The Nasdaq Stock
     Market.  Prior to August 19, 1993, there was no public market for the
     Common Stock

Stock Option Values

The  following  table  sets forth the number and aggregate  dollar  value  of
unexercised  options held at September 30, 1997 by the individuals  named  in
the  Summary Compensation Table.  None of the named individuals exercised any
options prior to September 30, 1997.

<PAGE> 44
<TABLE>
                           AGGREGATE OPTION VALUES
<CAPTION>
                                                       Value of Unexercised
                        Number of Unexercised           in the Money Options
                        Options at September               at September 30,
                            30, 1997(2)                       1997(1)(2)
Name                 Exercisable  Unexercisable    Exercisable    Unexercisable
<S>                        <C>           <C>        <C>           <C>
Moshael J. Straus          516,847       457,467    $ 8,283,319   $ 6,433,820
Daniel E. Straus           516,847       457,467      8,283,319     6,433,820
Stephen R. Baker           134,786       107,681      2,502,470     1,366,879
Susan S. Bailis                ---        97,500            ---       877,500
Mark R. Nesselroad           9,000        43,000        117,975       479,700
Keith F. Helmer                ---        10,000            ---        85,000
</TABLE>
 (1) The value of unexercisable in the money options was determined by using
     the Tender Offer price of $28.00 per share.
 (2) In connection with the Tender Offer options for all employees were
     accelerated and fully vested on the Tender Offer date.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The  following table sets forth certain information regarding the  beneficial
ownership of the common stock on February 12, 1998, with respect to (i)  each
person known to the Company to be the beneficial owner of more than 5% of the
outstanding  Common Stock; (ii) each person who is currently  a  director  or
nominee  to  be  a director of the Company; (iii) all current  directors  and
executive officers of the Company as a group; and (iv) those persons named in
the  Summary  Compensation  Table.  To the best of the  Company's  knowledge,
except as otherwise noted, the holder listed below has sole voting power  and
investment power over the Common Stock owned beneficially own.

Name of Beneficial Owner(1)(2)    Number of      Percent of
                                  Shares         Class

Genesis ElderCare Corp.           100            100%

(1)  None  of  the  current directors or executive officers  of  the  Company
     beneficially own stock of the Company.
(2)  None  of the persons named in the Summary Compensation beneficially  own
     stock of the Company.

Item 13. Certain Relationships and Related Transactions.

In  connection  with  the  Merger,  Multicare  and  Genesis  entered  into  a
management  agreement (the "Management Agreement") pursuant to which  Genesis
manages the Company'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) $1,991,666 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 $23,900,000 in any given year.
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.  Genesis  also entered into an asset purchase  agreement  (the
"Therapy  Sale  Agreement") with Multicare and certain  of  its  subsidiaries
pursuant  to  which  Genesis acquired all of the assets used  in  Multicare's
outpatient  and  inpatient  rehabilitation therapy business  for  $24,000,000
subject  to  adjustment and a stock purchase agreement  (the  "Pharmacy  Sale
Agreement") with Multicare and certain subsidiaries pursuant to which Genesis
will  acquire  all  of the outstanding capital stock and limited  partnership
interest  of  certain  subsidiaries of Multicare  that  are  engaged  in  the
business  of  providing institutional pharmacy services to third parties  for
$50,000,000  (the  "Pharmacy  Sale"), subject  to  adjustment.   The  Company
expects to complete the Pharmacy Sale in the first calendar quarter of 1998.

In   connection  with  the  Merger,  Genesis  acquired  from  certain  former
stockholders  of the Company the land and buildings of an eldercare  facility
located  in  New London, Connecticut, for a purchase price of  $8.4  million.
The  Company's operating subsidiary that leases the facility pays annual rent
to Genesis of $725,000.

<PAGE> 45
Genesis  has  sponsored the formation of ElderTrust ("ETT"), a Maryland  real
estate  investment  trust.  Michael R. Walker, Chairman and  Chief  Executive
Officer of the Company and Genesis is Chairman of ETT.  In February 1998  ETT
made  term loans to the Company with respect to the lease-up of two  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).  The Company guaranteed 20% of the principal amount of these
term loans.

In  February 1998 ElderTrust ("ETT") made term loans to subsidiaries  of  the
Company with respect to the lease up of two 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).

In  February 1998 ETT also made one construction loan to a subsidiary of  the
Company  to fund construction of an assisted living facility being  developed
by the Company.  The note bears interest at a fixed annual rate of 10.5%, and
will mature on the third anniversary of the loan, 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 of such  third
anniversary (or at the end of any extension period, if applicable).

