MULTICARE COMPANIES INC, 424B4, 1996-10-28

MULTICARE COMPANIES INC
424B4, 1996-10-28
SKILLED NURSING CARE FACILITIES

Previous: FIRST USA CREDIT CARD MASTER TRUST, 8-K, 1996-10-28

Next: MORGAN STANLEY FUND INC, 485BPOS, 1996-10-28

<PAGE>

PROSPECTUS Filed Pursuant to Rule 424(b)(4)
Registration No. 333-12819

3,000,000 SHARES
[Letterhead]
COMMON STOCK
------------------------

All the shares of Common Stock, par value $.01 per share (the "Common
Stock"), offered hereby (the "Offering") are being sold by The Multicare
Companies, Inc. (the "Company" or "Multicare").

The shares of Common Stock are listed on the New York Stock Exchange under
the symbol "MUL." The closing price of a share of Common Stock on October 24,
1996 was $19.00. See "Price Range of Common Stock."

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

SEE "RISK FACTORS" AT PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<S> <C> <C> <C>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS (1) COMPANY (2)
Per Share.................................... $18.50 $0.91 $17.59
Total(3)..................................... $55,500,000 $2,730,000 $52,770,000
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $300,000.

(3) Certain stockholders have granted the Underwriters a 30-day option to
purchase, pro rata, up to 450,000 additional shares of Common Stock on the
same terms and conditions as set forth above, solely to cover
over-allotments, if any. If the option is exercised in full, the total Price
to Public, Underwriting Discounts and Commissions, Proceeds to Company and
proceeds to such stockholders will be $63,825,000, $3,139,500, $52,770,000
and $7,915,500, respectively. See "Underwriting."

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

The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that certificates for the
shares of Common Stock offered hereby will be available for delivery on or about
October 30, 1996 at the offices of Smith Barney Inc., 333 West 34th Street, New
York, New York 10001.

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

SMITH BARNEY INC.
COWEN & COMPANY
DEAN WITTER REYNOLDS INC.
NATWEST SECURITIES LIMITED

October 24, 1996

<PAGE>
GEOGRAPHIC CONCENTRATION
OF
MULTICARE FACILITIES

[MAP SHOWING STATES WHERE FACILITIES ARE LOCATED]

@ Corporate Headquarters
* Regional Office
# Pharmacy

FACILITIES(1) BEDS(1)
----------------------------------------
Owned 80 8,987
Leased 25 2,867
Managed 48 3,891
----------------------------------------
TOTAL 153 15,745

(1) Gives effect to the completion of the pending acquisition of A-D-S.
Excludes 14 facilities with 1,668 beds at which A-D-S provides consulting
services.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

FOR UNITED KINGDOM PURCHASERS: The shares of Common Stock offered hereby
may not be offered or sold in the United Kingdom other than to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments, whether as principal or agent (except in circumstances that do not
constitute an offer to the public within the meaning of the Public Offers of
Securities Regulations 1995 or the Financial Services Act 1986) and this
Prospectus may only be issued or passed on to any person in the United Kingdom
if that person is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or a person to whom
this Prospectus may otherwise lawfully be passed on.

2
<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus.

THE COMPANY

Multicare is a leading provider of high quality long-term care and
specialty medical services in selected geographic regions. The Company's
long-term care services include skilled nursing care, Alzheimer's care and
related support activities traditionally provided in long-term care facilities.
Multicare's specialty medical services consist of (i) rehabilitation therapies
such as occupational, physical and speech therapy and stroke and orthopedic
rehabilitation, (ii) subacute care such as ventilator care, intravenous therapy,
and various forms of coma, pain and wound management, and (iii) institutional
pharmacy services through which the Company provides prescription drugs,
infusion therapies and certain medical supplies to patients at the Company's
facilities, as well as to patients at unaffiliated long-term care facilities.
Specialty medical service revenues accounted for 18%, 30%, 40% and 39% of net
revenues for the years ended December 31, 1993, 1994 and 1995 and the six months
ended June 30, 1996, respectively.

As of September 15, 1996, the Company operated 101 long-term care
facilities (including three assisted living facilities) and two outpatient
rehabilitation centers (68 owned, 23 leased, and 12 managed) in Connecticut,
Illinois, New Jersey, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, West
Virginia and Wisconsin with 11,561 beds. The Company's institutional pharmacies
serve more than 20,000 beds of which approximately one-third are owned, leased
or managed by Multicare. On June 17, 1996, the Company entered into a definitive
agreement to acquire The A.D.S Group ("A.D.S") which owns, operates or manages
50 facilities, including 23 long-term care facilities with 3,072 beds, 21
hospital-based subacute units with 534 beds, and six assisted living facilities,
totaling 578 beds, almost all of which are located in Massachusetts. A.D.S also
provides consulting services to an additional 14 facilities with 1,668 beds.
After giving effect to the acquisition of A.D.S, the Company will own, operate
or manage 151 long-term care facilities (including 9 assisted living facilities)
and two outpatient rehabilitation centers (80 owned, 25 leased and 48 managed)
and will provide consulting services to an additional 14 facilities, in 11
states. The completion of the acquisition of A.D.S is subject to a number of
conditions, including obtaining regulatory approvals.

Multicare has established a strong competitive position in the markets it
serves by providing high quality care in concentrated geographic regions. As a
result, the Company has achieved high occupancy rates, a favorable payor mix and
sustained growth in revenue and operating profits. Multicare's overall occupancy
rate for its owned and leased properties was approximately 92% for the year
ended December 31, 1995 and the six months ended June 30, 1996. The Company
achieved a quality mix (defined as non-Medicaid patient revenues) of 56%, 62%
and 66% of net revenues for the years ended December 31, 1993, 1994 and 1995,
respectively, and 64% for the six months ended June 30, 1996.

Multicare has implemented an operating and growth strategy designed to
sustain and enhance the Company's strong competitive position and to foster its
expansion into targeted geographic areas. The Company's operating strategy
focuses on providing high quality long-term care and specialty medical services
on a cost-effective basis. The Company seeks to maximize revenue and operating
profit by positioning itself as a premier provider in its markets thereby
achieving high occupancy rates and a favorable payor mix. The Company employs
rigorous managerial and financial controls which seek to contain cost without
compromising the quality of care provided. The Company also attempts to acquire
or develop facilities that are concentrated in selected geographic regions to
enable it to achieve operating efficiencies through economies of scale and
reduced corporate overhead.

3
<PAGE>
The Company's growth strategy emphasizes (i) the expansion and
diversification of its operations by selectively acquiring and developing
long-term care facilities, pharmacies and specialty medical service providers in
targeted geographic areas and (ii) further development of post-acute or
non-acute services in selected geographic areas to create a continuum of care
through the expansion of assisted living, home health care, hospital-based
subacute care and other related services. The Company has grown substantially
through acquisitions and through its ability to integrate newly acquired
operations into its existing operations and to increase their profitability by
implementing revenue enhancement and cost control programs. As a result of
acquisitions recently consummated and the Company's continued expansion of its
specialty medical services, the Company is now able to offer directly to many of
its patients, rather than relying on third party providers, pharmacy,
rehabilitation therapy, subacute care and other specialized services, which has
enabled the Company to better respond to the needs of its patients and to
control the costs related to such services.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company..................... 3,000,000 shares
Common Stock outstanding after the Offering............. 29,566,086 shares (1)
Use of Proceeds......................................... Repayment of indebtedness under the Company's bank
credit facility. See "Use of Proceeds."
New York Stock Exchange symbol.......................... "MUL"
</TABLE>

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

(1) Does not include (i) outstanding stock options to purchase 2,795,456 shares
of Common Stock, of which options to purchase 1,010,849 of such shares are
currently exercisable or will become exercisable within the next sixty days,
(ii) 4,975,962 shares issuable upon conversion of the Company's 7%
Convertible Subordinated Debentures due 2003 (the "Convertible Debentures")
or (iii) 554,973 shares to be issued in connection with the pending A.D.S
acquisition. See "Capitalization."

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

References in this Prospectus to the "Company" or "Multicare" refer to The
Multicare Companies, Inc., its consolidated subsidiaries and their predecessors,
or to any of them, depending on the context. Except where otherwise indicated,
all share and per share data in this Prospectus assume no exercise of the
Underwriters' over-allotment option and give effect to the stock dividend
declared in February 1993, the stock dividend declared in July 1993, and the
stock dividend declared in May 1996 (collectively, the "Stock Splits").

4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- -------------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- ----------- ------------
STATEMENTS OF OPERATIONS DATA(1):
Net revenues.............................. $ 87,838 $ 126,007 $ 162,384 $ 262,416 $ 353,048 $ 167,305 $ 251,946
Income from operations.................... 6,984 12,580 25,073 40,362 52,010 25,002 33,088
Interest expense.......................... 7,148 9,890 15,090 13,162 18,778 9,121 12,297
Income before income taxes and
extraordinary item(2)....................... 14 3,170 11,844 27,496 35,945 16,806 21,004
Income (loss) before extraordinary
item(2)..................................... (526) 1,750 7,117 17,042 22,147 10,358 12,977
Net income (loss)......................... (526) 1,750 3,254 15,422 18,425 10,358 11,496
Income per common share data assuming full
dilution:
Income (loss) before extraordinary item
per share................................... $(.04) $.12 $.42 $.71 $.84 $.39 $.46
Net income (loss) per share............. $(.04) $.12 $.19 $.64 $.69 $.39 $.41
Weighted average number of shares
outstanding................................. 14,646 14,646 16,962 23,967 26,513 29,863 32,511
OTHER DATA:
Income from operations before owners'
compensation(3)............................. $ 18,961 $ 22,543 $ 25,073 $ 40,362 $ 52,010 $ 25,002 $ 33,088
Average number of licensed beds........... 2,079 3,271 4,241 6,006 6,861 6,613 11,698
Average occupancy rate(4)................. 94.9% 91.0% 90.4% 92.2% 91.7% 91.2% 91.9%
Percentage of net revenues:
Quality mix(5).......................... 54.2% 55.5% 56.0% 62.5% 66.3% 68.0% 64.4%
Medicaid................................ 45.8% 44.5% 44.0% 37.5% 33.7% 32.0% 35.6%
</TABLE>

<TABLE>
<S> <C> <C>
YEAR ENDED SIX MONTHS
DECEMBER ENDED
31, JUNE 30,
1995 1996
----------- ------------
PRO FORMA AS ADJUSTED STATEMENTS OF OPERATIONS DATA(6):
Net revenues............................................................................ $ 524,074 $ 294,774
Income from operations.................................................................. 68,185 38,206
Other expense, net...................................................................... 32,814 13,928
Income before income taxes and extraordinary item(2).................................... 35,371 24,278
Income before extraordinary item(2)..................................................... 21,061 14,547
Income before extraordinary item per common share assuming full dilution................ $ 0.70 $ 0.46
Weighted average number of shares outstanding assuming full dilution.................... 30,068 36,066
</TABLE>

<TABLE>
<S> <C> <C> <C>
JUNE 30, 1996
-------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED
--------- --------- ---------
BALANCE SHEET DATA:(7)
Working capital.............................................................. $ 68,841 $ 76,187 $ 76,187
Total assets................................................................. 650,153 770,709 770,709
Total indebtedness, including capitalized lease obligations.................. 420,562 510,681 458,200
Stockholders' equity......................................................... $ 130,902 $ 141,170 $ 193,651
</TABLE>

- ---------------
(1) See footnote 1 to the Selected Consolidated Financial Data.

