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

                                 AMENDMENT NO. 1
                                       ON
                                   FORM 10-K/A

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

Commission file number 0-19294
                                   RehabCare Group, Inc.
                   (Exact name of Registrant as specified in its charter)

            Delaware                               51-0265872
(State or other jurisdiction of        (I.R.S. Employer Identification No.)
 incorporation or organization)

          7733 Forsyth Boulevard, 17th Floor, St. Louis, Missouri 63105
             (Address of principal executive offices and zip code)

Registrant's telephone number, including area code: (314) 863-7422

Securities  registered pursuant to         Name of exchange on which registered:
Section 12(b) of the Act:                  New York Stock Exchange
Common Stock, par value $.01 per share     New York Stock Exchange
Preferred Stock Purchase Rights

     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. ( )

     Indicate by check mark whether the Registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).              Yes X    No

     The  aggregate  market  value of voting  stock  held by  non-affiliates  of
Registrant at June 30, 2002 was $414,189,202.  At March 10, 2003, the Registrant
had 15,852,080 shares of Common Stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Part II of this  Annual  Report  on Form  10-K  incorporates  by  reference
information  contained in the Registrant's Annual Report to Stockholders for the
fiscal year ended December 31, 2002.

     Part III of this  Annual  Report on Form  10-K  incorporates  by  reference
information  contained in the  Registrant's  definitive  Proxy Statement for its
Annual Meeting of Stockholders to be held on April 30, 2003.

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                                       1
<PAGE>
                                EXPLANATORY NOTE

This Amendment No. 1 to Annual Report on Form 10-K/A for the year ended December
31, 2002 is being filed by the  Registrant  solely for the purpose of correcting
one  inadvertent   typographical   error  in  the  Consolidated   Statements  of
Stockholders'  Equity  for the years  ended  December  31,  2002,  2001 and 2000
included  in  "Item  8A.  Financial  Statements  and  Supplementary  Data."  The
correction  changes the number under the Treasury Shares column in the line item
"Balance,  December  31,  2002"  from  14,003 to  4,003.  The  remainder  of the
information  in the  Registrant's  financial  statements  and the related  notes
thereto included in Item 8A remains unchanged.

<PAGE>

ITEM 8A. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Independent Auditors' Report                                      33

Consolidated Balance Sheets as of  December 31, 2002 and 2001     34

Consolidated Statements of Earnings for the years
      ended December 31, 2002, 2001 and 2000                      35

Consolidated Statements of Stockholders' Equity for the years
      ended December 31, 2002, 2001 and 2000                      36

Consolidated Statements of Cash Flows for the years
      ended December 31, 2002, 2001 and 2000                      37

Consolidated Statements of Comprehensive Earnings for the years
      ended December 31, 2002, 2001 and 2000                      38

Notes to the Consolidated Financial Statements                    39

                                       32
<PAGE>

                          Independent Auditors' Report


The Board of Directors
RehabCare Group, Inc.:

     We have audited the accompanying  consolidated  balance sheets of RehabCare
Group,  Inc. and subsidiaries  (the "Company") as of December 31, 2002 and 2001,
and the related consolidated statements of earnings,  stockholders' equity, cash
flows and comprehensive  earnings for each of the years in the three-year period
ended  December  31,  2002.  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  auditing  standards  generally
accepted in the United States of America.  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 RehabCare
Group,  Inc. and  subsidiaries as of December 31, 2002 and 2001, and the results
of their operations and their cash flows for each of the years in the three-year
period  ended  December  31,  2002  in  conformity  with  accounting  principles
generally accepted in the United States of America.

     As discussed in note 5 to the consolidated financial statements,  effective
January 1, 2002 the Company adopted Statement of Financial  Accounting Standards
No. 142 "Goodwill and Other Intangible Assets."

/s/ KPMG LLP


St. Louis, Missouri
February 1, 2003


                                       33
<PAGE>

                              REHABCARE GROUP, INC.
                           Consolidated Balance Sheets
                  (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                              December 31,
                                                            ----------------
                                                            2002        2001
                                                            ----        ----
                                Assets
                                ------
<S>                                                      <C>         <C>
Current assets:
    Cash and cash equivalents                            $  9,580    $ 18,534
    Marketable securities, available-for-sale                   4       1,025
    Accounts receivable, net of allowance for doubtful
       accounts of $5,181 and $5,902 respectively          87,221      91,634
    Income taxes receivable                                 2,497       2,055
    Deferred tax assets                                     2,529       7,658
    Other current assets                                    3,625       2,140
                                                          -------     -------
       Total current assets                               105,456     123,046
Marketable securities, trading                              4,252       2,870
Equipment and leasehold improvements, net                  19,844      18,373
Goodwill, net                                             101,685     101,685
Other                                                       4,293       4,687
                                                          -------     -------
       Total assets                                      $235,530    $250,661
                                                         ========    ========
</TABLE>
<TABLE>
<CAPTION>
                 Liabilities and Stockholders' Equity
                 ------------------------------------
<S>                                                      <C>         <C>
Current liabilities:
    Accounts payable                                     $  1,959    $  3,567
    Accrued salaries and wages                             28,579      27,141
    Accrued expenses                                        7,072      14,814
                                                           ------      ------
       Total current liabilities                           37,610      45,522
Deferred compensation                                       4,266       3,043
Deferred tax liabilities                                    5,040       3,060
                                                           ------      ------
       Total liabilities                                   46,916      51,625
                                                           ------      ------

Stockholders' equity:
    Preferred stock, $.10 par value; authorized
       10,000,000 shares, none issued and outstanding          --          --
    Common stock, $.01 par value; authorized
       60,000,000 shares, issued 19,846,416 shares
       and 19,631,789 shares as of December 31,
       2002 and 2001, respectively                            198         196
    Additional paid-in capital                            111,671     109,522
    Retained earnings                                     131,452     107,057
    Less common stock held in treasury at cost,
       4,002,898 shares and 2,302,898 shares as of
       December 31, 2002 and 2001, respectively           (54,704)    (17,757)
    Accumulated other comprehensive earnings                   (3)         18
                                                           -------    -------
       Total stockholders' equity                          188,614    199,036
                                                           -------    -------
                                                          $235,530   $250,661
                                                          ========   ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       34
<PAGE>
                              REHABCARE GROUP, INC.
                       Consolidated Statements of Earnings
                      (in thousands, except per share data)
<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                  2002        2001        2000
                                                  ----        ----        ----
<S>                                            <C>         <C>         <C>
Operating revenues                             $562,565    $542,265    $452,374
Costs and expenses:
    Operating                                   413,081     394,651     321,192
    General and administrative                  101,453     101,085      80,120
    Depreciation and amortization                 8,334       9,562       6,873
                                                -------     -------     -------
        Total costs and expenses                522,868     505,298     408,185
                                                -------     -------     -------
        Operating earnings                       39,697      36,967      44,189
Interest income                                     319         385         232
Interest expense                                   (676)     (1,859)     (5,348)
Other income (expense), net                           9        (542)         24
                                                -------     -------     -------
        Earnings before income taxes             39,349      34,951      39,097
Income taxes                                     14,954      13,916      15,563
                                                -------     -------     -------
        Net earnings                            $24,395     $21,035     $23,534
                                                =======     =======     =======
Net earnings per common share:
    Basic                                      $   1.45    $   1.25    $   1.62
                                                =======     =======     =======
    Diluted                                    $   1.38    $   1.16    $   1.45
                                                =======     =======     =======
</TABLE>

See accompanying notes to consolidated financial statements.