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

Employment Agreements

In  January 1995, the Company entered into an employment agreement with  each
of  Moshael J. Straus and Daniel E. Straus.  Each agreement provides  for  an
initial term of five years, which will extend automatically at the end of the
initial five year term for additional one year periods unless, not less  than
180  days  prior to the end of the initial term or any such additional  term,
notice of non-extension is given by either the Company or the respective  Co-
Chief  Executive Officer.  Each employment agreement provides for  an  annual
base  salary  at an initial rate of $600,000, which may be increased  at  the
discretion of the Board of Directors, and a bonus, to be determined  pursuant
to  the Company's Key Employee Incentive Compensation Plan ("KEICP"), ranging
from  70%-150% of base salary, based upon goals and targets set  forth  in  a
business  plan  negotiated with the Compensation Committee.   Each  of  these
employment  agreements provides that if the Company terminates  the  Co-Chief
Executive Officer without Cause (as defined) or fails to renew his employment
agreement,  or  if such Co-Chief Executive Officer terminates his  employment
agreement for Good Reason (as defined) or upon Change of Control (as defined)
then (1) the Company will be obliged to pay the respective Co-Chief Executive
Officer  the greater of (x) any remaining salary payable during the  term  or
(y)  an  amount  equal to two times the annual salary for  the  then  current
employment  year (or, with respect to Change of Control, three  times  annual
salary  plus an amount equal to the highest bonus received during  the  prior
three years); (2) all stock options, stock awards and similar

<PAGE> 46

equity  rights  will  immediately vest and become exercisable;  and  (3)  the
Company  must  maintain  in  effect the Co-Chief  Executive  Officer's  other
benefits  for a period equal to the greater of the remainder of the  term  or
two  years.  Each of the Co-Chief Executive Officers is also entitled (i)  to
life  insurance  benefits in an amount equal to five times his  then  current
salary  (to  a  maximum of $5 million); (ii) life insurance  benefits  in  an
amount  not  exceeding $50 million in connection with a buy-sell  arrangement
between the Co-Chief Executive Officers; and (iii) disability insurance in an
amount equal to 66.67% of his then current salary.

In  January  1995,  the  Company entered into an  employment  agreement  with
Stephen R. Baker.  The agreement provides for an initial term of three  years
which will be renewed automatically at the end of the initial three year term
for  additional one-year periods unless, not less than 180 days prior to  the
end of the initial term or any such additional term, notice of non-renewal is
given  either by the Company or the employee.  The agreement provides for  an
annual  base  salary  at an initial rate of $250,000 which  may  be  reviewed
annually by the Board of Directors, and a bonus to be determined pursuant  to
the  Company's KEICP, ranging from 30%-75% of base salary, based  upon  goals
and  targets set forth in a business plan prepared by the Co-Chief  Executive
Officers.  The agreement provides that if the Company terminates the employee
without Cause (as defined) or fails to renew his employment agreement, or  if
the employee terminates his employment agreement for Good Reason (as defined)
or  upon  Change of Control (as defined) then (1) the Company will be obliged
to pay him the greater of (x) any remaining salary payable during the term or
(y)  an  amount  equal to two times the annual salary for  the  then  current
employment  year (or, with respect to Change of Control, three  times  annual
salary  plus an amount equal to the highest bonus received during  the  prior
three  years); (2) all stock options, stock awards and similar equity  rights
will  immediately  vest  and become exercisable; and  (3)  the  Company  must
maintain  in effect the employee's other benefits for a period equal  to  the
longer of the remainder of the term or two years.  Mr. Baker is also entitled
to  life insurance benefits in an amount equal to four times his then current
salary  (to  a maximum of $2 million) and disability insurance in  an  amount
equal to 66.67% of his salary.

In  December 1996, in connection with the Company's acquisition  of  The  ADS
Group the Company entered into an employment agreement with Susan Bailis. The
agreement  provides for an initial term of three years which will be  renewed
automatically  at the end of the initial three year term for additional  one-
year  periods unless, not less than 180 days prior to the end of the  initial
term  or  any such additional term, notice of non-renewal is given either  by
the Company or the employee. The agreement provides for an annual base salary
at  an  initial  rate  of  $200,000 which may be reviewed  by  the  Board  of
Directors, and a bonus, to be determined pursuant to the Company's KEICP. The
agreement provides that if the Company terminates the employee without  Cause
(as  defined) or fails to renew his employment agreement, or if the  employee
terminates  her  employment agreement for Good Reason (as  defined)  or  upon
Change  of Control (as defined) then (1) the Company will be obliged  to  pay
her the greater of (x) any remaining salary payable during the term or (y) an
amount  equal to the annual salary for the then current employment year  (or,
with  respect to Change of Control, three times annual salary plus an  amount
equal  to the highest bonus received during the prior three years);  (2)  all
stock  options, stock awards and similar equity rights will immediately  vest
and  become  exercisable; and (3) the Company must  maintain  in  effect  the
employee's  other benefits for a period equal to the longer of the  remainder
of  the  term  or  two  years.   Ms. Bailis is also  entitled  to  disability
insurance in an amount of 66.67% of her salary.