(2) The Company incurred extraordinary charges of $3,863, $1,620, $3,722 and
$1,481, net of taxes, in the years 1993, 1994 and 1995 and in the six months
ended June 30, 1996, respectively, relating to early extinguishment of debt.

(3) Owners' compensation represents compensation paid to owners prior to the
Company's initial public offering.

(4) Facilities owned or leased by the Company.

(5) Quality mix is defined as non-Medicaid patient revenues.

(6) Pro forma statements of operations data assumes the completion of the
pending acquisition of A.D.S and certain other acquisitions that occurred in
1995 and 1996 and the Offering and the application of the net proceeds
therefrom, as of the beginning of the respective period. For a detailed
description of the foregoing see "Capitalization" and "Unaudited Pro Forma
Condensed Consolidated Financial Statements."

(7) Pro forma balance sheet data assumes the completion of the acquisition of
A.D.S as of June 30, 1996. Pro forma as adjusted balance sheet data is also
adjusted to reflect the Offering and the application of the net proceeds
therefrom as of June 30, 1996. See "Capitalization" and "Unaudited Pro Forma
Condensed Consolidated Financial Statements."

5
<PAGE>
RISK FACTORS

In evaluating the Company and its business, prospective investors should
consider carefully the following factors and other information contained in this
Prospectus before purchasing the Common Stock offered hereby.

HEALTHCARE REFORM

The Company is subject to extensive governmental healthcare regulation.
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. The Company is unable to predict the impact
of healthcare reform proposals on the Company or its stock price; 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 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 recently been proposed could materially
adversely affect the Company's revenues derived from ancillary services. Concern
about the potential effects of proposed and unanticipated future reform measures
has contributed to the volatility of securities prices of companies in
healthcare and related industries and may similarly affect the Company's stock
price.

REIMBURSEMENT BY THIRD PARTY PAYORS

The Company typically receives a higher rate for services to private pay
and Medicare patients than for services to patients eligible for assistance
under Medicaid programs. For 1993, 1994, 1995 and the six months ended June 30,
1996, the Company derived approximately 40%, 39%, 41% and 39%, respectively, of
its net revenues from private pay and other sources, 44%, 38%, 34% and 36%,
respectively, from Medicaid and 16%, 23%, 25% and 25%, respectively, from
Medicare. Changes in the number of private pay patients and changes among
different pay sources could significantly affect the profitability of the
Company.

Both governmental and other third-parties payors, such as commercial
insurers, managed care organizations, HMOs and PPOs, have instituted cost
containment measures designed to limit the scope and amount of payments made to
long-term care providers. These measures include the adoption of initial and
continuing recipient eligibility criteria, the adoption of coverage criteria and
the establishment of payment ceilings. Furthermore, governmental reimbursement
programs are subject to statutory and regulatory changes, retroactive rate
adjustments, administrative rulings and government funding restrictions. There
can be no assurance that payments under state and or Federal governmental
programs will remain at levels comparable to present levels or will be
sufficient to cover the costs allocable to patients eligible for reimbursement
pursuant to such programs. In addition, there can be no assurance that the
Company's facilities or the services provided by the Company will continue to
meet the requirements for participation in such programs or that the states in
which the Company operates will continue to meet their Medicaid reimbursement
obligations on a timely basis, if at all. Any of the foregoing could materially
adversely affect the Company.

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 payment agencies
could seek to require the Company to repay any overcharges or amounts billed in

6
<PAGE>
violation 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. Any such action could materially adversely affect the
Company.

REGULATION

The Federal government and all states in which the Company operates
regulate various aspects of the Company's business. In addition to the
regulation of Medicaid and Medicare reimbursement rates, the development and
operation of long-term care facilities and the provision of long-term care
services are subject to Federal, state and local licensure and certification
laws that regulate with respect to a facility, among other things, the number of
beds, the provision of services, the distribution of pharmaceuticals, equipment,
staffing requirements, operating policies and procedures, fire prevention
measures, and compliance with building and safety codes and environmental laws.
There can be no assurance that Federal, state or local governments will not
impose additional restrictions on the Company's activities which might adversely
affect the Company's business. The failure to maintain or renew any required
regulatory approvals or licenses could adversely affect the Company's ability to
provide its services and receive reimbursement of its expenses.

Long-term care facilities are subject to periodic inspection by
governmental authorities to assure compliance with the various standards
established for continued licensing under state law and certification under the
Medicaid or Medicare programs. 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, the imposition of limitations on a facility's license, the
appointment of third-party temporary management for a facility, 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 initially meet or
continue to meet the requirements for participation in the Medicaid or Medicare
programs or state licensing authorities.

Most states have adopted Certificate of Need or similar laws which
generally require that the appropriate state regulatory agency approve the
construction or acquisition of, or the addition of beds or services to, a
long-term care facility. To the extent that a Certificate of Need or other
similar approval is required for the acquisition or construction of new
facilities or the expansion of beds, services or existing facilities, the
Company could be adversely affected by the failure or inability to obtain such
approval, changes in the standards applicable to such approval and possible
delays and expenses associated with obtaining such approval. 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.

The Company is also subject to Federal and state laws that govern financial
and other arrangements between healthcare providers. Federal laws, as well as
the laws of certain states, prohibit direct or 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
"anti-kickback law" which prohibits, among other things, the offer, payment,
solicitation or receipt of any form of remuneration in return for or to induce
the referral of Medicare and Medicaid patients or the purchase, sale or lease of
any service or product for which payment may be made under the Medicare or
Medicaid programs. A wide array of relationships and arrangements, including
ownership interests in a company by persons in a position to refer patients and
personal service agreements have, under certain circumstances, been alleged to
violate these provisions. A violation of the Federal anti-kickback law could
result in the loss of eligibility to participate in Medicare or Medicaid, or in
civil or criminal penalties for individuals or entities.

7
<PAGE>
Violation of state anti-kickback laws could lead to loss of licensure,
significant fines and other penalties for individuals or entities.

LEVERAGE

As of June 30, 1996, the Company's long-term indebtedness, including
capitalized leases and excluding current maturities, was $419.5 million or 76.2%
of total capitalization. See "Capitalization." After the Offering and the
application of $52.5 million of the proceeds therefrom to reduce amounts
outstanding under the Company's $350 million bank credit facility (the "Credit
Facility") and the consummation of the proposed acquisition of A.D.S, it is
expected that $456.0 million of long-term indebtedness, including capitalized
leases and excluding current maturities, or 70.2% of total capitalization, will
remain outstanding. A substantial portion of the Company's cash flow from
operations will continue to be required for principal and interest payments on
the Company's long-term indebtedness after the Offering. Although the Indenture
(the "Note Indenture") pursuant to which the Company's 12 1/2% Senior
Subordinated Notes due 2002 (the "12 1/2% Notes") were issued and the agreements
governing the Credit Facility restrict the Company's ability to incur
indebtedness, the Company still has the ability to incur additional indebtedness
and there will be approximately $76.9 million available for borrowings under the
Credit Facility after the completion of the pending A.D.S acquisition, the
Offering and the application of $52.5 million of the proceeds to reduce amounts
outstanding thereunder.

EXPANSION THROUGH ACQUISITION

A key element of the Company's growth to date, and of the Company's
strategy for the future, is expansion through the acquisition and development of
long-term care facilities. There can be no assurance that future suitable
acquisition candidates will be located, that acquisitions can be consummated or
construction projects completed successfully, or that added facilities can be
operated profitably or integrated successfully into the Company's operations.

Growth in the Company's operations entails certain risks. In order to
integrate new facilities into the Company's operations, the Company will be
required to expend significant management and financial resources. There can be
no assurance that the Company will be able to integrate successfully new
facilities into the Company's operations or that the Company's management
techniques will continue to be effective in a larger organization. In addition,
growth through acquisition entails certain risks in that the acquired facilities
could be subject to unanticipated business uncertainties or legal liabilities.
The Company seeks to minimize these risks through the due diligence and
documentation process undertaken in connection with its acquisitions.
Notwithstanding the Company's due diligence investigation when it undertakes
acquisitions, there can be no assurance that there do not exist environmental or
other liabilities that could have a material adverse effect on the Company. The
purchase of facilities from a bankruptcy estate, such as the Company's purchase
of 13 such facilities from Adventist Living Centers, Inc. in May 1992, or the
purchase of the stock of a publicly traded company, such as the purchase of
Concord Health Group, Inc. ("Concord") in February 1996, are circumstances in
which it is very unlikely that the Company would be able to recover any losses
attributable to the purchased business.

GEOGRAPHIC PAYOR CONCENTRATION

The Company's operations are located in Connecticut, Illinois, New Jersey,
Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia and
Wisconsin. Any adverse change in the regulatory environment or the reimbursement
rates paid under the Medicaid program in the states in which the Company
operates, and particularly in New Jersey, Pennsylvania, West Virginia and
Connecticut (in each of which the Company derived more than 10% of its total
revenues in the six months ended June 30, 1996), could have a material adverse
effect on the Company.

8
<PAGE>
COMPETITION

The long-term care industry is highly competitive. The Company competes
with other providers on the basis of the breadth and quality of its services,
the quality, appearance and reputation of its facilities and price. The Company
also competes in the recruitment and retention of qualified healthcare personnel
and the acquisition and development of additional facilities. The Company's
current and potential competitors include national, regional and local operators
of long-term care facilities, as well as acute care hospitals and rehabilitation
hospitals, some of whom have significantly greater financial and other resources
than the Company. The Company also faces competition from assisted living
operators as well as providers of home healthcare. In addition, the Company
competes with a number of non-profit organizations and similar businesses which
can finance capital expenditures on a tax-exempt basis or receive charitable
contributions unavailable to the Company. There can be no assurance that the
Company will not encounter increased competition in the future which could
adversely affect the Company's operating results, particularly if existing
restrictive policies relating to the issuance of Certificates of Need are
relaxed.