                                       35
<PAGE>

                              REHABCARE GROUP, INC.
                 Consolidated Statements of Stockholders' Equity
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                Accumu-
                                                                lated
                Common Stock   Addi-                            other    Total
                ------------   tional               Treasury    compre-  stock
                Issued         paid-in Retained  -------------- hensive holder's
                shares Amount  capital earnings  Shares  Amount earnings equity
                ------ ------  ------- --------  ------  ------ -------- -------
<S>             <C>     <C>    <C>      <C>      <C>   <C>       <C>    <C>
Balance,
  December 31,
  1999          15,700  $157   $33,101  $62,488  2,331 $(17,975) $ 12   $77,783

Net earnings        --    --        --   23,534     --       --    --    23,534

Conversion
  of debt          847     8     5,992       --     --       --    --     6,000

Exercise of
  stock options
  (including
  tax benefit)     862     9    10,410       --    (28)     218    --    10,637

Change in
  unrealized gain
  on marketable
  securities,
  net of tax        --    --        --       --     --       --     6         6
                ------  ----  -------- -------- ------ --------   ---  --------

Balance,
  December 31,
  2000          17,409   174    49,503   86,022  2,303  (17,757)   18   117,960

Net earnings        --    --        --   21,035     --       --    --    21,035
Issuance of
  common stock
  in connection
  with secondary
  offering       1,455    14    49,429       --     --       --    --    49,443

Exercise of
  stock options
  (including
  tax benefit)     767     8    10,590       --     --       --    --    10,598
                ------  ----  -------- -------- ------ --------   ---  --------

Balance,
  December 31,
  2001          19,631   196   109,522  107,057  2,303  (17,757)   18   199,036

Net earnings        --    --        --   24,395     --       --    --    24,395

Purchase of
  treasury stock    --    --        --       --  1,700  (36,947)   --   (36,947)

Exercise of
  stock options
  (including
  tax benefit)     215     2     2,149       --     --       --    --     2,151

Change in
  unrealized loss
  on marketable
  securities,
  net of tax        --    --        --       --     --       --   (21)      (21)
                ------  ----  -------- -------- ------ --------   ---  --------
Balance,
  December 31,
  2002          19,846  $198  $111,671 $131,452  4,003 $(54,704)  $(3) $188,614
                ======  ====  ======== ======== ====== ========   ===  ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       36
<PAGE>

                              REHABCARE GROUP, INC.
                      Consolidated Statements of Cash Flows
                                 (in thousands)
<TABLE>
<CAPTION>
                                                      Year Ended December 31,
                                                      -----------------------
                                                      2002     2001     2000
                                                      ----     ----     ----
<S>                                                 <C>      <C>      <C>
 Cash flows from operating activities:
   Net earnings                                     $24,395  $21,035  $23,534
   Adjustments to reconcile net earnings to net
     cash provided by operating activities:
      Depreciation and amortization                   8,334    9,562    6,873
      Provision for doubtful accounts                 4,511    4,594    3,466
      Write-down of investments                          --      500       --
      Income tax benefit realized on exercise
         of employee stock options                      770    6,386    5,505
      Change in assets and liabilities:
         Deferred compensation                          407      364      178
         Accounts receivable, net                       (98) (12,195) (20,249)
         Prepaid expenses and other current assets   (1,485)    (982)     (70)
         Other assets                                   464     (235)    (955)
         Accounts payable and accrued expenses       (9,350)   5,579   (3,458)
         Accrued salaries and wages                   1,438    2,295    7,511
         Income taxes                                 6,667     (613)  (6,197)
                                                    -------  -------  -------
               Net cash provided by operating
                activities                           36,053   36,290   16,138
                                                    -------  -------  -------
 Cash flows from investing activities:
   Additions to equipment and leasehold
     improvements, net                               (8,546) (10,613)  (7,899)
   Purchase of marketable securities                   (596)    (922)    (778)
   Proceeds from sale/maturities of
     marketable securities                            1,030    2,435      166
   Cash paid in acquisition of businesses,
     net of cash received                                --       --   (8,949)
   Other, net                                        (1,329)  (1,951)  (1,513)
                                                    -------  -------  -------
               Net cash used in investing
                activities                           (9,441) (11,051) (18,973)
                                                    -------  -------  -------

 Cash flows from financing activities:
   Proceeds from (repayments on) revolving
     credit facility, net                                --  (63,800)  51,800
   Repayments on long-term debt                          --   (4,502) (47,893)
   Proceeds from issuance of notes payable               --       --    1,000
   Purchase of treasury stock                       (36,947)      --       --
   Proceeds from sale of common stock, net               --   49,443       --
   Exercise of stock options                          1,381    4,212    5,132
                                                    -------  -------  -------
               Net cash provided by (used in)
                 financing activities               (35,566) (14,647)  10,039
                                                    -------  -------  -------
               Net increase (decrease) in
                 cash and cash equivalents           (8,954)  10,592    7,204
 Cash and cash equivalents at beginning of year      18,534    7,942      738
                                                    -------  -------  -------
 Cash and cash equivalents at end of year           $ 9,580  $18,534  $ 7,942
                                                    =======  =======  =======

</TABLE>

 See accompanying notes to consolidated financial statements.

                                       37
<PAGE>
                              REHABCARE GROUP, INC.
                Consolidated Statements of Comprehensive Earnings
                                 (in thousands)
<TABLE>
<CAPTION>
                                                      Year Ended December 31,
                                                      -----------------------
                                                      2002     2001     2000
                                                      ----     ----     ----

<S>                                                 <C>      <C>      <C>
 Net earnings                                       $24,395  $21,035  $23,534

 Other comprehensive earnings, net of tax -

      Unrealized holding gains (losses) arising
         during period                                  (21)      --        6
                                                    -------  -------  -------
 Comprehensive earnings                             $24,374  $21,035  $23,540
                                                    =======  =======  =======

</TABLE>

 See accompanying notes to consolidated financial statements.

                                       38
<PAGE>

                              REHABCARE GROUP, INC.
                   Notes to Consolidated Financial Statements
                        December 31, 2002, 2001 and 2000


(1)  Overview of Company and Summary of Significant Accounting Policies

     Overview of Company

     RehabCare  Group,  Inc. (the  Company) is a leading  provider of healthcare
staffing and program management services of inpatient rehabilitation and skilled
nursing units,  outpatient  therapy  programs and contract  therapy  services in
conjunction with over 7,000 hospitals and skilled nursing facilities  throughout
the United States.

     Principles of Consolidation

     The consolidated  financial  statements include the accounts of the Company
and its wholly owned subsidiaries.  All significant  inter-company  balances and
transactions have been eliminated in consolidation.

     Common Stock Split

     During May 2000,  the Company's  Board of Directors  approved a two-for-one
split of the Company's  common stock in the form of a stock dividend,  which was
distributed  on June 19,  2000,  to  stockholders  of record as of May 31, 2000.
Share  and per  share  amounts  in the  consolidated  financial  statements  and
accompanying notes have been restated to reflect the split.

     Cash Equivalents and Marketable Securities

     Cash in excess of daily requirements is invested in short-term  investments
with original maturities of three months or less. Such investments are deemed to
be cash equivalents for purposes of the consolidated statements of cash flows.

     The Company  classifies  its debt and equity  securities  into one of three
categories:   held-to-maturity,   trading,  or  available-for-sale.   Management
determines  the  appropriate  classification  of its  investments at the time of
purchase  and  reevaluates  such  determination  at  each  balance  sheet  date.
Investments  at  December  31,  2002  and  2001  consist  of  marketable  equity
securities.  All marketable securities included in current assets are classified
as  available-for-sale  and as such, the difference between cost and market, net
of taxes, is recorded as other accumulated  comprehensive  earnings.  Unrealized
gains or  losses  on such  securities  are not  recognized  in the  consolidated
statements of earnings until the securities are sold. All marketable  securities
in  non-current  assets are classified as trading,  with all investment  income,
including  unrealized gains or losses recognized in the consolidated  statements
of earnings.