In  December  1995, in connection with the Company's acquisition of  Glenmark
Associates,  Inc. the Company entered into a three year employment  agreement
with Mark R. Nesselroad. The agreement provides for an annual base salary  at
an  initial  rate  of $150,000 and a bonus to be determined pursuant  to  the
Company's  KEICP under which Mr. Nesselroad may earn a maximum  annual  bonus
equal to 35% of base salary.

<PAGE> 47
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a.) 1)Financial Statements
Independent Auditors' Report
Consolidated  Balance  Sheets as  of  December  31,  1996  and
 September 30, 1997
Consolidated  Statements of Operations  for  the  years  ended
 December 31, 1995 and 1996 and the nine months ended September
 30, 1996 (unaudited) and 1997
Consolidated Statements of Stockholders' Equity for the  years
 ended  December  31, 1995 and 1996 and the nine  months  ended
 September 30, 1997
Consolidated  Statements of Cash Flows  for  the  years  ended
 December 31, 1995 and 1996 and the nine months ended September
 30, 1996 (unaudited) and 1997
 Notes to Consolidated Financial Statements

2)Financial Statement Schedules
  Schedule II - Valuation and Qualifying Accounts for the years
  ended December 31, 1995 and 1996 and the nine months ended
           September 30, 1997

3)Exhibits
Exhibit
No.            Description
(1)2    Reorganization and Subscription Agreement, dated as of August 21,
        1992, among The Multicare Companies, Inc., Daniel E. Straus, Moshael J.
        Straus, Adina S. Rubin and Bethia S. Quintas
(2)3.1  Restated Certificate of Incorporation of The Multicare Companies, Inc.
   3.2  Certificate of Amendment of Restated Certificate of Incorporation of
        The Multicare Companies, Inc.
(2)3.3  By-laws of The Multicare Companies, Inc.
(1)4.1   Indenture for Senior Subordinated Notes
(5)4.2   Fiscal Agency Agreement for Subordinated Convertible Debentures
(1)10.1  Lease, dated July 29, 1986, between Jackson Health Care Associates and
         Health Resources of Jackson, Inc.
(2)10.2  Amended and Restated Amendment of Lease, dated as of November 18, 1992
         between Straus Associates and Health Resources of Colchester, Inc.
(2)10.3  Amended and Restated 1993 Stock Option Plan
(3)10.4  Amendments dated March 15 and April 4, 1994 to the Amended and
         Restated 1993 Stock Option Plan
(3)10.5  Non-Employee Directors' Stock Option Plan
(4)10.6  First Amendment Agreement dated as of October 19, 1995 among The
         Multicare Companies, Inc., Subsidiary Co-Borrowers, Subsidiary
         Guarantors, and The Chase Manhattan Bank, N.A.
(5)10.7  The Multicare Companies, Inc. Employee Stock Purchase Plan
(5)10.8  The Multicare Companies, Inc. Directors Retainer and Meeting Fee Plan
(5)10.9  The Multicare Companies, Inc. Key Employee Incentive Compensation Plan
(5)10.10 Amended and Restated Credit Agreement dated as of March 31, 1995
         among The Multicare Companies, Inc., Subsidiary Co-Borrowers,
         Subsidiary Guarantors and The Chase Manhattan Bank, N.A.
(5)10.11 Loan Agreement dated October 13, 1992 between Meditrust Mortgage
         Investments, Inc. and various Glenmark entities
(5)10.12 First Amendment to Loan Agreement dated as of November 30, 1995