The Company expects competition for the acquisition and development of
long-term care facilities to increase in the future as the demand for long-term
care increases. Construction of new (or the expansion of existing) long-term
care facilities near the Company's facilities could adversely affect the
Company's business. State regulations generally require a Certificate of Need
before a new long-term care facility can be constructed or additional licensed
beds can be added to existing facilities. Certificate of Need legislation is
currently in place in all states in which the Company operates. In Pennsylvania,
current Certificate of Need legislation has a "sunset provision" which will
result in the legislation expiring as of December 18, 1996 unless the
legislation is extended. As of the date of this Prospectus, there is no
extension or amendment legislation pending. The Company believes that
Certificate of Need regulations 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 subacute 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.

STAFFING AND LABOR COSTS

Staffing and labor costs represent the Company's largest expense. Labor
costs accounted for 65%, 63%, 63% and 63% of the Company's total facility
operating expenses in 1993, 1994 and 1995 and the six months ended June 30,
1996, respectively. The Company competes with other healthcare providers in
attracting and retaining qualified or skilled personnel. The long-term care
industry has, at times, experienced shortages of qualified personnel. A shortage
of nurses or other trained personnel or general economic inflationary pressures
may require the Company to enhance its wage and benefits package in order to
compete with other employers. There can be no assurance that the Company's labor
costs will not increase or, if they do, that they can be matched by
corresponding increases in private-payor revenues or governmental reimbursement.
Failure by the Company to attract and retain qualified employees, to control its
labor costs or to match increases in its labor expenses with corresponding
increases in revenues could have a material adverse effect on the Company.
Approximately 3,600 employees at 28 of the Company's facilities are covered by
collective bargaining agreements. Although the Company believes that it
maintains good working relationships with its employees and the unions that
represent certain of its employees, it cannot predict the impact of continued or
increased union representation or organizational activities on its future
operations.

9
<PAGE>
DEPENDENCE UPON KEY PERSONNEL

The success of the Company and its growth strategy is dependent upon the
active involvement of a small group of key management personnel. The loss of
services of any of these individuals could have a material adverse effect on the
Company.

CONCENTRATION OF OWNERSHIP; SHARES ELIGIBLE FOR FUTURE SALE

Following the Offering, certain members of the Straus family (the
"Principal Stockholders") will own beneficially approximately 50.3% of the
outstanding shares of Common Stock. Accordingly, these stockholders will have
the power to elect the Company's directors and control the outcome of other
stockholder activity.

Sales of Common Stock in the public market following the Offering could
adversely affect prevailing market prices. The Company and its executive
officers and directors have agreed not to sell or otherwise dispose of any
shares of Common Stock or any securities convertible into, or exchangeable for,
Common Stock, for a period of 90 days (and 30 days in the case of certain
Principal Stockholders holding an aggregate of 1,891,158 shares of Common Stock)
after the date of this Prospectus without the prior written consent of Smith
Barney Inc. as representative of the Underwriters. Upon the expiration of such
agreements, the holders of such shares of Common Stock could cause the Company
to register such shares under the Securities Act. In addition, approximately
4,975,962 shares of Common Stock are issuable upon conversion of the Convertible
Debentures and such shares should be freely tradeable following conversion.

CERTAIN ANTI-TAKEOVER PROVISIONS

Certain provisions of the Restated Certificate of Incorporation and By-laws
of the Company, as well as Delaware corporate law, contain provisions that may
be deemed to have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt that a stockholder of the Company might
consider in its best interest, including an attempt that might result in the
receipt of a premium over the then current market price for the shares held by
stockholders. Certain of these provisions allow the Company to issue, without
stockholder approval, preferred stock having rights senior to those of the
Common Stock. Other provisions impose various procedural and other requirements
that could make it more difficult for stockholders to effect certain corporate
actions. In addition, the Company is subject to Section 203 of the Delaware
General Corporation Law which under certain circumstances can make it more
difficult for a third party to gain control of the Company without approval of
the Board of Directors.

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements included in or incorporated by reference in this
Prospectus constitute "Forward-Looking Statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). The Company
desires to take advantage of certain "Safe Harbor" provisions of the Reform Act
and is including this special note to enable the Company to do so.
Forward-Looking Statements included or incorporated by reference in this
Prospectus involve known and unknown risks, uncertainties, and other factors
which would cause the Company's actual results, performance (financial or
operating) or achievements to differ materially from the future results,
performance (financial or operating) or achievements expressed or implied by
such Forward-Looking Statements. A number of the important factors that could
cause such material differences to occur are set forth in the Company's Form
10-K for the year ended December 31, 1995, and are incorporated herein by
reference.

10
<PAGE>
RECENT DEVELOPMENTS

As part of its growth strategy, the Company continually evaluates
acquisition candidates and opportunities to construct new facilities and expand
existing facilities. The Company has developed significant in-house legal,
financial, regulatory and construction expertise needed to undertake this type
of growth. The Company has grown through acquisition, construction, lease and
management agreements. Since January 1, 1995, the Company has added 94
facilities with 9,201 licensed beds in eight states (including facilities to be
acquired in the pending A.D.S acquisition, but excluding 14 facilities to which
A.D.S provides consulting services).

THE A.D.S ACQUISITION

On June 17, 1996, a wholly-owned subsidiary of the Company entered into a
definitive agreement to acquire A.D.S, a long-term care company headquartered in
Newton, Massachusetts. A.D.S owns, operates or manages 50 facilities, including
23 long-term care facilities with 3,072 beds, 21 hospital-based subacute units
with 534 beds and six assisted living facilities, totaling 578 beds, almost all
of which are located in Massachusetts. A.D.S also provides consulting services
to an additional 14 facilities with 1,668 beds, operates several ancillary
businesses including home health, both Medicare certified and private, and
provides out-patient rehabilitation services at numerous locations. Under the
terms of the agreement, the Company will pay approximately $62.1 million in
cash, assume or repay approximately $27.0 million in debt and issue 554,973
shares of its Common Stock upon the closing of the acquisition of A.D.S. The
closing is subject to a number of significant conditions, including, among
others, the receipt of all required regulatory and other consents and licenses,
the approval of A.D.S's shareholders, the satisfactory completion of Multicare's
due diligence, the completion of schedules and the receipt of consent of the
banks which are parties to the Credit Facility. The transaction is expected to
be completed during the fourth quarter of 1996. There can be no assurance,
however, that the A.D.S acquisition will be consummated.

The Company believes that the A.D.S acquisition will further the Company's
long range growth strategy and that it permits the Company to become the largest
provider of long-term care in Massachusetts with the acquisition of a cluster of
regionally concentrated facilities. In addition, the acquisition is expected to
enhance and complement the Company's capabilities in the area of assisted living
and subacute care and in developing regional networks of post-acute care, as
well as advance the Company's capabilities to manage facilities, including, in
particular, transitional and other long-term care units that are located in
acute care hospitals. The Company also believes that A.D.S is positioned to
benefit from the purchasing power and certain management systems that the
Company is able to provide. The A.D.S acquisition will also provide Multicare
with an experienced management team which will be responsible for the Company's
operations in Massachusetts as well as the entire New England region.

Alan D. Solomont, founder, chairman and a principal stockholder of A.D.S,
has been a member of the Company's Board of Directors since 1994. Mr. Solomont
will become vice chairman of Multicare upon consummation of the A.D.S
acquisition. Susan S. Bailis, currently president, chief operating officer and a
principal of A.D.S, will join Multicare as a senior vice president, and will
serve as president of a new A.D.S/Multicare subsidiary that will have operating
control over Multicare's New England operations, including the operations
acquired as part of the A.D.S acquisition. Mr. Solomont and Ms. Bailis will
receive employment agreements which will provide 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 executive. Mr. Solomont's agreement will
provide for an annual base salary of $300,000 and Ms. Bailis' agreement will
provide for an annual base salary of $200,000, which in each case may be
increased at the discretion of the Board of Directors. Each executive will be
eligible to receive a bonus to be determined pursuant to the Company's Key
Employee Incentive Compensation Plan. The other terms of the employment
agreements are substantially the

11
<PAGE>

same as the employment agreements currently in effect with the Company's
Executive Vice President. Each of the executives will also be entitled to
certain life and disability insurance benefits. Mr. Solomont will receive
options to purchase 300,000 shares of Common Stock and Ms. Bailis will receive
options to purchase 97,500 shares of Common Stock, at the market price of the
Common Stock at the time the A.D.S acquisition is consummated. Mr. Solomont and
Ms. Bailis will also enter into three-year non-competition agreements as part of
the acquisition agreement. Mr. Solomont controls and is an investor in entities
that own certain of the assisted living facilities managed by A.D.S. The Company
has agreed to permit Mr. Solomont and Ms. Bailis and other stockholders of A.D.S
who are receiving Common Stock in the acquisition to include the Common Stock
acquired by them as part of the acquisition in any registration statement under
the Securities Act effected by the Company for the benefit of certain Principal
Stockholders occuring after the first anniversary of the closing of the A.D.S
acquisition, subject to certain limitations.

OTHER RECENT ACQUISITIONS

The following other significant acquisitions and developments have taken
place:

In January 1995, the Company acquired the assets and operations of an
institutional pharmacy business located in New Jersey which currently services
over 20,000 beds.

In December 1995, the Company acquired the outstanding capital stock of
Glenmark Associates, Inc. ("Glenmark"), a long-term care provider operating 21
facilities and several ancillary businesses with approximately 1,700 beds,
located principally in West Virginia.

In December 1995 and February 1996, the Company acquired the assets and
operations of two long-term care facilities with an aggregate of 356 beds in
Connecticut and commenced management of three long-term care facilities in Rhode
Island with approximately 373 beds.

In February 1996, the Company acquired the outstanding capital stock of
Concord, a publicly traded company that operated 15 long-term care facilities
with approximately 2,600 beds, including three assisted living facilities, and
several ancillary businesses in Pennsylvania.

The Company frequently is in discussions with third parties concerning the
possible acquisition of long-term care facilities. Although the Company
regularly considers and evaluates opportunities for expansion and from time to
time enters into letters of intent that provide the Company with an exclusivity
period during which it considers possible acquisitions, the Company does not at
this time have any firm commitments to make any material acquisitions of
long-term care facilities other than the A.D.S transaction.

The following table summarizes the growth in facilities and beds of the
Company since January 1, 1995, giving effect to the acquisition of A.D.S:

<TABLE>
<S> <C> <C> <C> <C>
JANUARY 1, 1995 SEPTEMBER 15, 1996
------------------------ --------------------------
STATE FACILITIES BEDS FACILITIES(1) BEDS(1)
- ----------------------------------------------------------- ------------- --------- --------------- ---------
Massachusetts.............................................. -- -- 49 4,094
New Jersey................................................. 19 2,341 21 2,719
Pennsylvania............................................... 3 416 17 2,370
West Virginia.............................................. -- -- 21 1,857
Ohio....................................................... 14 1,266 13 1,087
Connecticut................................................ 5 660 8 1,106
Wisconsin.................................................. 7 1,006 7 957
Illinois................................................... 9 707 11 949
Rhode Island............................................... -- -- 3 373
Virginia................................................... 1 90 2 175
Vermont.................................................... 1 58 1 58
--
--------- ----- ---------
Total................................................. 59 6,544 153 15,745
-- --------- ----- ---------
-- --------- ----- ---------
</TABLE>

- ---------------
(1) Excludes 1,668 beds in 14 facilities in which A.D.S provides consulting
services.