     Credit Risk

     The Company  provides  services to a  geographically  diverse  clientele of
healthcare  providers throughout the United States. The Company performs ongoing
credit  evaluations  of its  clientele  and  does  not  require  collateral.  An
allowance  for  doubtful  accounts is  maintained  at a level  which  management
believes is sufficient to cover anticipated credit losses.

                                       39
<PAGE>

                              REHABCARE GROUP, INC.
             Notes to Consolidated Financial Statements (Continued)
                        December 31, 2002, 2001 and 2000


     Equipment and Leasehold Improvements

     Depreciation and  amortization of equipment and leasehold  improvements are
computed using the  straight-line  method over the estimated useful lives of the
related  assets,  principally:  equipment - three to seven  years and  leasehold
improvements  - life  of  lease  or life  of  asset,  whichever  is  less.  Upon
retirement or disposition,  the cost and related  accumulated  depreciation  are
removed  from the  accounts  and any gain or loss is  included in the results of
operation. Repairs and maintenance are expensed as incurred.

     Acquisitions

     On July 1, 2001,  the Company  adopted  Statement of  Financial  Accounting
Standards  ("Statement")  No. 141,  "Business  Combinations".  Statement No. 141
eliminates   the   pooling-of-interests   method  of  accounting   for  business
combinations  completed after June 30, 2001. All of the Company's  acquisitions,
including  those prior to the adoption of Statement No. 141, were  accounted for
using the purchase method of accounting,  and as such the assets and liabilities
acquired  were  recorded  at  their  estimated  fair  values  on  the  dates  of
acquisition.  Operating  results of the acquired  companies were included in the
Company's consolidated financial statements from the dates of acquisition.

     Goodwill and Other Identifiable Intangible Assets

     Goodwill,  which  represents  the excess of cost over net assets  acquired,
relates to acquisitions.  Prior to January 1, 2002,  goodwill was amortized on a
straight-line basis over 25 to 40 years.  Effective January 1, 2002, the Company
adopted  Statement  No.  142,  "Goodwill  and Other  Intangible  Assets".  Under
Statement No. 142,  goodwill and intangible  assets with indefinite lives are no
longer amortized to expense, but instead tested for impairment at least annually
and any related  losses  recognized in earnings when  identified.  There were no
such impairments of goodwill and intangible assets during the periods presented.
See note 5 "Goodwill and Other Identifiable Intangible Assets."

     Long-Lived Assets

     The Company has adopted Statement No. 144 "Accounting for the Impairment or
Disposal of  Long-Lived  Assets"  effective  January 1, 2002.  Statement No. 144
addresses  financial  accounting  and reporting for the impairment of long-lived
assets to be disposed of, and  supersedes  Statement No. 121 and APB Opinion No.
30. The Company reviews  identified  intangible and other long-lived  assets for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying value of the asset may not be recoverable. If such events or changes in
circumstances are present,  an impairment loss would be recognized if the sum of
the  expected  future  net cash flows was less than the  carrying  amount of the
asset.  There were no such  impairment  losses of  long-lived  assets during the
periods presented.

     Disclosure About Fair Value of Financial Instruments

     The carrying  amounts of cash and cash  equivalents,  receivables,  prepaid
expenses and other current assets, accounts payable,  accrued salaries and wages
and accrued  expenses  approximate  fair value because of the short  maturity of
these items.

                                       40
<PAGE>

                              REHABCARE GROUP, INC.
             Notes to Consolidated Financial Statements (Continued)
                        December 31, 2002, 2001 and 2000

     Revenues and Costs

     The Company recognizes revenues and related costs from temporary healthcare
staffing  assignments and therapy program  management  services in the period in
which services are  performed.  Costs related to marketing and  development  are
expensed as incurred.

     Stock-Based Compensation

     The Company  accounts for stock options using the intrinsic value method of
Accounting  Principles  Board  Option  No. 25  "Accounting  for Stock  Issued to
Employees"  as  permitted  by  Statement  No. 123  "Accounting  for  Stock-Based
Compensation." The intrinsic value method recognizes  compensation expense equal
to the excess,  if any, of the fair market value of the  Company's  stock on the
grant  date over the  exercise  price.  Statement  No.  123  requires  pro forma
disclosure of net earnings  (loss) and earnings  (loss) per share as if the fair
value method of Statement  No. 123 had been  applied.  The  Black-Scholes  stock
option pricing model was used to estimate the fair value of options  granted for
the pro forma disclosure.

     Income Taxes

     Deferred  tax  assets  and   liabilities   are   recognized  for  temporary
differences  between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards.  Deferred tax assets and  liabilities  are measured using enacted
tax rates in effect for the year in which those  differences  are expected to be
recovered or settled.

     Treasury Stock

     The  purchase of the  Company's  common  stock is  recorded  at cost.  Upon
subsequent reissuance, the treasury stock account is reduced by the average cost
basis of such stock.

     Use of Estimates

     The  preparation  of financial  statements  in conformity  with  accounting
principles  generally  accepted  in  the  United  States  of  America,  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  consolidated  financial  statements.  Estimates also affect the
reported amounts of revenues and expenses during the period.  Actual results may
differ from those estimates.

     Reclassifications

     Certain  prior years'  amounts have been  reclassified  to conform with the
current year presentation.

                                       41
<PAGE>
                              REHABCARE GROUP, INC.
             Notes to Consolidated Financial Statements (Continued)
                        December 31, 2002, 2001 and 2000


(2)  Marketable Securities

     Current  marketable  securities  at December 31, 2002 consist  primarily of
marketable equity and debt securities.  Noncurrent marketable securities consist
primarily of  marketable  equity  securities  ($2.2  million and $1.1 million at
December  31, 2002 and 2001,  respectively)  and money market  securities  ($2.1
million and $1.8  million at December 31, 2002 and 2001,  respectively)  held in
trust under the Company's deferred compensation plan.

(3)  Allowance for Doubtful Accounts

     Activity in the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                    -----------------------
                                                 2002        2001        2000
                                                 ----        ----        ----
                                                        (in thousands)

<S>                                            <C>         <C>         <C>
         Balance at beginning of year          $5,902      $5,347      $4,577
         Provisions for doubtful accounts       4,511       4,594       3,466
         Allowance related to acquisitions         --          --         471
         Accounts written off                  (5,232)     (4,039)     (3,167)
                                               ------      ------      ------
         Balance at end of year                $5,181      $5,902      $5,347
                                               ======      ======      ======
</TABLE>

(4)  Equipment and Leasehold Improvements

     Equipment and leasehold improvements, at cost, consist of the following:
<TABLE>
<CAPTION>
                                                              December 31,
                                                              ------------
                                                            2002        2001
                                                            ----        ----
                                                             (in thousands)

<S>                                                       <C>         <C>
         Equipment                                        $35,064     $29,687
         Leasehold improvements                             3,881       2,374
                                                          -------     -------
                                                           38,945      32,061
         Less accumulated depreciation and amortization    19,101      13,688
                                                          -------     -------
                                                          $19,844     $18,373
                                                          =======     =======
</TABLE>

(5)  Goodwill and Other Identifiable Intangible Assets

     Under Statement No. 142, the Company completed the transitional  impairment
tests of goodwill during the first quarter of 2002 and  subsequently  tested for
impairment  during  the  fourth  quarter of 2002.  The  results  of these  tests
indicated that there was no impairment of goodwill as of the date of adoption of
Statement No. 142 on January 1, 2002 and  subsequently  on December 31, 2002. As
of the date of  adoption of  Statement  No.  142,  the  Company had  unamortized
goodwill in the amount of $101.7 million and  unamortized  intangible  assets in
the  amount  of  $0.1  million,  all of  which  are  subject  to the  transition
provisions of Statement No. 142.