<PAGE> 48
(5)10.13 Intercreditor Agreement dated December 1, 1995 between The Chase
         Manhattan Bank, N.A. , Meditrust Mortgage Investments, Inc. and
         Meditrust of West Virginia, Inc.
(5)10.14 Second Amendment to Loan Agreement entered into effective as of
         November 30, 1995
(5)10.15 Agreement and Plan of Merger Among HRWV, Inc., Glenmark Associates,
         Inc., Glenmark Holding Company Limited Partnership, Mark R. Nesselroad
         and Glenn T. Adrian
(5)10.16 Facility Lease Agreement dated as of November 30, 1995 between
         Meditrust of West Virginia, Inc. and Glenmark Limited Liability
         Company
(5)10.17 Second Amendment Agreement dated as of February 22, 1996 among The
         Multicare Companies, Inc. Subsidiary Co-Borrowers, Subsidiary
         Guarantors, the Banks Signatory hereto, and The Chase Manhattan Bank,
         N.A., as Agent
(6)10.18 Agreement and Plan of Merger, dated as of January 15, 1996, among
         The Multicare Companies, Inc., CHG Acquisition Corp., and Concord
         Health Group, Inc.
(7)10.19 Second Amended and Restated Credit Agreement, dated as of May 22,
         1996, among The Multicare Companies, Inc., the Subsidiary Co-
         Borrowers, the Subsidiary Guarantors, the Banks Signatory thereto and
         The Chase Manhattan Bank, N.A., as Agent
(7)10.20 Acquisition Agreement, dated as of June 17, 1996, by and among
         A.D.S/Multicare, Inc. and Alan D. Solomont, David Solomont, Ahron M.
         Solomont, Jay H. Solomont, David Solomont, Susan S. Bailis and the
         Seller Entities signatory thereto (the "A.D.S Acquisition Agreement")
(7)10.21 Amendment No. 1, dated August 12, 1996, to the A.D.S Acquisition
         Agreement.
(8)10.22 Amendment No. 2, dated as of September 25, 1996 to the A.D.S
         Acquisition Agreement.
(8)10.23 Amendment No. 3, dated as of October 29, 1996 to the A.D.S
         Acquisition Agreement.
(8)10.24 Amendment No. 4, dated as of December 11, 1996 to the A.D.S
         Acquisition Agreement.
(8)10.25 Third Amended and Restated Credit Agreement dated as of December
         11, 1996 among The Multicare Companies, Inc. and certain of its
         Subsidiaries, and NationsBank, N.A. as Administrative Agent.
(8)10.26 Master Lease, Open End Mortgage and Purchase Option dated as of
         December 11, 1996 among Academy Nursing Home, Inc., Nursing and
         Retirement Center of the Andovers, Inc., Prescott Nursing Home, Inc.,
         Willow Manor Nursing Home, Inc., and A.D.S/Multicare, Inc.
(8)10.27 Appendix A to Participation Agreement, Master Lease, Supplements,
         Loan Agreement, and Lease Facility Mortgages.
(8)10.28 Participation Agreement, dated as of December 11, 1996 among The
         Multicare Companies, Inc., as Guarantor, Various Subsidiaries of The
         Multicare Companies, Inc. as Lessees, Selco Service Corporation, as
         Lessor, Various Financial Institutions as Tranche B Lenders,
         Nationsbank, N.A., as Lease Agent for the Lenders, and Nationsbank,
         N.A., as Collateral Agent for the Secured Parties.
(9)10.29 The Multicare Companies, Inc. Non-qualified Stock Purchase Plan

<PAGE> 49

(9)10.30 Employment Agreement, dated as of January 1, 1995, between The
         Multicare Companies, Inc. and Daniel E. Straus
(9)10.31 Employment Agreement, dated as of January 1, 1995, between The
         Multicare Companies, Inc. and Moshael J. Straus
(9)10.32 Employment Agreement, dated as of January 1, 1995, between The
         Multicare Companies, Inc. and Stephen R. Baker
(9)10.33 Employment Agreement, dated as of January 1, 1995, between The
         Multicare Companies, Inc. and Paul J. Klausner
(9)10.34 Employment Agreement, dated as of January 1, 1995, between Care 4,
         L.P., and Andrew Horowitz
(9)10.35 Employment Agreement, dated as of December 1, 1995, between
         Glenmark Associates, Inc. and Mark R. Nesselroad
(9)10.36 Amendment, dated July 19, 1996, to Agreement and Plan of Merger
         among HRWV, Inc., Glenmark Associates, Inc., Glenmark Holding Company
         Limited Partnership, Mark R. Nesselroad and Glenn T. Adrian
(10)10.37 Agreement and Plan of Merger dated June 16, 1997 by and among
          Genesis ElderCare Corp., Genesis ElderCare Acquisition Corp., Genesis
          Health Ventures, Inc. and The Multicare Companies, Inc.
(11)10.38 Third Amended and Restated Credit Agreement dated October 9, 1997 to
          Genesis Health Ventures, Inc. from Mellon Bank, N.A., Citicorp USA,
          Inc., First Union National Bank and NationsBank, N.A.
(12)10.39 Credit Agreement dated October 14, 1997 to The Multicare Companies,
          Inc. from Mellon Bank, N.A., Citicorp USA, Inc., First Union National
          Bank and NationsBank, N.A.
(12)10.40 Management Agreement dated October 9, 1997 among The Multicare
          Companies, Inc., Genesis Health Ventures, Inc. and Genesis ElderCare
          Network Services, Inc.
(11)10.41 Stockholders' Agreement dated October 9, 1997 among Genesis
          ElderCare Corp., The Cypress Group L.L.C., TPG Partners II, L.P.,
          Nazem, Inc. and Genesis Health Ventures, Inc.
(11)10.42 Put/Call Agreement dated October 9, 1997 among The Cypress Group
          L.L.C., TPG Partners II, L.P., Nazem, Inc. and Genesis Health
          Ventures, Inc.
(12)10.43 Stock Purchase Agreement dated October 10, 1997 among Genesis Health
          Ventures, Inc., The Multicare Companies, Inc., Concord Health Group,
          Inc., Horizon Associates, Inc., Horizon Medical Equipment and Supply,
          Inc., Institutional Health Care Services, Inc., Care4, L.P., Concord
          Pharmacy Services, Inc., Compass Health Services, Inc. and Encare of
          Massachusetts, Inc.
(12)10.44 Asset Purchase Agreement dated October 10, 1997 among Genesis Health
          Ventures, Inc., The Multicare Companies, Inc., Health Care Rehab
          Systems, Inc., Horizon Rehabilitation, Inc., Progressive
          Rehabilitation Centers, Inc. and Total Rehabilitation Center, L.L.C.
(10)10.45 Letter Agreement dated June 16, 1997 between Genesis Health
          Ventures, Inc. and Straus Associates.
    11    Statement re: Computation of Earnings Per Share
(9) 13    1996 Annual Report to stockholders
    21    Subsidiaries of the Registrant
    27    Financial Data Schedule