12
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the Offering, after deducting the
estimated underwriting discounts and commissions and offering expenses payable
by the Company, are approximately $52.5 million. At the present time, the
Company intends to use the net proceeds of the Offering to repay outstanding
indebtedness under the Credit Facility which were incurred to finance certain of
the acquisitions, principally Concord, listed under "Recent Developments." The
Company anticipates that future borrowings under the Credit Facility may be made
for general corporate purposes, including working capital and future
acquisitions, including the acquisition of A.D.S; however, the Company also is
considering alternative sources of debt or lease financing for such purposes.
Borrowings under the Credit Facility are due on February 28, 2000, and bear
interest at prime or LIBOR-based rates, subject in the case of LIBOR-based loans
to an applicable margin that varies in accordance with the Company's interest
coverage ratio. The Company's interest rate under the Credit Facility is
currently approximately 6.7%.

PRICE RANGE OF COMMON STOCK

Multicare's Common Stock is listed on the New York Stock Exchange under the
symbol "MUL." The Company's Common Stock was traded on the Nasdaq National
Market under the symbol "MLTI" from August 18, 1993 until August 30, 1995. Prior
to August 18, 1993, there was no public trading market for the Common Stock. The
following table sets forth for each period indicated the high and low last or
closing sale prices for the Common Stock as reported by the Nasdaq National
Market for the period from January 1, 1995 to August 30, 1995 and by the New
York Stock Exchange for the period from August 31, 1995 to October 24, 1996.
Prices have been adjusted for a 50% stock dividend in May 1996.

<TABLE>
<S> <C> <C>
PRICE
--------------------
HIGH LOW
--------- ---------
Calendar year 1995
First Quarter............................................................................... $ 15 1/2 $ 11 5/8
Second Quarter.............................................................................. 15 1/8 11 1/4
Third Quarter............................................................................... 15 5/8 11 1/4
Fourth Quarter.............................................................................. 16 1/8 11 3/4
Calendar year 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 (through October 24, 1996)................................................... 22 3/8 18 1/4
</TABLE>

The closing price of a share of Common Stock on October 24, 1996 was
$19.00.

DIVIDEND POLICY

Since its inception in March 1992, the Company has not paid any cash
dividends on its Common Stock and does not anticipate paying any dividends in
the foreseeable future. The agreement governing the Credit Facility and the Note
Indenture restrict the Company's ability to pay dividends. Any future
determination to pay cash dividends will be at the discretion of the Board of
Directors and will be dependent upon the Company's financial condition, results
of operations, contractual restrictions, capital requirements, business
prospects and such other factors as the Board of Directors deems relevant.

13
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company (i) as of
June 30, 1996, (ii) on a pro forma basis to reflect consummation of the pending
A.D.S acquisition and (iii) as further adjusted to reflect the Offering and the
application of the net proceeds therefrom to repay certain indebtedness. See
"Use of Proceeds."

<TABLE>
<S> <C> <C> <C>
JUNE 30, 1996
-------------------------------------
(DOLLARS IN THOUSANDS)
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
Short-term debt:
Notes payable and current portion of long-term debt and capitalized
lease obligations......................................................... $ 1,052 $ 2,193 $ 2,193
----------- ----------- -----------
----------- ----------- -----------
Long-term debt, excluding current portion:
Bank Debt............................................................... $ 263,429 $ 325,570 $ 273,089
7% Convertible Subordinated Debentures due 2003......................... 86,250 86,250 86,250
12 1/2% Senior Subordinated Notes due 2002.............................. 29,688 29,688 29,688
Other................................................................... 29,932 56,769 56,769
Capitalized lease obligations........................................... 10,211 10,211 10,211
----------- ----------- -----------
Total long-term debt, excluding current portion...................... 419,510 508,488 456,007

Stockholders' equity(1)(2):
Preferred stock, $.01 par value, 7,000,000 shares authorized; none
issued and outstanding.............................................. -- -- --
Common stock, $.01 par value, 70,000,000 shares authorized; 26,541,592
shares issued and outstanding; pro forma 27,096,565; pro forma as
adjusted, 30,096,565 265 271 301
Additional paid-in capital.............................................. 80,930 91,192 143,643
Retained earnings....................................................... 49,707 49,707 49,707
----------- ----------- -----------
Total stockholders' equity........................................... 130,902 141,170 193,651
----------- ----------- -----------
Total capitalization............................................... $ 550,412 $ 649,658 $ 649,658
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

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

(2) On May 29, 1996, the Company increased its authorized capitalization to
70,000,000 shares of Common Stock and 7,000,000 shares of preferred stock.
The outstanding share data gives effect to the 50% stock dividend effected
on that date.

14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected consolidated historical financial data presented below with
respect to 1991, 1992, 1993, 1994 and 1995 are derived from and should be used
in conjunction with the Company's audited consolidated financial statements and
related notes which, as to 1993, 1994 and 1995 are incorporated herein by
reference. The consolidated historical amounts prior to November 18, 1992
comprise the accounts of various entities, interests in which were exchanged for
Common Stock of the Company. See "The Reorganization." The consolidated
historical financial data as of June 30, 1996 and for the six months ended June
30, 1995 and 1996 are derived from and should be read in conjunction with the
Company's unaudited consolidated financial statements which are incorporated
herein by reference. The unaudited data has been prepared on the same basis as
the other financial statements of the Company and, in the opinion of management,
include all adjustments (consisting only of normal, recurring adjustments)
necessary for a fair presentation of the financial position and results of
operations of the Company for such periods. Results for interim periods are not
necessarily indicative of those to be expected for the year.

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
STATEMENTS OF OPERATIONS DATA(1):
Net revenues.................................... $ 87,838 $ 126,007 $ 162,384 $ 262,416 $ 353,048 $ 167,305 $ 251,946
Expenses:
Operating expenses(2)......................... 63,378 93,649 124,681 201,250 270,224 127,696 196,238
Corporate, general and administrative......... 1,309 4,081 6,338 11,446 17,643 8,262 12,413
Depreciation and amortization................. 4,190 5,734 6,292 9,358 13,171 6,345 10,207
Owners' compensation(3)....................... 11,977 9,963 -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total expenses.............................. 80,854 113,427 137,311 222,054 301,038 142,303 218,858
--------- --------- --------- --------- --------- --------- ---------
Income from operations.......................... 6,984 12,580 25,073 40,362 52,010 25,002 33,088
--------- --------- --------- --------- --------- --------- ---------
Other income (expense):
Investment income............................. 178 480 1,861 296 2,713 925 213
Interest expense.............................. (7,148) (9,890) (15,090) (13,162) (18,778) (9,121) (12,297)
--------- --------- --------- --------- --------- --------- ---------
Total other income (expense)................ (6,970) (9,410) (13,229) (12,866) (16,065) (8,196) (12,084)
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes and
extraordinary item............................ 14 3,170 11,844 27,496 35,945 16,806 21,004
Income tax expense(4)........................... 540 1,420 4,727 10,454 13,798 6,448 8,027
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary item......... (526) 1,750 7,117 17,042 22,147 10,358 12,977
Extraordinary item, net of tax benefit(5)....... -- -- 3,863 1,620 3,722 -- 1,481
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)............................... $ (526) $ 1,750 $ 3,254 $ 15,422 $ 18,425 $ 10,358 $ 11,496
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Income per common share assuming full dilution(6):
Income (loss) before extraordinary item......... $ (.04) $ .12 $ .42 $ .71 $ .84 $ .39 $ .46
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)............................... $ (.04) $ .12 $ .19 $ .64 $ .69 $ .39 $ .41
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average number of shares outstanding... 14,646 14,646 16,962 23,967 26,513 29,863 32,511
OTHER DATA:
Average number of licensed beds................. 2,079 3,271 4,241 6,006 6,861 6,613 11,698
Average occupancy rate(7)....................... 94.9% 91.0% 90.4% 92.2% 91.7% 91.2% 91.9%
Percentage of net revenues:
Quality mix(8)................................ 54.2% 55.5% 56.0% 62.5% 66.3% 68.0% 64.4%
Medicaid...................................... 45.8% 44.5% 44.0% 37.5% 33.7% 32.0% 35.6%
</TABLE>

15
<PAGE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JUNE 30, 1996
---------------------------------
DECEMBER 31, PRO FORMA
----------------------------------------------------- PRO AS
1991 1992 1993 1994 1995 ACTUAL FORMA(9) ADJUSTED(9)
--------- --------- --------- --------- --------- --------- ----------- ---------
BALANCE SHEET DATA(1):
Working capital....................... $ 1,231 $ 39,696 $ 15,158 $ 34,005 $ 55,542 $ 68,841 $ 76,187 $ 76,187
Total assets.......................... 73,598 155,485 162,255 308,755 470,958 650,153 770,709 770,709
Long-term debt including current
portion................................. 37,721 114,285 79,583 130,260 256,933 410,071 500,190 447,709
Capitalized lease obligations
including current portion........... 32,938 32,621 26,554 26,618 26,149 10,491 10,491 10,491
Stockholders' equity (deficit)........ $ (8,370) $ (11,276) $ 32,591 $ 100,105 $ 113,895 $ 130,902 $ 141,170 $ 193,651
</TABLE>

- ---------------
(1) The consolidated statement of operations data and consolidated balance sheet
data for the years 1991 and 1992 combined the historical results of
operations of the various business entities and real property interests
owned by the Company's stockholders which were consolidated under a single
entity on November 18, 1992 (the "Reorganization").

(2) Operating expenses include salaries, wages and benefits paid to facility
personnel and other facility expenses consisting principally of
housekeeping, food, contracted professional services, rent, maintenance, and
utilities.

(3) Represents compensation paid to owners prior to the Company's initial public
offering.

(4) In connection with the Reorganization on November 18, 1992, the Company, a C
corporation, assumed the tax basis of the assets and liabilities of the
(terminated) S corporations and partnerships. Income tax expense reflects
income taxes as if the Company had been subject to Federal and state income
taxes for each of the years 1991 and 1992, presuming a consolidated Federal
income tax return.

(5) The Company incurred extraordinary charges relating to early extinguishment
of debt.

(6) For all periods presented prior to June 30, 1996, primary earnings per share
are the same as income per common share assuming full dilution. Primary
earnings per share for the six months ended June 30, 1996 are $.47 and $.42
for income before extraordinary item and net income, respectively.