                                       42
<PAGE>
                              REHABCARE GROUP, INC.
             Notes to Consolidated Financial Statements (Continued)
                        December 31, 2002, 2001 and 2000

     The  following  table  indicates the effect on net earnings and diluted net
earnings  per share if  Statement  No.  142 had been in  effect  for each of the
periods presented in the consolidated statements of earnings:
<TABLE>
<CAPTION>
                                                Year Ended December 31,
                                                -----------------------
                                               2002       2001       2000
                                               ----       ----       ----
                                         (in thousands, except per share data)

<S>                                          <C>        <C>        <C>
Reported net earnings                        $24,395    $21,035    $23,534
 Add back: goodwill amortization,
    net of taxes                                  --      2,844      2,151
                                             -------    -------    -------
Adjusted net earnings                        $24,395    $23,879    $25,685
                                             =======    =======    =======

Basic net earnings per share:
As reported                                  $  1.45    $  1.25    $  1.62
Add back: goodwill amortization,
   net of taxes                                   --       0.17       0.14
                                             -------    -------    -------
Adjusted basic net earnings per share        $  1.45    $  1.42    $  1.76
                                             =======    =======    =======

Diluted net earnings per share:
As reported                                  $  1.38    $  1.16    $  1.45
Add back: goodwill amortization,
   net of taxes                                   --       0.16       0.13
                                             -------    -------    -------
Adjusted diluted net earnings per share      $  1.38    $  1.32    $  1.58
                                             =======    =======    =======
</TABLE>

(6)  Long-Term Debt

     Effective  August  29,  2000,  the  Company  consummated  a $125.0  million
five-year  revolving credit facility,  replacing its then existing $90.0 million
term and revolving credit facility. The interest rates are set based on either a
base rate  plus  from  0.50% to 1.75% or a  Eurodollar  rate plus from  1.50% to
2.75%.  The base rate is the higher of the  Federal  Funds Rate plus .50% or the
prime rate.  The  Eurodollar  rate is defined as (a) the Interbank  Offered Rate
divided by (b) 1 minus the Eurodollar  Reserve  Requirement.  The Company pays a
fee on the unused portion of the commitment  from 0.375% to 0.50%.  The interest
rates  and  commitment  fees  vary  depending  on the  ratio  of  the  Company's
indebtedness,  net of cash and marketable  securities,  to cash flow. Borrowings
under the credit  facility  are secured  primarily by the  Company's  assets and
future  income and  profits.  The credit  facility  requires the Company to meet
certain financial  covenants  including  maintaining minimum net worth and fixed
charge coverage ratios. The average  outstanding  borrowings under the revolving
credit  facilities for 2002, 2001 and 2000 were $0.2 million,  $12.4 million and
$20.0  million at  weighted-average  interest  rates of 5.4%,  8.1% and 8.6% per
annum, respectively. As of December 31, 2002 there was no balance outstanding on
the revolving  credit  facility.  Interest paid for 2002, 2001 and 2000 was $0.8
million, $2.2 million and $5.3 million,  respectively.  Included in the interest
paid amounts are commitment fees on the unused portion of the commitment of $0.6
million, $0.3 million and $0.1 million for 2002, 2001 and 2000, respectively.

                                       43
<PAGE>
                              REHABCARE GROUP, INC.
             Notes to Consolidated Financial Statements (Continued)
                        December 31, 2002, 2001 and 2000


     The Company  also has a $1.5  million  letter of credit and a $3.1  million
promissory  note issued to our worker's  compensation  carrier as collateral for
reimbursement  of claims.  This letter of credit  reduces the amount the Company
may borrow under the line of credit.  The  promissory  note would become payable
only upon an event of default as described in the  security  agreement  with the
worker's compensation carrier.

(7)  Stockholders' Equity

     During the third quarter of 2002, the Company repurchased  1,700,000 shares
of its common stock at a cost of $36.9  million.  These shares are  presented as
treasury stock in the Company's consolidated balance sheet.

     During  March 2001,  the Company  issued and sold  1,455,000  shares of its
common stock in an underwritten  public equity  offering.  The net proceeds from
this  transaction  of $49.4  million  were used to  reduce  the  Company's  then
outstanding balance on its revolving credit facility.

     The  Company  has various  long-term  performance  plans for the benefit of
employees and nonemployee  directors.  Under the plans, employees may be granted
incentive stock options or nonqualified stock options and nonemployee  directors
may be granted nonqualified stock options. Certain of the plans also provide for
the granting of stock appreciation rights, restricted stock, performance awards,
or stock units.  Stock  options may be granted for a term not to exceed 10 years
(five years with respect to a person receiving  incentive stock options who owns
more than 10% of the capital stock of the Company) and must be granted within 10
years from the adoption of the respective  plan. The exercise price of all stock
options  must be at least  equal to the fair  market  value (110% of fair market
value for a person receiving an incentive stock option who owns more than 10% of
the capital stock of the Company) of the shares on the date of grant. Except for
options granted to nonemployee directors that become fully exercisable after six
months, substantially all remaining stock options become fully exercisable after
four years from date of grant.  At December 31, 2002,  2001 and 2000, a total of
1,058,270,  1,549,594 and 1,841,116  shares,  respectively,  were  available for
future issuance under the plans.

     The per share  weighted-average  fair value of stock options granted during
2002,  2001 and 2000 was  $13.49,  $24.78 and $15.20 on the dates of grant using
the Black  Scholes  option-pricing  model  with the  following  weighted-average
assumptions:  2002 - expected  dividend  yield 0%,  volatility of 55%, risk free
interest  rate of 3.8% and an  expected  life of 6 to 8 years;  2001 -  expected
dividend  yield 0%,  volatility  of 56%,  risk free interest rate of 4.5% and an
expected life of 7 to 9 years;  2000 - expected dividend yield 0%, volatility of
55%, risk free interest rate of 5.0% and an expected life of 4 to 6 years.

     The Company  continues  to account for  stock-based  employee  compensation
plans using the intrinsic value method under Accounting Principles Board Opinion
No.  25  and  related   Interpretations.   Accordingly,   stock-based   employee
compensation cost is not reflected in net earnings, as all stock options granted
under  the  plans  had an  exercise  price  equal  to the  market  value  of the
underlying  common  stock on the date of grant.  Had  compensation  cost for the
Company's stock-based compensation plans been determined based on the fair value
at the grant dates for awards  under those plans  consistent  with the method of
Statement No. 123, "Accounting for Stock Based Compensation",  the Company's net
earnings and earnings per share would have been reduced to the pro forma amounts
indicated below:

                                       44
<PAGE>
                              REHABCARE GROUP, INC.
             Notes to Consolidated Financial Statements (Continued)
                        December 31, 2002, 2001 and 2000


<TABLE>
<CAPTION>
                                                Year Ended December 31,
                                                -----------------------
                                              2002        2001        2000
                                              ----        ----        ----
                                          (in thousands, except per share data)
<S>                                         <C>         <C>         <C>
  Net earnings, as reported                 $24,395     $21,035     $23,534
  Deduct: Total stock-based employee
    compensation expense determined under
    fair value based method for all awards,
    net of related tax effects               (5,130)     (4,390)     (2,155)
                                            -------     -------     -------

  Proforma net earnings                     $19,265     $16,645     $21,379
                                            =======     =======     =======

  Basic earnings per share:   As reported     $1.45       $1.25       $1.62
                                              =====       =====       =====
                              Pro forma       $1.15       $0.99       $1.47
                                              =====       =====       =====

  Diluted earnings per share: As reported     $1.38       $1.16       $1.45
                                              =====       =====       =====
                              Pro forma       $1.09       $0.92       $1.32
                                              =====       =====       =====
</TABLE>