(1) Incorporated by reference from Registration Statement No. 33-51176 on
    Form S-1 effective November 18, 1992.
(2) Incorporated by reference from Registration Statement No. 33-65444 on
    Form S-1 effective August 18, 1993.
(3) Incorporated by reference from Registration Statement No. 33-79298
    effective June 22, 1994.
(4) Incorporated by reference from Quarterly Report on Form 10-Q for the
    quarterly period ended September 30, 1995.
(5) Incorporated by reference from Annual Report on Form 10-K for the year
    ended December 31, 1995.
(6) Incorporated by reference from the Tender Offer Statement on Schedule 14D-
    1 of CHG Acquisition Corp., and The Multicare Companies, Inc., dated 
    January 22, 1996.
(7) Incorporated by Reference from Registration Statement No. 333-12819 on
    Form S-3 effective October 24, 1996.
(8) Incorporated by reference from Current Report on Form 8-K, dated December
    26, 1996.

<PAGE> 50

(9) Incorporated by reference from Annual Report on Form 10-K for the year
    ended December 31, 1996.
(10) Incorporated by reference to the Tender Offer on Schedule 14D-1 filed by
     Genesis ElderCare Acquisition Corp. on June 20, 1997.
(11) Incorporated by reference to Amendment No.7 to the Tender Offer
     Statement on Schedule 14D-1 filed by Genesis ElderCare Corp. and Genesis
     ElderCare Acquisition Corp. on June 20,1997.
(12) Incorporated by reference to Genesis Health Ventures, Inc.'s Current
     Report on Form 8-K dated October 9, 1997.

<PAGE>  51

                        Independent Auditors' Report


The Board of Directors
The Multicare Companies, Inc.:


Under  date  of  February  4, 1998, we reported on the  consolidated  balance
sheets  of The Multicare Companies, Inc. and subsidiaries as of December  31,
1996  and  September  30,  1997, and the related consolidated  statements  of
operations, stockholders' equity, and cash flows each of the years in the two-
year period ended December 31, 1996 and the nine month period ended September
30,  1997 as contained in the annual report on Form 10-K.  In connection with
our  audits of the aforementioned consolidated financial statements, we  also
have  audited the related financial statement schedule in the Form 10-K. This
financial   statement  schedule  is  the  responsibility  of  the   Company's
management.   Our responsibility is to express an opinion on  this  financial
statement schedule based on our audits.

In  our  opinion,  such  financial statement  schedule,  when  considered  in
relation  to  the basic consolidated financial statements taken as  a  whole,
presents fairly, in all material respects, the information set forth therein.



KPMG Peat Marwick LLP


Philadelphia, Pennsylvania
February 4, 1998
<PAGE>


                                                                  SCHEDULE II

<TABLE>


                        THE MULTICARE COMPANIES, INC.
                              AND SUBSIDIARIES
 .
                      Valuation and Qualifying Accounts

                   Years ended December 31, 1995 and 1996
             and the nine month period ended September 30, 1997

                               (In thousands)


<CAPTION>
                          Balance     Charged    Charged               Balance
                          at          to         to                    at end
Classifications           beginning   costs      other                 of
                          of period   expenses   accounts  Deductions  period
                                                 (1)       (2)
<S>                       <C>          <C>       <C>         <C>       <C>
Year ended September
30, 1997:
Allowance for doubtful
accounts                  $11,531      3,521       125       4,108     11,069

Year ended December 31,
1996:
Allowance for doubtful
accounts                  $ 5,241      4,760     2,502         972     11,531

Year ended December 31,
1995:
Allowance for doubtful
accounts                  $ 2,726      3,483       ---         968      5,241
</TABLE>


(1) Represents amounts related to acquisitions
(2) Represents amounts written-off as uncollectible.

<PAGE>
Pursuant  to  the  requirements of Section 13  or  15(d)  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.