(7) Facilities owned or leased by the Company.

(8) Quality mix is defined as non-Medicaid patient revenues.

(9) Pro forma balance sheet data assumes the completion of the acquisition of
A.D.S as of June 30, 1996. Pro forma as adjusted balance sheet data is also
adjusted to reflect the Offering and the application of the net proceeds
therefrom as of June 30, 1996. See "Capitalization" and "Unaudited Pro Forma
Condensed Consolidated Financial Statements."

16
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

The accompanying unaudited pro forma condensed consolidated balance sheet
at June 30, 1996, has been prepared as if the proposed acquisition of A.D.S had
been consummated, and the shares offered under this Prospectus had been issued,
on June 30, 1996. The accompanying unaudited pro forma condensed statements of
operations for the year ended December 31, 1995 and the six months ended June
30, 1996 have been prepared as if the Glenmark acquisition, the Concord
acquisition and the proposed acquisition of A.D.S had been consummated on
January 1, 1995. All of these acquisitions are accounted for as purchases. The
unaudited pro forma condensed consolidated statements of operations are further
adjusted to reflect the sale of shares of Common Stock offered under this
Prospectus and the repayment of certain debt with the proceeds thereof as
described under "Use of Proceeds." The unaudited pro forma financial information
has been prepared on the basis of assumptions described in the notes to the
Unaudited Pro Forma Condensed Consolidated Financial Statements. The Unaudited
Pro Forma Condensed Consolidated Financial Statements are not necessarily
indicative of actual results that would have been achieved had the acquisitions
and Offering actually been completed as of the dates indicated. The Unaudited
Pro Forma Condensed Consolidated Financial Statements should be read in
conjunction with the respective historical financial statements and the related
notes thereto of the Company and certain of the acquired entities incorporated
by reference therein, and of A.D.S included elsewhere in this Prospectus. There
can be no assurance, however, that the A.D.S acquisition will be consummated.

17
<PAGE>
THE MULTICARE COMPANIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
MULTICARE
HISTORICAL PRO FORMA MULTICARE OFFERING PRO FORMA
MULTICARE A.D.S ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
----------- --------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 2,034 $ 4,956 $ 6,990 $ 6,990
Marketable securities................. -- 897 897 897
Accounts receivable, net.............. 107,356 9,098 116,454 116,454
Prepaid expense and other current
asset................................... 13,318 2,207 15,525 15,525
Deferred taxes........................ 3,498 3,498 3,498
----------- --------- ------------ ----------- ------------ ----------
Total current assets............. 126,206 17,158 143,364 143,364
Property, plant and equipment, net 382,140 28,584 $ 28,744 (1) 439,468 439,468
Goodwill, net........................... 115,528 39,653 (2) 155,181 155,181
Debt issuance costs, net................ 5,622 462 (462)(3) 5,622 5,622
Other assets............................ 20,657 6,417 27,074 27,074
----------- --------- ------------ ----------- ------------ ----------
$ 650,153 $ 52,621 $ 67,935 $ 770,709 $ -- $ 770,709
----------- --------- ------------ ----------- ------------ ----------
----------- --------- ------------ ----------- ------------ ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities............................. $ 56,313 $ 8,671 $ 64,984 $ 64,984
Current portion of long-term debt and
capitalized lease obligations...... 1,052 1,141 2,193 2,193
----------- --------- ------------ ----------- ------------ ----------
Total current liabilities........ 57,365 9,812 67,177 67,177
Long-term debt and capitalized lease
obligations............................. 419,510 26,837 $ 62,141 (4) 508,488 $ (52,481)(7) 456,007
Deferred taxes........................ 42,376 11,498 (5) 53,874 53,874
Stockholders' equity:
Common stock.......................... 265 324 (318)(6) 271 30 (8) 301
Additional paid-in capital............ 80,930 2,358 7,904 (6) 91,192 52,451 (8) 143,643
Retained earnings..................... 49,707 13,257 (13,257)(6) 49,707 49,707
Unrealized gain on marketable
securities.............................. 33 (33)(6)
----------- --------- ------------ ----------- ------------ ----------
Total stockholders' equity....... 130,902 15,972 (5,704) 141,170 52,481 193,651
----------- --------- ------------ ----------- ------------ ----------
$ 650,153 $ 52,621 $ 67,935 $ 770,709 $ -- $ 770,709
----------- --------- ------------ ----------- ------------ ----------
----------- --------- ------------ ----------- ------------ ----------
</TABLE>

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.

18
<PAGE>
THE MULTICARE COMPANIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
MULTICARE
HISTORICAL PRO FORMA MULTICARE OFFERING PRO FORMA
MULTICARE GLENMARK(9) CONCORD(10) A.D.S(11) ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
----------- ----------- ----------- ----------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues........... $ 353,048 $ 52,395 $ 52,609 $ 66,022 $ 524,074 $ 524,074
Expenses:
Operating expenses... 270,224 43,759 39,204 54,715 407,902 407,902
Corporate, general
and administrative..... 17,643 4,710 3,574 3,521 $ (4,000)(14) 25,448 25,448
Depreciation and
amortization........... 13,171 1,768 2,286 1,486 3,828 (15) 22,539 22,539
----------- ----------- ----------- ----------- ------------ ----------- ------------- ----------
Total expenses... 301,038 50,237 45,064 59,722 (172) 455,889 -- 455,889
----------- ----------- ----------- ----------- ------------ ----------- ------------- ----------
Income from
operations............. 52,010 2,158 7,545 6,300 172 68,185 68,185

Other income
(expense).............. (16,065) (4,070) (3,563) (2,135) (10,786)(16) (36,619) $ 3,805(18) (32,814)
----------- ----------- ----------- ----------- ------------ ----------- ------------- ----------
Income (loss) before
income taxes and
extraordinary item..... 35,945 (1,912) 3,982 4,165 (10,614) 31,566 3,805 35,371
Income tax expense
(benefit).............. 13,798 1,290 51 (2,368)(17) 12,771 1,539(17) 14,310
----------- ----------- ----------- ----------- ------------ ----------- ------------- ----------
Income (loss) before
extraordinary item..... $ 22,147 $ (1,912) $ 2,692 $ 4,114 $ (8,246) $ 18,795 $ 2,266 $ 21,061
----------- ----------- ----------- ----------- ------------ ----------- ------------- ----------
----------- ----------- ----------- ----------- ------------ ----------- ------------- ----------
Income before
extraordinary item
per common share
assuming full
dilution............... $ 0.84 $ 0.69 $ 0.70
Weighted average
number of shares
outstanding............ 26,513 555 27,068 3,000 30,068
</TABLE>

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.

19
<PAGE>
THE MULTICARE COMPANIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
MULTICARE
HISTORICAL PRO FORMA MULTICARE OFFERING PRO FORMA
MULTICARE CONCORD(12) A.D.S(13) ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
----------- ----------- --------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues................... $ 251,946 $ 8,090 $ 34,738 $ 294,774 $ 294,774
Expenses:
Operating expenses........... 196,238 6,081 28,071 230,390 230,390
Corporate, general and
administrative................. 12,413 545 1,723 $ (850)(14) 13,831 13,831
Depreciation and
amortization................... 10,207 351 732 1,057 (15) 12,347 12,347
----------- ----------- --------- ------------ ----------- ------------ -----------
Total expenses.......... 218,858 6,977 30,526 207 256,568 -- 256,568
----------- ----------- --------- ------------ ----------- ------------ -----------
Income from
operations..................... 33,088 1,113 4,212 (207) 38,206 38,206
Other income (expense)......... (12,084) (520) (850) (2,180)(16) (15,634) $ 1,706(18) (13,928)
----------- ----------- --------- ------------ ----------- ------------ -----------
Income (loss) before
income taxes and
extraordinary item... 21,004 593 3,362 (2,387) 22,572 1,706 24,278
Income tax expense............. 8,027 201 40 779(17) 9,047 684(17) 9,731
----------- ----------- --------- ------------ ----------- ------------ -----------
Income before
extraordinary item... $ 12,977 $ 392 $ 3,322 $ (3,166) $ 13,525 $ 1,022 $ 14,547
----------- ----------- --------- ------------ ----------- ------------ -----------
----------- ----------- --------- ------------ ----------- ------------ -----------
Income before extraordinary
item per common share
assuming full dilution
(19)........................... $0.46 $0.47 $0.46
Weighted average number of
shares outstanding............. 32,511 555 33,066 3,000 36,066
</TABLE>

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.

20
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company has entered into a definitive agreement to acquire A.D.S
(including all assets and liabilities) for $62.1 million of cash and issuance of
554,973 shares of Common Stock valued at $10.3 million. The preliminary
allocation of the purchase price to property, plant and equipment and goodwill
was determined by management estimates, as appraisals are not yet available.

<TABLE>
<S> <C>
(1) The allocation of the purchase price of the proposed acquisition of A.D.S to property, plant and equipment
based on estimated fair market values.

(2) Increase in goodwill resulting from purchase price in excess of estimated fair market value of net assets
acquired.

(3) The elimination of deferred financing costs.

(4) Additional borrowings under the Company's Credit Facility to complete the proposed acquisition of A.D.S.

(5) Increase in deferred taxes relating to the proposed A.D.S acquisition to reflect the difference in estimated
fair market values and tax bases of assets and liabilities acquired.

(6) The issuance of 554,973 shares of the Company's Common Stock to complete the proposed acquisition of A.D.S
and elimination of historical equity of A.D.S.

(7) The application of the net proceeds of the Offering to repay $52.5 million of long-term debt outstanding
under the Company's revolving Credit Facility.

(8) Issuance of Common Stock in connection with the Offering, net of underwriter's discount and expenses.

(9) Reflects historical operations of Glenmark and the elimination of the results of operations for a Glenmark
entity not acquired by the Company for the eleven months ended November 30, 1995. Also reflects the
historical operations for the eleven months ended November 30, 1995 of four long-term care facilities for
which Glenmark entered into a lease agreement in November 1995. The historical results of these leased
facilities have been adjusted to eliminate management fees, record rent expense and eliminate depreciation
and interest expense.

(10) Represents historical operations of Concord for the year ended December 31, 1995. These amounts have been
derived by adding the results of operations for the six months ended December 31, 1995 to and deducting the
results for the six months ended December 31, 1994 from the audited financial statement amounts for the year
ended June 30, 1995, incorporated by reference herein.

(11) Reflects the historical results of operations for A.D.S for the year ended December 31, 1995.

(12) Represents historical results of operations for Concord from January 1, 1996 to February 21, 1996.

(13) Represents historical results of operations for A.D.S for the six months ended June 30, 1996.