     A summary of the status of the Company's  stock option plans as of December
31, 2002,  2001 and 2000,  and changes  during the years then ended is presented
below:
<TABLE>
<CAPTION>
                            2002                2001                2000
                            ----                ----                ----
                              Weighted-           Weighted-           Weighted-
                               Average             Average             Average
                              Exercise            Exercise            Exercise
                      Shares    Price     Shares    Price     Shares    Price
                      ------  ---------   ------  ---------   ------  ---------
<S>                <C>         <C>     <C>         <C>     <C>         <C>
Outstanding at
   beginning
   of year         2,935,575   $16.99  3,262,975   $10.62  3,890,698   $ 7.30
Granted              664,700    22.66    539,373    39.97    457,600    28.76
Exercised           (214,565)    6.49   (766,753)    6.12   (869,019)    5.70
Forfeited           (217,876)   25.66   (100,020)   15.08   (216,304)    8.81
                   ---------           ---------           ---------
Outstanding at
   end of year     3,167,834   $18.31  2,935,575   $16.99  3,262,975   $10.62
                   =========           =========           =========
Options exercis-
   able at
   end of year     2,011,184           1,873,702           2,199,037
                   =========           =========           =========

</TABLE>

                                       45
<PAGE>
                              REHABCARE GROUP, INC.
             Notes to Consolidated Financial Statements (Continued)
                        December 31, 2002, 2001 and 2000


      The following table summarizes information about stock options outstanding
at December 31, 2002:
<TABLE>
<CAPTION>
                        Options Outstanding              Options Exercisable
               --------------------------------------  -----------------------
                         Weighted-Average
                                            Weighted-    Weighted-
    Range of                   Remaining     Average      Average
    Exercise       Number     Contractual   Exercise      Number      Exercise
     Prices     Outstanding      Life         Price     Exercisable    Price
     ------     -----------      ----         -----     -----------    -----
<C>              <C>           <C>           <C>        <C>           <C>
$ 0.00 -  4.70     143,543      1.7 years    $ 4.24       143,543     $ 4.24
  4.70 -  9.40   1,196,318      5.2            8.07     1,104,418       7.98
  9.40 - 14.10     476,800      5.7           11.55       466,800      11.54
 18.80 - 23.50     532,950      9.6           22.23         3,200      21.86
 23.50 - 28.20     105,000      9.0           25.66        53,250      25.36
 28.20 - 32.90      12,500      7.3           30.18         2,500      32.38
 32.90 - 37.60     209,600      7.7           34.00       108,600      34.00
 37.60 - 42.30     318,916      8.5           39.65        97,916      39.71
 42.30 - 47.00     172,207      8.2           43.77        30,957      43.84
                 ---------                              ---------
                 3,167,834      6.6          $18.31     2,011,184     $12.55
                 =========                              =========

</TABLE>

     On  October  1,  2002,  the  Company's  stockholder  rights  plan  that was
originally  adopted in 1992 expired in accordance  with its terms.  The board of
directors of the Company adopted a new stockholder rights plan pursuant to which
preferred stock purchase rights were  distributed as a dividend on each share of
the Company's outstanding common stock as of the close of business on October 1,
2002.  Each right,  when  exercisable,  will entitle the holders to purchase one
one-hundredth  of a share of a newly  designated  series B junior  participating
preferred  stock of the Company at an initial  exercise price of $150.00 per one
one-hundredth of a share.

     The rights are not exercisable or transferable until a person or affiliated
group acquires beneficial ownership of 20% or more of the Company's common stock
or  commences a tender or exchange  offer for 20% or more of the stock,  without
the  approval  of the board of  directors.  In the event  that a person or group
acquires 20% or more of the  Company's  stock or if the Company or a substantial
portion of the Company's  assets or earning power is acquired by another entity,
each right will covert into the right to purchase shares of the Company's or the
acquiring  entity's  stock,  at the  then-current  exercise  price of the right,
having a value at the time equal to twice the exercise price.

     The  series B  preferred  stock is  non-redeemable  and junior of any other
series of preferred  stock that the Company may issue in the future.  Each share
of series B preferred stock, upon issuance, will have a preferential dividend in
the amount  equal to the  greater  of $1.00 per share or 100 times the  dividend
declared per share on the Company's  common stock. In the event of a liquidation
of  the  Company,  the  series  B  preferred  stock  will  receive  a  preferred
liquidation  payment  equal to the greater of $100 or 100 times the payment made
on each share of the Company's common stock.  Each one  one-hundredth of a share
of series B preferred  stock will have one vote on all matters  submitted to the
stockholders  and will vote together as a single class with the Company's common
stock.

                                       46
<PAGE>
                              REHABCARE GROUP, INC.
             Notes to Consolidated Financial Statements (Continued)
                        December 31, 2002, 2001 and 2000


(8)  Earnings per Share

     The  following  table  sets  forth the  computation  of basic  and  diluted
earnings per share:
<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                    -----------------------
   Numerator:                                     2002        2001        2000
   ----------                                     ----        ----        ----
                                                        (in thousands,
                                                    except per share data)
<S>                                              <C>        <C>         <C>
   Numerator for basic earnings per share -
      earnings available to common
      stockholders (net earnings)                $24,395    $21,035     $23,534

   Effect of dilutive securities - after-tax
      interest on convertible subordinated
      promissory notes                                --         --          28
                                                 -------    -------     -------
   Numerator for diluted earnings per share -
      earnings available to common
      stockholders after assumed conversions     $24,395    $21,035     $23,562
                                                 =======    =======     =======

   Denominator:

   Denominator for basic earnings per share -
      weighted-average shares outstanding         16,833     16,775      14,563

   Effect of dilutive securities:
      Stock options                                  809      1,302       1,705
                                                 -------    -------     -------

   Denominator for diluted earnings per share -
      adjusted weighted-average shares and
      assumed conversions                         17,642     18,077      16,268
                                                 =======    =======     =======

   Basic earnings per share                      $  1.45    $  1.25     $  1.62
                                                 =======    =======     =======

   Diluted earnings per share                    $  1.38    $  1.16     $  1.45
                                                 =======    =======     =======

</TABLE>

(9)  Employee Benefits

     The Company has an Employee Savings Plan,  which is a defined  contribution
plan  qualified  under  Section  401(k) of the Internal  Revenue  Code,  for the
benefit  of its  eligible  employees.  Employees  who  attain  the age of 21 and
complete  12  consecutive  months of  employment  with a minimum of 1,000  hours
worked are eligible to participate in the plan. Each  participant may contribute
from  2% to 20%  of  his or her  annual  compensation  to the  plan  subject  to
limitations  on  the  highly  compensated   employees  to  ensure  the  plan  is
nondiscriminatory.  Contributions  made by the Company to the  Employee  Savings
Plan  are at  rates  of up to 50% of the  first  4% of  employee  contributions.
Expense in  connection  with the Employee  Savings Plan for 2002,  2001 and 2000
totaled $1.9 million, $1.7 million and $1.1 million, respectively.

     The Company maintains a nonqualified deferred compensation plan for certain
employees.  Under the plan, participants may defer up to 100% of their base cash
compensation.  The amounts  are held by a trust in  designated  investments  and
remain the property of the Company until distribution.  At December 31, 2002 and
2001,  $4.3  million and $2.6  million,  respectively,  were  payable  under the
nonqualified  deferred compensation plan and approximated the value of the trust
assets owned by the Company.

                                       47
<PAGE>
                              REHABCARE GROUP, INC.
             Notes to Consolidated Financial Statements (Continued)
                        December 31, 2002, 2001 and 2000


(10) Lease Commitments

     The  Company  leases  office  space  and  certain  office  equipment  under
noncancellable   operating   leases.   Future   minimum  lease   payments  under
noncancellable  operating  leases, as of December 31, 2002, that have initial or
remaining lease terms in excess of one year total approximately $4.8 million for
2003,  $4.5 million for 2004,  $4.1 million for 2005,  $3.3 million for 2006 and
$2.5 million for 2007.  Rent expense for 2002,  2001 and 2000 was  approximately
$5.5 million, $4.8 million and $3.7 million, respectively.