                By:           MICHAEL R. WALKER           .
                           Chairman and Chief Executive Officer
February 10, 1998

   Pursuant to the requirements of the Securities Exchange Act of 1934,  this
report  has  been  signed below by the following persons  on  behalf  of  the
Registrant and in the capacities and on the dates indicated.

      Signature               Title                 Date

                           Chairman of the
                           Board,
                           Chief Executive
/S/          MICHAEL       Officer               February 10, 1998
             R. WALKER     and Director
                           (Principal
                           Executive
                           Officer)
Michael R. Walker

                           Senior Vice
                           President,
/S/          GEORGE V.     Chief Financial       February 10, 1998
             HAGER, JR.    Officer
                           (Principal
                           Accounting
                           Officer)
George V. Hager, Jr.

                           Vice President,
                           Assistant
/S/          JAMES L.      Secretary and         February 10, 1998
             SINGLETON     Director
James L. Singleton

                           Vice President,
                           Assistant
/S/           JAMES        Secretary and         February 10, 1998
              G. COULTER   Director
James G. Coulter


/S/           JONATHAN     Director              February 10, 1998
              J. COSLET
Jonathan J. Coslet


/S/           RICHAR       Director               February 10, 1998
              R. HOWARD
Richard. R. Howard


/S/           KARL I.      Director               February 10, 1998
              PETERSON
Karl J. Peterson


/S/           WILLIAM      Director               February 10, 1998
              L. SPIEGEL
William L. Spiegel


/S/           JAMES        Director               February 10, 1998
              A. STERN
James A. Stern

                                                                   EXHIBIT 21


                                   Jurisdiction of
Percentage of
Subsidiaries of The Multicare Companies, Inc.  Incorporation  Ownership