(14) Corporate, general and administrative expense has been adjusted to reflect the elimination of duplicative
positions at A.D.S and Concord, which have been or will be vacated and will not be replaced, consolidation
and closing of Concord corporate offices, elimination of various public company costs incurred by Concord,
and reduction of professional and accounting fees.
</TABLE>

21
<PAGE>
<TABLE>
<S> <C>
(15) Depreciation and amortization expense has been increased by amortization of goodwill incurred in the
consummated and proposed acquisitions and depreciation resulting from the allocation of the Company's
purchase price for the acquisitions to property, plant and equipment. Goodwill is being amortized over
periods of twenty-five to forty years.
(16) Net interest expense has been increased to reflect the financing of the consummated and proposed
acquisitions with the Company's revolving credit facility bearing interest at 7.25% and 6.5%, for the year
ended December 31, 1995 and the six months ended June 30, 1996, respectively.
(17) Income tax expense has been adjusted to reflect a consolidated effective tax rate of approximately 40%.
(18) Interest expense has been reduced for the repayment of long-term debt with the net proceeds of the Offering.
(19) Income before extraordinary item per share was determined on the assumption that the Company's Convertible
Debentures were converted on January 1, 1996 and was adjusted for the amounts representing interest and
amortization of debt issuance costs, net of tax effect.
</TABLE>

22
<PAGE>
BUSINESS

INTRODUCTION

Multicare is a leading provider of high quality long-term care and
specialty medical services in selected geographic regions. The Company's
long-term care services include skilled nursing care, Alzheimer's care and
related support activities traditionally provided in long-term care facilities.
Multicare's specialty medical services consist of (i) rehabilitation therapies
such as occupational, physical and speech therapy and stroke and orthopedic
rehabilitation, (ii) subacute care such as ventilator care, intravenous therapy,
and various forms of coma, pain and wound management, and (iii) institutional
pharmacy services through which the Company provides prescription drugs,
infusion therapies and certain medical supplies to the Company's patients and to
patients at unaffiliated long-term care facilities.

INDUSTRY BACKGROUND

The long-term care industry encompasses a broad range of healthcare
services provided to the elderly and to other patients with medically complex
needs who can be cared for outside of the acute care hospital environment.
Long-term care facilities offer skilled nursing care, routine rehabilitation
therapy and other support services, primarily to elderly patients. In addition,
long-term care facilities may provide a broad range of specialty medical
services. The Company believes that demand for the services provided by
long-term care facilities will increase substantially during the next decade due
primarily to demographic trends, advances in medical technology and emphasis on
healthcare cost containment. At the same time, government restrictions and high
construction and start-up costs are expected to limit the supply of long-term
care facilities. In addition, a trend toward consolidation in the industry is
expected to provide the Company with opportunities for future growth.

COMPANY STRATEGY

Multicare has implemented an operating strategy and growth strategy
designed to sustain and enhance the Company's strong competitive position and to
foster its expansion into targeted geographic areas. The Company's operating
strategy focuses on providing high quality long-term care and specialty medical
services on a cost-effective basis. The Company seeks to maximize revenue and
operating profit by positioning itself as a premier provider in its markets
thereby achieving high occupancy rates and a favorable payor mix. The Company
employs rigorous managerial and financial controls which seek to contain costs
without compromising the quality of care provided. The Company also attempts to
acquire or develop facilities that are concentrated in selected geographic
regions to enable it to achieve operating efficiencies through economies of
scale and reduced corporate overhead.

The Company's growth strategy emphasizes (i) the expansion and
diversification of its operations by selectively acquiring and developing
long-term care facilities, pharmacies and specialty medical service providers in
targeted geographic areas and (ii) further development of post-acute or
non-acute services in selected geographic areas to create a continuum of
services through the expansion of assisted living, home health care,
hospital-based subacute care and other related care. The Company has grown

23
<PAGE>
substantially through acquisitions and through its ability to integrate newly
acquired operations into its existing operations and to increase their
profitability by implementing revenue enhancement and cost control programs.
There can be no assurance, however, that future suitable acquisition candidates
will be located, that acquisitions can be consummated or that added facilities
can be operated profitably or integrated successfully into the Company's
operations. As a result of acquisitions recently consummated and the Company's
continued expansion of its specialty medical services, the Company is now able
to offer directly to many of its patients, rather than relying on third party
providers, pharmacy, rehabilitation, therapy, subacute care and other
specialized services, which has enabled the Company to better respond to the
needs of its patients and to control the costs related to such services.

The following summarizes the key elements of the Company's strategy:

Provide High Quality Care. In order to provide quality care to its
residents, the Company seeks to employ highly qualified administrators and
nurses, and to retain the services of qualified medical directors. Regional
quality assurance professionals and committees at the facility level (composed
of the facility administrator and the facility's senior medical professionals)
continually monitor the quality of care provided to ensure compliance with
Company and governmental standards. The Company believes that its commitment to
providing high quality care and services has enhanced the reputation and the
competitive position of its facilities in the markets they serve.

Achieve Operating Efficiencies. Multicare has maintained its strong
operating performance through effective managerial and financial control systems
and geographic concentration. The Company believes that concentrating its
long-term care facilities within selected geographic regions enables the Company
to achieve operating efficiencies through economies of scale, reduced corporate
overhead and more effective management supervision and financial controls.
Geographic concentration also allows the Company to establish more effective
working relationships with referral sources and regulatory authorities in the
states in which it operates. The Company's management philosophy stresses close
oversight of facility operations by individuals in three levels of management
(facility, divisional and corporate). Divisional controllers ensure that
facility revenue and expense items are properly captured and are also
responsible for the preparation of monthly financial reports. The Company's
centralized, automated financial reporting system enables corporate financial
personnel to monitor key operating and financial data and budget variances on a
timely basis.

Maintain High Occupancy Rates and Quality Mix. An important strategy in
expanding the revenues and profitability of the Company's facilities is to
maintain high occupancy and achieve a favorable payor mix. The Company seeks to
achieve this by: (i) expanding the breadth and quality of services offered,
including the addition of pharmacy and other specialty medical services and (ii)
adding marketing programs designed to increase occupancy, improve quality mix
and develop additional referral sources.

Expand Specialty Medical Services. Specialty medical services include
subacute care for medically complex patients, intensive rehabilitation therapies
and in-house pharmacy services. These services are usually provided at higher
profit margins than routine services and compete with significantly higher cost
hospital care. The Company operates units dedicated to subacute care within
certain of its long-term care facilities, in addition to providing subacute
services throughout the majority of its facilities. The Company also operates
two outpatient rehabilitation centers. The Company provides therapies including
physical, occupational and speech services at all its skilled nursing facilities
and respiratory services at selected facilities. Multicare currently owns and
operates institutional pharmacies that service in excess of 20,000 beds.

Acquire Additional Facilities. In its existing regions, the Company seeks
to strengthen its operations base through acquiring or constructing individual
facilities. The Company believes that expansion into new geographic regions can
be achieved most economically through the acquisition of multi-facility
operations. In identifying and selecting acquisition candidates, the Company
takes into

24
<PAGE>
consideration opportunities for revenue expansion, either through quality
improvements or changes in the mix of services offered, and cost control, as
well as community demographics, historical occupancy rates, existing payor mix,
reputation, regulatory compliance history, state reimbursement policies and the
physical condition and appearance of the facility. The Company believes it has
been successful to date in improving the operating performance of acquired
facilities through increased occupancy rates, expansion of the scope of
specialty medical services offered, improved payor mix, modernization and
renovation and introduction of its buying power and management and financial
control systems.

Construct and Expand Facilities. The Company maintains a construction
division that is responsible for the supervision of new construction, renovation
and additions. The Company's construction capabilities enable it to capitalize
on new development opportunities in its markets and to effectively expand and
renovate its existing facilities when permitted by law. The Company completed
two newly constructed skilled nursing facilities in the past year and has three
additional facilities under construction scheduled for opening by the first
quarter of 1997. In addition, the Company has three assisted living facilities
under construction with one scheduled to open during the fourth quarter of 1996.
The Company anticipates that it will continue to develop facilities and
estimates capital expenditures for construction, renovation and additions of $37
million over the next twelve months (exclusive of A.D.S). The Company does not
act as a general contractor, but has in-house architects and has developed a
facility prototype for use at its new facilities. In selecting development
sites, the Company takes into account community demographics, historical
occupancy rates of facilities in the same area, state reimbursement policies and
site conditions.

PATIENT SERVICES

Basic Patient Services

Basic patient services are those traditionally provided to elderly patients
in long-term care facilities 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 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 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 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 extensive treatment and a higher level of
skilled nursing care. These services typically generate higher profit margins
than basic patient services because the higher complexity of the patients'
medical conditions results in a need for increased levels of care and ancillary
services.

25
<PAGE>
Institutional Pharmacy Services. The Company operates six institutional
pharmacies which served a total of approximately 20,000 beds at September 15,
1996, of which approximately one-third are owned, leased or managed by the
Company. The pharmacies provide long-term health care facilities and other
institutions a variety of products and services including prescription drugs,
pharmacy consulting, and enteral, urological and intravenous therapies. The
Company's concentration of facilities in certain targeted geographic regions
enables it to provide these services to not only its facilities in those regions
but to facilities not operated by the Company.

Subacute Care. Subacute 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 (cardiovascular accident) care, CAPD
(continuous ambulatory peritoneal dialysis), pain management, hospice care, and
tracheostomy and other ostomy care. The Company provides a range of subacute
care services to patients at its facilities. The Company plans to continue to
expand its subacute 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 long-term care 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 has full time in-house therapists,
including physical, occupational, and speech therapists, at a majority of its
facilities. The Company also offers respiratory services at selected facilities.
In addition, the Company operates two outpatient rehabilitation facilities in
New Jersey and Illinois.

OPERATIONS

General. The day-to-day operations of each 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.

The facilities operated by the Company are currently divided into four
divisions, each of which is supervised by a team including a divisional
director, a divisional controller, a marketing director, and a clinical services
director. The divisional and facility personnel are supported by a corporate
staff based at the Company's New Jersey headquarters. Corporate personnel are
responsible for the establishment of policies and procedures, training, goals,
and strategies; quality assessment and assurance oversight; reimbursement,
accounting, information technology, cash management, and treasury functions; the
development of monitoring systems and operational procedures; construction and
development programs; human resources management; and the development and
implementation of new programs.

Management and Financial Controls. Consistent with its strategy of
maintaining strict control over costs, the Company has developed an integrated
structure of management and financial systems and controls intended to maximize
operating efficiency. The Company stresses frequent communication among
facility, divisional and corporate personnel and active involvement by
management in the day-to-day operations of the facilities. The Company's
integrated management and financial information systems enable management to
monitor key operations and financial data on a timely basis. Key operating data,
such as payables and billing data, cash collections and admissions/discharge
data, are

26
<PAGE>
entered into the system daily from workstations located at each facility. This
information forms the basis for a variety of management and financial reports,
including monthly financial statements.