(11) Income Taxes

      Income taxes consist of the following:
<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                     -----------------------
                                                 2002        2001        2000
                                                 ----        ----        ----
                                                         (in thousands)
<S>                                             <C>        <C>         <C>
       Federal - current                        $6,918     $14,232     $12,675
       Federal - deferred                        6,265      (1,964)      1,045
       State                                     1,771       1,648       1,843
                                               -------     -------     -------
                                               $14,954     $13,916     $15,563
                                               =======     =======     =======
</TABLE>

     A reconciliation  between  expected income taxes,  computed by applying the
statutory  Federal income tax rate of 35% to earnings  before income taxes,  and
actual income tax is as follows:
<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                    -----------------------
                                                 2002        2001        2000
                                                 ----        ----        ----
                                                        (in thousands)
<S>                                            <C>         <C>         <C>
       Expected income taxes                   $13,773     $12,233     $13,684
       Tax effect of interest income from
           municipal bond obligations exempt
           from Federal taxation                   (29)        (56)        (47)
       State income taxes, net of Federal
           income tax benefit                      790       1,071       1,198
       Tax effect of goodwill amortization
           expense not deductible for
           tax purposes                             --         599         398
       Other, net                                  420          69         330
                                               -------     -------     -------
                                               $14,954     $13,916     $15,563
                                               =======     =======     =======
</TABLE>

                                       48
<PAGE>
                              REHABCARE GROUP, INC.
             Notes to Consolidated Financial Statements (Continued)
                        December 31, 2002, 2001 and 2000


      The tax effects of temporary differences that give rise to the deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
                                                             December 31,
                                                             ------------
                                                          2002         2001
                                                          ----         ----
                                                           (in thousands)
<S>                                                      <C>         <C>
         Deferred tax assets:
            Provision for doubtful accounts              $1,476      $1,698
            Accrued insurance, bonus and
               vacation expense                           3,311       4,465
            Other                                         1,069       3,645
                                                         ------      ------
                                                          5,856       9,808
                                                         ------      ------
         Deferred tax liabilities:
            Goodwill amortization                         5,596       4,120
            Other                                         2,771       1,090
                                                         ------      ------
                                                          8,367       5,210
                                                         ------      ------
            Net deferred tax asset (liability)          $(2,511)     $4,598
                                                         ======      ======
</TABLE>

     The Company is required to establish a valuation allowance for deferred tax
assets if, based on the weight of available evidence, it is more likely than not
that some portion or all of the  deferred  tax assets will not be realized.  The
ultimate  realization of deferred tax assets is dependent upon the generation of
future  taxable income during the periods in which those  temporary  differences
become deductible.  Management  considers the scheduled reversal of deferred tax
liabilities,  projected  future  taxable  income and tax planning  strategies in
making this  assessment.  Based upon the level of historical  taxable income and
projections  for future  taxable  income in the periods  which the  deferred tax
assets are  deductible,  management  believes that a valuation  allowance is not
required,  as it is more likely  than not that the results of future  operations
will generate sufficient taxable income to realize the deferred tax assets.

     Income taxes paid by the Company for 2002, 2001 and 2000 were $7.5 million,
$8.5 million and $13.0 million, respectively.

(12) Industry Segment Information

     The Company operates in two business  segments that are managed  separately
based on fundamental differences in operations:  healthcare staffing and program
management  services.  Program management includes inpatient programs (including
acute rehabilitation and skilled nursing units), outpatient therapy programs and
contract  therapy  programs.  All of the Company's  services are provided in the
United States.  Summarized  information  about the Company's  operations in each
industry segment is as follows:

                                       49
<PAGE>
                              REHABCARE GROUP, INC.
             Notes to Consolidated Financial Statements (Continued)
                        December 31, 2002, 2001 and 2000
<TABLE>
<CAPTION>
                              Revenues from
                          Unaffiliated Customers         Operating Earnings
                       ---------------------------   --------------------------
                             (in thousands)                (in thousands)
                         2002      2001      2000      2002     2001(1)  2000(1)
                         ----      ----      ----      ----     ----     ----
<S>                   <C>       <C>       <C>       <C>       <C>       <C>
Healthcare staffing   $277,543  $304,574  $260,100  $ (1,683) $  1,496  $12,298
Program management:
  Inpatient            130,743   123,276   119,963    28,941    28,606   28,350
  Outpatient            49,003    49,754    42,332     3,315     3,895    4,372
  Contract therapy     105,276    64,661    29,979     9,124     2,970     (831)
                      --------  --------  --------  --------  --------  -------
  Program
   management total    285,022   237,691   192,274    41,380    35,471   31,891
                      --------  --------  --------  --------  --------  -------
     Total            $562,565  $542,265  $452,374  $ 39,697  $ 36,967  $44,189
                      ========  ========  ========  ========  ========  =======

</TABLE>
<TABLE>
<CAPTION>
                       Depreciation and Amortization     Capital Expenditures
                       -----------------------------   ------------------------
                             (in thousands)                (in thousands)
                         2002      2001      2000      2002      2001     2000
                         ----      ----      ----      ----      ----     ----
<S>                   <C>       <C>       <C>        <C>       <C>      <C>
Healthcare staffing   $  1,808  $  3,280  $  2,813  $    567  $  1,424  $ 3,703
Program management:
  Inpatient              4,636     3,674     2,861     3,478     3,864    2,575
  Outpatient               800     1,520       809     1,306     1,695      849
  Contract therapy       1,090     1,088       390     3,195     3,630      772
                      --------  --------  --------  --------  --------  -------
Program
 management total        6,526     6,282     4,060     7,979     9,189    4,196
                      --------  --------  --------  --------  --------  -------
   Total              $  8,334  $  9,562  $  6,873  $  8,546  $ 10,613  $ 7,899
                      ========  ========  ========  ========  ========  =======

</TABLE>
<TABLE>
<CAPTION>
                              Total Assets               Unamortized Goodwill
                         -------------------------   ---------------------------
                             (in thousands)                (in thousands)
                            as of December 31,            as of December 31,
                         2002      2001      2000      2002      2001     2000
                         ----      ----      ----      ----      ----     ----
<S>                   <C>       <C>       <C>       <C>       <C>      <C>
Healthcare staffing   $ 92,551  $102,880  $109,911  $ 52,956  $ 52,956 $ 54,021
Program management:
  Inpatient             80,921    91,135    66,194    17,162    17,162   17,750
  Outpatient            29,433    30,297    30,064    18,577    18,577   19,745
  Contract therapy      32,625    26,349    22,924    12,990    12,990   13,266
                      --------  --------  --------  --------  -------- --------
  Program
   management total    142,979   147,781   119,182    48,729    48,729   50,761
                      --------  --------  --------  --------  -------- --------
     Total            $235,530  $250,661  $229,093  $101,685  $101,685 $104,782
                      ========  ========  ========  ========  ======== ========

</TABLE>

(1)  Operating  earnings  for 2001 and 2000 have been  adjusted  to reflect  the
     corporate expense allocation methodology utilized in 2002.