Academy Nursing Home, Inc.                          MA        100%
ADS Apple Valley Limited Partnership                MA        100%
ADS Apple Valley, Inc.                              MA        100%
ADS Consulting, Inc.                                MA        100%
ADS Danvers ALF, Inc.                               DE        100%
ADS Dartmouth ALF, Inc.                             DE        100%
ADS Dartmouth General Partnership                   MA        100%
ADS Hingham ALF, Inc.                               DE        100%
ADS Hingham Nursing Facility Limited Partnership    MA        100%
ADS Hingham Nursing Facility, Inc.                  MA        100%
ADS Home Health, Inc.                               DE        100%
ADS Management, Inc.                                MA        100%
ADS Palm Chelmsford, Inc.                           MA         49%
ADS Recuperative Center Limited Partnership         MA        100%
ADS Recuperative Center, Inc.                       MA        100%
ADS Reservoir Waltham, Inc.                         MA         49%
ADS Senior Housing, Inc.                            MA        100%
ADS Village Manor, Inc.                             MA        100%
ADS/Multicare, Inc.                                 DE        100%
ANR, Inc.                                           DE        100%
Applewood Health Resources, Inc.                    DE        100%
Assisted Living Associates of Wall, Inc.            NJ        100%
Automated Professional Accounts, Inc.               WV        100%
Berkeley Haven Limited Partnership                  WV         50%
Berks Nursing Homes, Inc.                           PA        100%
Bethel Health Resources, Inc.                       DE        100%
Breyut Convalescent Center, Inc.                    NJ        100%
Breyut Convalescent Center, L.L.C.                  NJ        100%
Brightwood Property, Inc.                           WV        100%
Canterbury of Sheperdstown Limited Partnership      WV         50%
Care Haven Associates                               NJ        100%
Care Haven Associates Limited Partnership           WV      68.69%
Care4, L.P.                                         DE        100%
Century Care Construction, Inc.                     NJ        100%
Century Care Management, Inc.                       DE        100%
Charlton Nursing Care Center                        MA         20%
Chateau Village Health Resources, Inc.              DE        100%
CHG Investment Corp., Inc.                          DE        100%
CHNR-1, Inc.                                        DE        100%
Colonial Hall Health Resources, Inc.                DE        100%
Colonial House Health Resources, Inc.               DE        100%
Compass Health Services, Inc.                       WV        100%
Concord Companion Care, Inc.                        PA        100%
Concord Health Group, Inc.                          DE        100%
Concord Healthcare Services, Inc.                   PA        100%
Concord Home Health, Inc.                           PA        100%
Concord Pharmacy Services, Inc.                     PA        100%
Concord Rehab, Inc.                                 PA        100%
Concord Service Corporation                         PA        100%
Courtyard Nursing Care Center Partnership           MA      33.33%
Cumberland Associates of Rhode Island, L.P.         DE        100%
CVNR, Inc.                                          DE        100%
Dawn View Manor, Inc.                               WV        100%
Delm Nursing, Inc.                                  PA        100%
Elmwood Health Resources, Inc.                      DE        100%
Encare of Massachusetts, Inc.                       DE        100%
Encare of Mendham, Inc.                             NJ        100%
Encare of Mendham, L.L.C.                           NJ        100%
Encare of Pennsylvania, Inc.                        PA        100%
Encare of Pennypack, Inc.                           PA        100%
Encare of Quakertown, Inc.                          PA        100%
Encare of Wyncote, Inc.                             PA        100%
ENR, Inc.                                           DE        100%
Glenmark Associates - Dawnview Manor, Inc.          WV        100%
Glenmark Associates, Inc.                           WV        100%
Glenmark Limited Liability Company I                WV        100%
Glenmark Properties I, Limited Partnership          WV        100%
Glenmark Properties, Inc.                           WV        100%
GMA - Brightwood, Inc.                              WV        100%
GMA - Madison, Inc.                                 WV        100%
GMA - Uniontown, Inc.                               PA        100%
GMA Construction, Inc.                              WV        100%
GMA Partnership Holding Company, Inc.               WV        100%
Groton Associates of Connecticut, L.P.              DE        100%
Health Resources of Academy Manor, Inc.             DE        100%
Health Resources of Arcadia, Inc.                   DE        100%
Health Resources of Boardman, Inc.                  DE        100%
Health Resources of Bridgeton, Inc.                 NJ        100%
Health Resources of Bridgeton, L.L.C.               NJ        100%
Health Resources of Brooklyn, Inc.                  DE        100%
Health Resources of Cedar Grove, Inc.               NJ        100%
Health Resources of Cinnaminson, Inc.               NJ        100%
Health Resources of Cinnaminson, L.L.C.             NJ        100%
Health Resources of Colchester, Inc.                CT        100%
Health Resources of Columbus, Inc.                  DE        100%
Health Resources of Cranbury, Inc.                  NJ        100%
Health Resources of Cranbury, L.L.C.                NJ        100%
Health Resources of Cumberland, Inc.                DE        100%
Health Resources of Eatontown, Inc.                 NJ        100%
Health Resources of Emery, Inc.                     DE        100%
Health Resources of Emery, L.L.C.                   NJ        100%
Health Resources of Englewood, Inc.                 NJ        100%
Health Resources of Englewood, L.L.C.               NJ        100%
Health Resources of Ewing, Inc.                     NJ        100%
Health Resources of Ewing, L.L.C.                   NJ        100%
Health Resources of Fair Lawn, Inc.                 DE        100%
Health Resources of Fair Lawn, L.L.C.               NJ        100%
Health Resources of Farmington, Inc.                DE        100%
Health Resources of Gardner, Inc.                   DE        100%
Health Resources of Glastonbury, Inc.               CT        100%
Health Resources of Groton, Inc.                    DE        100%
Health Resources of Jackson, Inc.                   NJ        100%
Health Resources of Jackson, L.L.C.                 NJ        100%
Health Resources of Karmenta and Madison, Inc.      DE        100%
Health Resources of Lakeview, Inc.                  NJ        100%
Health Resources of Lakeview, L.L.C.                NJ        100%
Health Resources of Lemont, Inc.                    DE        100%
Health Resources of Lynn, Inc.                      NJ        100%
Health Resources of Marcella, Inc.                  DE        100%
Health Resources of Middletown (R.I.), Inc.         DE        100%
Health Resources of Montclair, Inc.                 NJ        100%