Quality Assurance. The Company has developed a comprehensive quality
assurance program involving personnel at all levels and designed to maintain
standards of care at each of the Company's facilities. Each facility maintains a
quality assurance committee comprised of facility management and senior medical
professionals. The committee is responsible for monitoring and evaluating all
aspects of the facility's operations, including patient care, physical
environment, staff appearance, patient rights, patient activities, and dietary
regimen. Facility administrators and divisional directors are encouraged to play
an active role in quality assurance by maintaining a high-profile presence and
closely monitoring all aspects of operations. The Company believes its quality
assurance process is unique in that the scored internal assessment tools that
measure quality and quantify standards are used by both facility staff and
corporate evaluators. The tools incorporate federal guidelines, standards of
practice, and corporate policies and procedures. State guidelines are included
as applicable during the evaluation process. All medical and other consulting
personnel are required to prepare and submit reports at the end of each
scheduled visit identifying any patient care or other quality related issues.
Patient satisfaction surveys are conducted periodically and provide a
confidential method for patients and their families to comment on the Company's
patient care services. Discharge interviews allow the Company to assess patient
satisfaction and to isolate potential patient care issues.

Marketing. The Company engages in local and divisional marketing efforts to
promote and maintain occupancy rates, to improve its quality mix and to enter
into and maintain arrangements with managed care providers. The Company's
marketing activities are overseen by a corporate director of marketing who
oversees the marketing efforts of the Company's marketing directors and facility
admissions directors and administrators, who together seek to establish
relationships with referring physicians, hospital discharge planners, managed
care companies, social workers, community organizations, local attorneys, bank
trust officers, and senior citizens', Alzheimer's and other support groups. The
Company believes that many of the services and programs provided by its
facilities supplement formal marketing efforts by promoting a facility's
reputation in the community as the provider of choice in the local markets. For
example, the availability of specialty medical services can be a key factor in
the selection of a long-term care facility. In addition, each facility offers a
variety of community programs and activities which are designed primarily as a
service to the community and as a means to enhance the quality of patient life.
The Company believes these programs also contribute to increased occupancy by
making the facility a more attractive choice to prospective residents.

SOURCES OF REVENUES

The Company derives its revenues principally by providing skilled nursing
services and specialty medical services which include institutional pharmacy
services, rehabilitation therapies, subacute care, sales of medical supplies,
home health care and other specialized services. The sources of the Company's
revenues are a combination of private payment sources, state Medicaid programs
for indigent patients and the Federal Medicare program for certain elderly and
disabled patients. The Company's skilled nursing revenues are determined by a
number of factors, including the licensed bed capacity of its facilities; the
occupancy rates at its facilities; the mix of patients and the rates of
reimbursement among payor categories (private, Medicaid and Medicare); and the
extent to which certain ancillary services the Company provides to patients in
its facilities are utilized by the patients and paid for by the respective
payment sources. The Company employs reimbursement specialists to monitor
applicable cost ceilings and other regulatory developments, to comply with all
reporting requirements and to assist the Company in recovering reimbursement
payments. While the Company believes that it has been successful in meeting
applicable cost ceilings and in obtaining reimbursement, there can be no
assurance that reimbursement rates will remain at present levels. In particular,
cost containment proposals at both the Federal and state levels may have an
adverse effect on the Company's ability to recover its costs of providing
services to Medicaid and Medicare patients. See "--Governmental Regulation."

27
<PAGE>
The following table identifies the Company's net revenues attributable to
each of its revenue sources for the periods indicated below.

NET REVENUES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
------------------------------- ENDED
1993 1994 1995 JUNE 30, 1996
--------- --------- --------- -------------
<S> <C> <C> <C> <C>
Private pay and other........................................... 40% 39% 41% 39%
Medicaid........................................................ 44% 38% 34% 36%
Medicare........................................................ 16% 23% 25% 25%
--------- --------- --------- -------------
Total...................................................... 100% 100% 100% 100%
--------- --------- --------- -------------
--------- --------- --------- -------------
</TABLE>

Private Pay and Other. Private pay revenues include payments from
individuals who pay directly for services without governmental assistance and
include payments from commercial insurers, Blue Cross organizations, health
maintenance organizations, preferred provider organizations, workers'
compensation programs and other similar 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
other providers in the local market and by Medicaid and Medicare reimbursement
rates. Competitor analyses are undertaken periodically to discern local market
pricing. 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. Also included are revenues
derived from pharmacy services, management fees, and certain other ancillary
businesses.

Medicaid. Substantially all of the facilities operated by the Company
participate in the Medicaid program. Under the Federal Medicaid statute and
related regulations, state Medicaid programs must provide facility rates that
are reasonable and adequate to cover the costs of efficiently and economically
operated facilities providing services in conformity with state and Federal
standards. Furthermore, payments must be sufficient to enlist enough providers
so that service under the state's Medicaid plan are available to recipients at
least to the extent that those services are available to the general population.
The Medicaid programs in the states within which the Company operates pay a per
diem rate for providing services to Medicaid patients based upon historical
costs adjusted for inflation and subject to restrictive limitations. The
reimbursement methodologies upon which reimbursement is based may be either
prospective or retrospective in nature. Reimbursement rates are determined by
the state, while the Federal government retains the right to approve or
disapprove individual state plans. Medicaid programs in certain states in which
the Company operates currently include incentive allowances for providers whose
costs are less than certain ceilings and who meet other requirements. See
"--Governmental Regulation."

Medicare. Substantially all of the Company's facilities are certified
Medicare providers. Medicare is a federally funded and administered health
insurance program primarily designed for individuals who are age 65 or over and
are entitled to receive Social Security benefits. The Medicare program consists
of two parts. The first part (Part A) covers inpatient hospital services and
services furnished by other institutional healthcare providers, such as
long-term care facilities. The second part (Part B) covers the services of
doctors, suppliers of medical items and services, and various types of
outpatient services. Part B services include physical, speech and occupational
therapy, medical supplies, certain intensive rehabilitation and psychiatric
services, ancillary diagnostic services, and other services of the type

28
<PAGE>
provided by long-term care or acute care facilities. Part A coverage is limited
to a specified term (generally 100 days in a long-term care facility) and
requires beneficiaries to share some of the cost of covered services through the
payment of a deductible and a co-insurance payment. There are no limits on
duration of coverage for Part B services, but there is an annual deductible and
a co-insurance requirement for most services covered by Part B.

The Medicare program is a retrospective program. An interim rate based upon
historical cost factors is paid by Medicare during the cost reporting period and
a cost settlement is made based on actual costs for the period. Final
settlements are subject to an audit of the filed cost report whereby adjustments
may result in additional payments being made to the Company or in recoupments
from the Company. Under 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 may 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 future requests. The
failure to recover these excess costs in the future would adversely affect the
Company's financial position and results of operations.

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.

PROPERTIES

The Company has sought to retain ownership of a significant portion of its
real estate and it believes that this provides the Company with substantial
financing flexibility. The following table summarizes by state certain
information regarding the Company's facilities and outpatient rehabilitation
centers before giving effect to the A.D.S acquisition.
<TABLE>
<CAPTION>

OWNED LEASED MANAGED
------------------------ ------------------------ ------------------------
FACILITIES BEDS FACILITIES BEDS FACILITIES BEDS
------------- --------- ------------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
New Jersey.................................. 13 1,425 8 1,294 -- --
Pennsylvania................................ 13 1,512 -- -- 4 858
West Virginia............................... 12 1,046 4 331 5 480
Ohio........................................ 9 837 4 250 -- --
Connecticut................................. 5 766 2 250 -- --
Wisconsin................................... 5 726 2 231 -- --
Illinois.................................... 10 857 1 92 -- --
Rhode Island................................ -- -- -- -- 3 373
Virginia.................................... -- -- 2 175 -- --
Vermont..................................... 1 58 -- -- -- --

-- --------- -- --------- -- -------
68 7,227 23 2,623 12 1,711

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

<CAPTION>
TOTAL
FACILITIES BEDS
------------- ---------
New Jersey.................................. 21 2,719
Pennsylvania................................ 17 2,370
West Virginia............................... 21 1,857
Ohio........................................ 13 1,087
Connecticut................................. 7 1,016
Wisconsin................................... 7 957
Illinois.................................... 11 949
Rhode Island................................ 3 373
Virginia.................................... 2 175
Vermont..................................... 1 58

----- ---------
103 11,561

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

------------------------
</TABLE>

The Company has granted security interests in substantially all of its
assets to secure its credit facilities. Twenty of the Company's facilities are
leased by the respective operating entities from third parties. One of the
Company's Connecticut facilities and one of the Company's New Jersey facilities
are leased from related parties owned by the Principal Stockholders of the
Company and one of the Company's New Jersey facilities is leased from a related
party 50% owned by certain Principal Stockholders of the Company. The inability
of the Company to make rental payments 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

29
<PAGE>
owner. The Company's headquarters in Hackensack, New Jersey is leased under a
seven-year lease, expiring in 1998.

The Company considers its properties to be in good operating condition and
suitable for the purposes for which they are being used. See "Recent
Developments" for a description of recently completed and pending acquisitions.

COMPETITION

The Company competes with other providers on the basis of the breadth and
quality of services, the quality, appearance and reputation of its facilities
and price. The Company also competes in the recruitment of qualified healthcare
personnel and the acquisition and development of additional facilities. The
Company's current and potential competitors include national, regional and local
long-term care providers as well as acute care hospitals and rehabilitation
hospitals, some of whom have significantly greater financial and other resources
than the Company. The Company also faces competition from assisted living
operators and providers of home healthcare. In addition, certain competitors 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. There can be no assurance that the
Company will not encounter increased competition in the future which could
adversely affect the Company's operating results, particularly if existing
restrictive policies relating to the issuance of Certificates of Need are
relaxed.

GOVERNMENTAL REGULATION

The Federal government and all states in which the Company operates
regulate various aspects of the Company's business. In addition to the
regulation of rates by governmental payor sources, the development and operation
of long-term care facilities and the provision of long-term care services are
subject to Federal, state and local licensure and certification laws which
regulate with respect to a facility, among other matters, the number of beds,
the services provided, the distribution of pharmaceuticals, equipment, staffing
requirements, operating policies and procedures, fire prevention measures, and
compliance with building and safety codes and environmental laws. There can be
no assurance that Federal, state or local governments will not impose additional
restrictions which might adversely affect the Company's ability to provide its
services and receive reimbursement of its expenses.

All of the facilities operated by the Company as of September 15, 1996, are
licensed under applicable state laws and have the required Certificates of Need
from responsible state authorities.