                                       50
<PAGE>
                              REHABCARE GROUP, INC.
             Notes to Consolidated Financial Statements (Continued)
                        December 31, 2002, 2001 and 2000


(13) Quarterly Financial Information (Unaudited)

<TABLE>
<CAPTION>
                                                 Quarter Ended
                               ------------------------------------------------
          2002                 December 31  September 30   June 30     March 31
          ----                 -----------  ------------   -------     --------
                                     (in thousands, except per share data)

<S>                             <C>          <C>          <C>          <C>
 Operating revenues             $140,810     $142,690     $140,836     $138,229
 Operating earnings               12,024       11,595        9,526        6,552
 Earnings before income taxes     11,870       11,511        9,472        6,496
 Net earnings                      7,358        7,137        5,872        4,028
 Net earnings per common share:
    Basic                            .46          .43          .34          .23
    Diluted                          .45          .41          .32          .22

</TABLE>
<TABLE>
<CAPTION>
                                                 Quarter Ended
                               ------------------------------------------------
          2001                 December 31  September 30   June 30     March 31
          ----                 -----------  ------------   -------     --------
                                      (in thousands, except per share data)
<S>                             <C>          <C>          <C>          <C>
 Operating revenues             $134,236     $140,434     $136,871     $130,724
 Operating earnings (loss)        (2,787)      13,519       13,193       13,042
 Earnings (loss) before
  income taxes                    (3,356)      13,356       13,024       11,927
 Net earnings (loss)              (2,017)       8,042        7,832        7,178
 Net earnings (loss) per
  common share:
    Basic                           (.12)         .47          .46          .47
    Diluted                         (.12)         .44          .43          .42

</TABLE>

(14) Recently Issued Accounting Pronouncements

     In June 2002,  the FASB  issued  Statement  No. 146  "Accounting  for Costs
Associated with Exit or Disposal  Activities." This statement nullifies Emerging
Issues Task Force  (EITF)  Issue No. 94-3,  "Liability  Recognition  for Certain
Employee  Termination  Benefits  and Other Costs to Exit an Activity  (including
Certain Costs  Incurred in a  Restructuring)."  This  statement  requires that a
liability for a cost associated with an exit or disposal  activity be recognized
when the liability is incurred rather than the date of an entity's commitment to
an exit plan.  The  Company  implemented  Statement  No. 146 on January 1, 2003.
Management  does not  expect  that  this  statement  will  have an impact on its
consolidated financial position or results of operations.

     In December  2002,  the FASB issued  Statement  No.  148,  "Accounting  for
Stock-Based  Compensation  -  Transition  and  Disclosure - an amendment of FASB
Statement No. 123." Statement No. 148 amends Statement No. 123,  "Accounting for
Stock-Based  Compensation," to provide  alternative  methods of transition for a
voluntary  change to the fair value based method of accounting  for  stock-based
employee  compensation.  In addition,  Statement  No. 148 amends the  disclosure
requirements  of  Statement  No. 123 to require  prominent  disclosures  in both
annual and  interim  financial  statements  about the method of  accounting  for
stock-based employee compensation and the effect on the methods used on reported
results.  The  disclosure  requirements  apply to all companies for fiscal years
ending  after  December  15,  2002.  See note 7  "Stockholders  Equity"  for the
required disclosures of Statement No. 148 at December 31, 2002.

                                       51
<PAGE>
                              REHABCARE GROUP, INC.
             Notes to Consolidated Financial Statements (Continued)
                        December 31, 2002, 2001 and 2000


(15) Contingencies

     In May 2002, a lawsuit was filed in the United  States  District  Court for
the Eastern  District of Missouri against the Company and certain of its current
directors  and  officers.  The  plaintiffs  allege  violations  of  the  federal
securities  laws and are  seeking to  certify  the suit as a class  action.  The
proposed class consists of persons that purchased shares of the Company's common
stock between August 10, 2000 and January 21, 2002. The case alleges  weaknesses
in the software systems selected by the Company's  healthcare  staffing services
business,  StarMed  Staffing Group,  and the purported  negative effects of such
systems on the healthcare  staffing  services business  operations.  The Company
recently  filed a motion  to  dismiss  with the  court.  No  discovery  has been
commenced in the case pending the court's ruling on the motion to dismiss.

     In August 2002, a derivative  lawsuit was filed in the Circuit Court of St.
Louis County,  Missouri  against the Company and certain of its  directors.  The
complaint,  which is based upon  substantially  the same facts as are alleged in
the  federal  securities  class  action,  was filed on behalf of the  derivative
plaintiff  by a law firm that had earlier  filed suit against the Company in the
federal case.  The Company has filed a motion to dismiss based  primarily on the
derivative  plaintiff's  failure to make a pre-suit demand. The Company has also
filed a motion to stay the  derivative  suit until the final  resolution  of the
federal  securities  law class action.  The federal court hearing the securities
law class action recently stayed  discovery in the derivative  proceeding  until
discovery commences in the class action.

     In February 2003, a complaint was filed in the United States District Court
for the Northern  District of Illinois  against the Company and the former owner
of eai Healthcare  Staffing  Solutions  ("eai").  The complaint seeks investment
banking fees under a retainer  agreement  executed by the former owner of eai in
February 1997, a company that RehabCare acquired in December 1999. The complaint
asserts fees in connection with three separate  financing  transactions  and two
acquisition  transactions which the Company  understands were consummated by eai
prior to its  acquisition by the Company.  At the time of the  acquisition,  the
Company  had  identified  potential  fees under  this  retainer  agreement  as a
possible contingent liability of eai and had negotiated indemnification from the
former  owner of eai in the stock  purchase  agreement  for any fees and  costs,
including  attorneys' fees and expenses,  arising from such retainer  agreement.
The  Company  has given  notice to the  former  owner of eai of the  demand  for
indemnification in this suit. No definitive  response has been received from the
former owner of eai with respect to the Company's indemnification demand.

     In addition to above matters,  the Company and its subsidiaries are parties
to a number  of other  claims  and  lawsuits.  While  these  actions  are  being
contested,  the outcome of individual matters is not predictable with assurance.
The Company does not believe that any liability  resulting from any of the above
matters,  after taking into  consideration  its  insurance  coverage and amounts
already  provided for, will have a material  adverse effect on its  consolidated
financial position, cash flows or liquidity.  However, such matters could have a
material effect on results of operations in a particular  quarter or fiscal year
as they develop or as new issues are identified.



                                       52
<PAGE>
SIGNATURES

     Pursuant to the  requirements of Section 13 of the Securities  Exchange Act
of 1934,  the  Registrant has duly caused this report to be signed on its behalf
by the undersigned,  therunto duly authorized.

Dated:  March 25, 2003
                                           REHABCARE GROUP, INC.
                                           (Registrant)

                                           By: /s/    Vincent L. Germanese
                                           -------------------------------
                                                      Vincent L. Germanese
                                                      Senior Vice President,
                                           Chief Financial Officer and Secretary


                                           By: /s/    James M. Douthitt
                                           -------------------------------
                                                      James M. Douthitt
                                                      Senior Vice President and
                                                      Chief Accounting Officer


<PAGE>

CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER

I, Alan C. Henderson, certify that:

1.   I have  reviewed  this  Amendment  No. 1 to Annual Report on Form 10-K/A of
     RehabCare Group, Inc. (the "Registrant"):

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the Registrant as of, and for, the periods presented in this annual report;

4.   The  Registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  Registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b)   evaluated the  effectiveness of the Registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The Registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  Registrant's  auditors  and the audit
     committee of  Registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  Registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  Registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  Registrant's  internal
          controls; and

6.   The  Registrant's  other  certifying  officer and I have  indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date: March 25, 2003                       By: /s/ Alan C. Henderson
                                           -------------------------
                                                   Alan C. Henderson
                                           President and Chief Executive Officer


<PAGE>


CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Vincent L. Germanese, certify that:

1.   I have  reviewed  this  Amendment  No. 1 to Annual Report on Form 10-K/A of
     RehabCare Group, Inc. (the "Registrant"):

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the Registrant as of, and for, the periods presented in this annual report;

4.   The  Registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  Registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b)   evaluated the  effectiveness of the Registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The Registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  Registrant's  auditors  and the audit
     committee of  Registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  Registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  Registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  Registrant's  internal
          controls; and

6.   The  Registrant's  other  certifying  officer and I have  indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date:  March 25, 2003                      By: /s/    Vincent L. Germanese
                                           -------------------------------
                                                      Vincent L. Germanese
                                                      Senior Vice President,
                                           Chief Financial Officer and Secretary