Health Resources of Morristown, Inc.                NJ        100%
Health Resources of Norfolk, Inc.                   DE        100%
Health Resources of North Andover, Inc.             DE        100%
Health Resources of Norwalk, Inc.                   CT        100%
Health Resources of Pennington, Inc.                NJ        100%
Health Resources of Ridgewood, Inc.                 NJ        100%
Health Resources of Ridgewood, L.L.C.               NJ        100%
Health Resources of Rockville, Inc.                 DE        100%
Health Resources of Solomont/Brookline, Inc.        DE        100%
Health Resources of South Brunswick, Inc.           NJ        100%
Health Resources of Tazewell, Inc.                  DE        100%
Health Resources of Troy Hills, Inc.                NJ        100%
Health Resources of Voorhees, Inc.                  NJ        100%
Health Resources of Wallingford, Inc.               DE        100%
Health Resources of Warwick, Inc.                   DE        100%
Health Resources of West Orange, L.L.C.             NJ        100%
Health Resources of Westwood, Inc.                  DE        100%
Healthcare Rehab Systems, Inc.                      PA        100%
Helstat, Inc.                                       WV        100%
Hingham Healthcare Limited Partnership              MA         50%
HMNH Realty, Inc.                                   DE        100%
HNCA, Inc.                                          PA        100%
Holly Manor Associates of New Jersey, L.P.          DE        100%
Horizon Associates, Inc.                            WV        100%
Horizon Medical Equipment and Supply, Inc.          WV        100%
Horizon Mobile, Inc.                                WV        100%
Horizon Rehabilitation, Inc.                        WV        100%
HR of Charleston, Inc.                              WV        100%
HRWV Huntington, Inc.                               WV        100%
Institutional Health Care Services, Inc.            NJ        100%
Lakewood Health Resources, Inc.                     DE        100%
Laurel Health Resources, Inc.                       DE        100%
Lehigh Nursing Homes, Inc.                          PA        100%
LRC Holding Company, Inc.                           DE        100%
LWNR, Inc.                                          DE        100%
Mabri Convalescent Center, Inc.                     CT        100%
Markglen, Inc.                                      WV        100%
Marlington Associates Limited Partnership           WV        44.06%
Marpe Development Company, Inc.                     CT        100%
Marshfield Health Resources, Inc.                   DE        100%
Mercerville Associates of New Jersey, L.P.          DE        100%
Merry Heart Health Resources, Inc.                  DE        100%
MHNR, Inc.                                          DE        100%
Middletown (RI) Associates of Rhode Island, L.P.    DE        100%
Montgomery Nursing Homes, Inc.                      PA        100%
Multicare AMC, Inc.                                 DE        100%
Multicare Home Health of Illinois, Inc.             DE        100%
Multicare Management, Inc.                          NY        100%
Multicare Member Holding Corp.                      NJ        100%
Multicare Payroll Corp.                             NJ        100%
National Pharmacy Service, Inc.                     PA        100%
Northwestern Management Services, Inc.              OH        100%
Nursing and Retirement Center of the Andovers, Inc. MA        100%
PHC Operating Corp.                                 DE        100%
Pocahontas Continuous Care Center, Inc.             WV        100%
Point Pleasant Haven Limited Partnership            WV        100%
Pompton Associates, L.P.                            NJ        100%
Pompton Care, Inc.                                  NJ        100%
Pompton Care, L.L.C.                                NJ        100%
Prescott Nursing Home, Inc.                         MA        100%
Progressive Rehabilitation Centers, Inc.            DE        100%
Providence Funding Corporation                      DE        100%
Providence Health Care, Inc.                        DE        100%
Providence Medical, Inc.                            DE        100%
Raleigh Manor Limited Partnership                   WV        100%
Rest Haven Nursing Home, Inc.                       WV        100%
Ridgeland Health Resources, Inc.                    DE        100%
River Pines Health Resources, Inc.                  DE        100%
Rivershores Health Resources, Inc.                  DE        100%
RLNR, Inc.                                          DE        100%
Roephel Convalescent Center, Inc.                   NJ        100%
Roephel Convalescent Center, L.L.C.                 NJ        100%
Romney Health Care Center Limited Partnership       WV        100%
Rose Healthcare, Inc.                               NJ        100%
Rose View Manor, Inc.                               PA        100%
Roxborough Nursing Homes, Inc.                      PA        100%
RSNR, Inc.                                          DE        100%
RVNR, Inc.                                          DE        100%
S.T.B. Investors, LTD.                              NY        100%
Schuylkill Nursing Homes, Inc.                      PA        100%
Schuylkill Partnership Acquisition Corp.            PA        100%
Scotchwood Institutional Services, Inc.             NJ        100%
Scotchwood Massachusetts Holding Company, Inc.      DE        100%
Senior Living Ventures, Inc.                        PA        100%
Senior Source, Inc.                                 MA        100%
Sisterville Haven Limited Partnership               WV        100%
Snow Valley Health Resources, Inc.                  DE        100%
Solomont Family Fall River Venture, Inc.            MA        100%
Solomont Family Medford Venture, Inc.               MA        100%
Stafford Convalescent Center, Inc.                  DE        100%
SVNR, Inc.                                          DE        100%
Teays Valley Haven Limited Partnership              WV        100%
The ADS Group, Inc.                                 MA        100%
The Apple Valley Center Limited Partnership         MA         50%
The House of Campbell, Inc.                         WV        100%
The Multicare Companies, Inc.                       DE        100%
The Recuperative Center Limited Partnership         MA        47.55%
The Straus Group - Hopkins House, L.P.              NJ        100%
The Straus Group - Old Bridge, L.P.                 NJ        100%
The Straus Group - Quakertown Manor, L.P.           NJ        100%
The Straus Group - Ridgewood, L.P.                  NJ        100%
TMC Acquisition Corp.                               NJ        100%
Total Rehabilitation Center, Inc.                   DE        100%
Total Rehabilitation Center, L.L.C.                 NJ        100%
Tri State Mobile Medical Services, Inc.             WV        100%
Wallingford Associates of Connecticut, L.P.         DE        100%
Warwick Associates of Rhode Island, L.P.            DE        100%
Westford Nursing and Retirement Center, Inc.        MA        100%
Westford Nursing and Retirement Center Limited
Partnership                                         MA        100%
Willow Manor Nursing Home, Inc.                     MA        100%