<PAGE>


                                  EXHIBIT INDEX


3.1  Restated  Certificate  of  Incorporation  (filed  as  Exhibit  3.1  to  the
     Registrant's  Registration  Statement  on  Form  S-1,  dated  May  9,  1991
     [Registration No. 33-40467], and incorporated herein by reference)

3.2  Certificate of Amendment of Certificate of Incorporation  (filed as Exhibit
     3.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
     May 31, 1995 and incorporated herein by reference)

3.3  Amended  and  Restated  Bylaws  (filed as Exhibit  3.3 to the  Registrant's
     Quarterly  Report on Form 10-Q for the quarter ended September 30, 2002 and
     incorporated herein by reference)

4.1  Rights Agreement,  dated August 28, 2002, by and between the Registrant and
     Computershare  Trust Company,  Inc. (filed as Exhibit 1 to the Registrant's
     Registration Statement on Form 8-A filed September 5, 2002 and incorporated
     herein by reference)

10.1 1987 Incentive Stock Option and 1987 Nonstatutory Stock Option Plans (filed
     as Exhibit  10.1 to the  Registrant's  Registration  Statement on Form S-1,
     dated May 9, 1991 [Registration No. 33-40467],  and incorporated  herein by
     reference) *

10.2 Form of Stock Option  Agreement  (filed as Exhibit 10.2 to the Registrant's
     Registration  Statement on Form S-1,  dated May 9, 1991  [Registration  No.
     33-40467], and incorporated herein by reference) *

10.3 Employment  Agreement with Alan C.  Henderson,  dated May 1, 1991 (filed as
     Exhibit 10.4 to Amendment No. 1 to the Registrant's  Registration Statement
     on  Form  S-1,  dated  June  19,  1991  [Registration  No.  33-40467],  and
     incorporated herein by reference) *

10.4 Form of Termination  Compensation Agreement for Alan C. Henderson (filed as
     Exhibit 10.6 to the Registrant's  Registration Statement on Form S-1, dated
     February 18, 1993 [Registration No. 33-58490],  and incorporated  herein by
     reference) *

10.5 Form of Termination  Compensation  Agreement for other  executive  officers
     (filed as Exhibit 10.5 to the Registrant's Report on Form 10-K, dated March
     15, 2002, and incorporated herein by reference) *

10.6 Supplemental  Bonus  Plan  (filed  as  Exhibit  10.8  to  the  Registrant's
     Registration  Statement on Form S-1, dated February 18, 1993  [Registration
     No. 33-58490], and incorporated herein by reference) *

10.7 Deferred  Profit  Sharing Plan (filed as Exhibit 10.15 to the  Registrant's
     Registration  Statement on Form S-1, dated February 18, 1993  [Registration
     No. 33-58490], and incorporated herein by reference) *


<PAGE>


                             EXHIBIT INDEX (CONT'D)

10.8 RehabCare  Executive Deferred  Compensation Plan (filed as Exhibit 10.12 to
     the Registrant's  Report on Form 10-K, dated May 27, 1994, and incorporated
     herein by reference) *

10.9 RehabCare Directors' Stock Option Plan (filed as Appendix A to Registrant's
     definitive  Proxy Statement for the 1994 Annual Meeting of Stockholders and
     incorporated herein by reference) *

10.10Amended and Restated 1996 Long-Term  Performance  Plan (filed as Appendix A
     to Registrant's  definitive  Proxy Statement for the 1999 Annual Meeting of
     Stockholders and incorporated herein by reference) *

10.11RehabCare  Group,  Inc.  1999  Non-Employee  Director  Stock Plan (filed as
     Appendix B to Registrant's  definitive  Proxy Statement for the 1999 Annual
     Meeting of Stockholders and incorporated herein by reference) *

10.12Credit  Agreement,  dated as of August  29,  2000,  by and among  RehabCare
     Group,  Inc.,  as borrower,  certain  subsidiaries  and  affiliates  of the
     borrower, as guarantors,  and First National Bank, Firstar Bank, N.A., Bank
     of  America,  N.A.,  First  Union  Securities,  Inc.,  and Banc of  America
     Securities,  LLC (filed as Exhibit 10.1 to Registrant's Quarterly Report on
     Form 10-Q for the quarter ended September 30, 2000 and incorporated  herein
     by reference)

10.13Pledge  Agreement,  dated as of August  29,  2000,  by and among  RehabCare
     Group, Inc. and Subsidiaries,  as pledgors,  and Bank of America,  N.A., as
     collateral  agent,  for the  holders of the Secured  Obligations  (filed as
     Exhibit 10.1 to Registrant's  Quarterly Report on Form 10-Q for the quarter
     ended September 30, 2000 and incorporated herein by reference)

10.14Security  Agreement,  dated as of August 29, 2000,  by and among  RehabCare
     Group, Inc. and Subsidiaries,  as grantors,  and Bank of America,  N.A., as
     collateral  agent,  for the  holders of the Secured  Obligations  (filed as
     Exhibit 10.1 to Registrant's  Quarterly Report on Form 10-Q for the quarter
     ended September 30, 2000 and incorporated herein by reference)

13.1 Those portions of the  Registrant's  Annual Report to Stockholders  for the
     year ended  December 31, 2002 included in response to Items 5 and 6 of this
     Annual Report on Form 10-K**

21.1 Subsidiaries of the Registrant**

23.1 Consent of KPMG LLP

99.1 Certification of the Chief Executive Officer

99.2 Certification of the Chief Financial Officer

-------------------------
* Management contract or compensatory plan or arrangement.
**Previously filed on March 14, 2003


<PAGE>

                                                                    EXHIBIT 23.1




                          Independent Auditors' Consent

The Board of Directors
RehabCare Group, Inc.:

We consent to the  incorporation by reference in the registration  statement No.
33-43236  on  Form  S-8,  registration  statement  No.  33-67944  on  Form  S-8,
registration  statement  No.  33-82106 on Form S-8,  registration  statement No.
33-82048 on Form S-8,  registration  statement  No.  333-11311  on Form S-8, and
registration statement No. 333-86679 on Form S-8 of RehabCare Group, Inc. of our
report dated February 1, 2003, with respect to the  consolidated  balance sheets
of RehabCare Group,  Inc. and subsidiaries as of December 31, 2002 and 2001, and
the related  consolidated  statements of earnings,  stockholders'  equity,  cash
flows, and  comprehensive  earnings for the three-year period ended December 31,
2002, which report appears in the December 31, 2002 annual report on Form 10-K/A
of  RehabCare  Group,  Inc.  Our report  refers to the  adoption of Statement of
Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets."



/s/ KPMG LLP


St. Louis, Missouri
March 25, 2003



<PAGE>

                                                                    EXHIBIT 99.1





                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Annual Report of RehabCare Group, Inc. (the "Company") on
Form 10-K/A for the period ending December 31, 2002 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Alan C. Henderson,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350,
as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:


     (1)  The Report fully  complies with the  requirements  of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.



                                      /s/       Alan C. Henderson
                                           --------------------------
                                                Alan C. Henderson
                                           Chief Executive Officer of
                                           RehabCare Group, Inc.
                                           March 25, 2003




<PAGE>

                                                                    EXHIBIT 99.2





                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Annual Report of RehabCare Group, Inc. (the "Company") on
Form 10-K/A for the period ending December 31, 2002 as filed with the Securities
and  Exchange  Commission  on the date  hereof  (the  "Report"),  I,  Vincent L.
Germanese,  Senior Vice  President and Chief  Financial  Officer of the Company,
certify,  pursuant to 18 U.S.C.  ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:


     (1)  The Report fully  complies with the  requirements  of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.



                                      /s/       Vincent L. Germanese
                                           --------------------------
                                                Vincent L. Germanese

                                           Senior Vice President and
                                           Chief Financial Officer of
                                           RehabCare Group, Inc.
                                           March 25, 2003