30
<PAGE>

Substantially all of the Company's facilities are certified or approved as
providers under the Medicaid and Medicare programs. Further, the Company has no
reason to believe that any individual providers of healthcare services at the
Company's facilities do not meet applicable licensing requirements. Both initial
and continuing qualification of a long-term care facility to participate in such
programs depend upon many factors, including accommodations, equipment,
services, non-discrimination policies against indigent patients, patient care,
quality of life, residents' rights, safety, personnel, physical environment, and
adequacy of policies, procedures and controls. Licensing, certification and
other applicable standards vary from jurisdiction to jurisdiction and are
revised periodically. State and/or Federal agencies survey or inspect all
long-term care facilities on a regular basis to determine whether such
facilities are in compliance with the requirements for participation in
government sponsored third party payor programs. 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
initially meet or continue to meet the requirements for participation in the
Medicaid or Medicare programs or state licensing authorities. Changes in the
Federal survey regulations became effective July 1, 1995. These Federal
regulations affect the Federal and state survey process and the imposition of
sanctions. The breadth of the new rules and their recent effective date create
uncertainty over how the rules will be implemented. The Company is unable to
predict how these regulatory changes and their implementation will affect the
Company.

The Company believes that its facilities are in substantial compliance with
all statutes, regulations, standards and requirements applicable to its
business. However, the compliance history of a prior operator may be used by
state or Federal regulators in determining possible actions against a successor
operator, and in the ordinary course of business, the Company's facilities
receive notices of deficiencies following surveys for failure to comply with
various regulatory requirements. In most cases, the Company and the reviewing
agency will agree upon corrective measures to be taken to bring the facility
into compliance. 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 any material adverse affect 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 affect on
the Company.

The Omnibus Budget Reconciliation Act of 1993 (the "OBRA") affected
Medicare reimbursement for skilled nursing services in two ways, both of which
have had a minimal effect on the Company's earnings. First, the current limits
on the portion of the Medicare reimbursement known as "routine service costs"
(excluding capital-related expenses) were frozen for two consecutive years
beginning on October 1, 1993. Second, the return of equity included in Medicare
reimbursement was eliminated beginning October 1, 1993. While the Company
believes that it is in substantial compliance with the current requirements of
OBRA, it is unable to predict how future interpretation and enforcement of
regulations promulgated under OBRA by the state and Federal governments could
affect the Company in the future.

The Company is also subject to Federal and state laws which govern
financial and referral arrangements between healthcare providers. Federal laws,
as well as the law of certain states, prohibit direct or indirect payments of
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 or services or the purchase, sale, or
lease of any service or product for

31
<PAGE>

which payment may be made under the Medicare or Medicaid programs. These laws
include 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. A wide array of
relationships and arrangements, including ownership interests in a company by
persons who are in a position to refer patients and personal service agreements
have, under certain circumstances, been alleged to violate these provisions.
Certain discount arrangements may also violate the law. A violation of the
Federal anti-kickback law could result in the loss of eligibility to participate
in Medicare or Medicaid, or in criminal and civil penalties.

In addition, the Federal government and some states restrict certain
business relationships between physicians and other providers of healthcare
services. Effective January 1, 1995, the Stark law prohibits any physician with
a financial relationship (defined as a direct or indirect ownership or
investment interest or compensation arrangement) with an entity from making a
referral for a "designated health service" to that entity, and prohibits that
entity from billing for such services. "Designated health services" do not
include skilled nursing services, but do include many services which nursing
facilities provide to their patients including clinical laboratory services,
therapy and enteral and parenteral nutrition.

All states in which the Company operates have adopted Certificate of Need
or similar laws which generally require that a state agency approve certain
acquisitions and changes in ownership and determine that a need exists prior to
the addition or reduction of beds or services, the implementation of other
changes, the incurrence of certain capital expenditures or, in certain states,
the closure of a facility. In Pennsylvania, current Certificate of Need
legislation has a "sunset provision" which will result in the legislation
expiring as of December 18, 1996 unless the legislation is extended. As of the
date of this Prospectus, there is no extension or amendment legislation pending.
State approvals are generally issued for a specified maximum expenditure and
require implementation of the proposal within a specified period of time.
Failure to obtain the necessary state approval can result in the inability of
the facility to provide the service, operate the facility, or complete the
acquisition, addition or other change, and may also result in the imposition of
sanctions or other adverse action on the facility's license and reimbursement.

On August 21, 1996, President Clinton signed the Health Insurance
Portability and Accountability Act ("HR 3103"). HR 3103 contains a variety of
significant healthcare fraud and abuse provisions, including creation of a
coordinated federal healthcare fraud and abuse program; establishment of a
Medicare integrity program; expansion of current healthcare fraud and abuse
sanctions; creation of a healthcare fraud criminal sanction; creation of a
criminal penalty for fraudulent disposition of assets in order to obtain
Medicaid benefits; and expansion of the authority to impose, and increasing the
amount of, civil monetary penalties.

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 or its stock
price; 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

32
<PAGE>
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 15, 1996, the Company employed approximately 11,600
persons. Approximately 3,600 employees at 28 of the Company's facilities are
covered by collective bargaining agreements. The Company believes that it has
had good relationships 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. 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. The Company competes with other healthcare
providers and with non-healthcare providers for both professional and
non-professional employees.

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.

LEGAL PROCEEDINGS

The Company is a party to claims and legal actions arising in the ordinary
course of business. Management does not believe that any litigation to which the
Company is currently a party will have a material adverse effect on the Company.

33
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The directors and executive officers of the Company are as follows:

<TABLE>
<S> <C> <C>
NAME AGE POSITION
- ----------------------------------------------------- ----------- -----------------------------------------------------
Moshael J. Straus.................................... 43 Chairman of the Board of Directors and Co-Chief
Executive Officer
Daniel E. Straus..................................... 39 President, Co-Chief Executive Officer and Director
Stuart H. Altman..................................... 58 Director
Constance B. Girard-diCarlo.......................... 49 Director
Menachem Rosenberg................................... 45 Director
Alan D. Solomont..................................... 47 Director
George R. Zoffinger.................................. 48 Director
Stephen R. Baker..................................... 40 Executive Vice President, Chief Operating Officer and
Director
Paul J. Klausner..................................... 39 Director of Construction and Director
Bradford C. Burkett.................................. 36 Senior Vice President, General Counsel and Secretary
Thomas P. Foy........................................ 45 Senior Vice President, Business Development and
Governmental Affairs
Joel Jaffe........................................... 50 Senior Vice President, Treasurer
Robert S. Anderson................................... 34 Vice President, Finance
Kevin P. Breslin..................................... 30 Vice President, Acquisitions
Ronald G. Clarendon.................................. 53 Vice President, Human Resources
Barbara A. Marte..................................... 56 Vice President, Product Development and Enhancement
</TABLE>

Certain additional information concerning the above persons is set forth
below:

Moshael J. Straus, the brother of Daniel E. Straus, was a co-founder of the
Company in 1984 and since 1978, was involved in the business of the Company's
predecessors. Mr. Straus has been co-principal owner of the Company since its
establishment. He assumed the positions of Chairman of the Board of Directors
and Co-Chief Executive Officer of the Company in September 1992. Mr. Straus has
been a member of the Board of Directors since 1992.

Daniel E. Straus, the brother of Moshael J. Straus, was a co-founder of the
Company in 1984 and since 1978, was involved in the business of the Company's
predecessors. Mr. Straus has been co-principal owner of the Company since its
establishment. He assumed the positions of President and Co-Chief Executive
Officer of Multicare in September 1992. Mr. Straus has been a member of the
Board of Directors since 1992.

Stuart H. Altman has served as the Sol C. Chaikin Professor of National
Health Policy at The Heller School at Brandeis University since 1977. Mr. Altman
also served as Dean of The Heller School from September 1977 through June 1993,
and was Interim President of Brandeis University from 1990 through September
1991. Mr. Altman has also served as Chairman of the Board, Institute for Health
Policy, at The Heller School since 1977. In addition, Mr. Altman has served in
several government positions including serving as the Chairman of the
Prospective Payment Assessment Commission from 1984 through 1996 and as a senior
member of the Clinton/Gore Health Advisory Group. Mr. Altman also served as
Deputy Assistant Secretary for Planning and Evaluation/Health in the Department
of Health, Education and Welfare from July 1971 through August 1976. Mr. Altman
currently serves as a member of the Board of Directors of IDX Systems, Inc., a
healthcare information systems company and

34
<PAGE>
on several other charitable and educational boards and foundations. Mr. Altman
has been a member of the Board of Directors since March 1996.

Constance B. Girard-diCarlo has served as President of the Healthcare
Support Services Division of ARAMARK Corporation since 1990. ARAMARK is a $6
billion service management company headquartered in Philadelphia, Pennsylvania.
Mrs. Girard-diCarlo is responsible for the non-clinical support services ARAMARK
manages for more than 300 healthcare institutions nationwide. Mrs.
Girard-diCarlo previously served as the President of ARAMARK School Nutrition
Services, the Vice President, Midlantic Region, ARAMARK Campus Services and as
an Assistant General Counsel of ARAMARK. Mrs. Girard-diCarlo is a member of the
Board of Directors of EnergyNorth, Inc., a public utility holding company
headquartered in Manchester, New Hampshire, and serves on the Boards of Widener
University and the Free Library of Philadelphia Foundation. Mrs. Girard-diCarlo
has been a member of the Board of Directors since March 1996.

Menachem Rosenberg has been a partner of the public accounting firm of
Margolin, Winer & Evens in Garden City, New York for the past 14 years. Mr.
Rosenberg is a Certified Public Accountant and a member of the American
Institute of Certified Public Accountants and the New York State Society of
Certified Public Accountants. Mr. Rosenberg is the author of numerous articles
on income tax, investments, finance, mergers and acquisitions and a lecturer on
similar topics to various professional and trade groups. Mr. Rosenberg has been
a member of the Board of Directors since 1994.

Alan D. Solomont is the founder and since 1985 has been the Chief Executive
Officer of A.D.S. Mr. Solomont has been a member of the Board of Directors since
1994. Following the acquisition of A.D.S, Mr. Solomont will become Vice Chairman
of the Company.

George R. Zoffinger has served as Chairman of CoreStates New Jersey
National Bank since April 1994. Mr. Zoffinger previously served as President and
Chief Executive Officer of Constellation Bancorp. and its principal subsidiary,
Constellation Bank, N.A., since December 1991. From March 1990 through December
1991, Mr. Zoffinger served as the Commissioner of the New Jersey State
Department of Commerce and Economic Development and the Chairman of the Board of
Directors of the New Jersey Economic Development Authority since March 1990. Mr.
Zoffinger has also served as Chairman of New Jersey's Host Committee for the
1994 World Cup Soccer Games. Mr. Zoffinger has been a member of the Board of
Directors since 1995.

Stephen R. Baker has served as Executive Vice President responsible for
finance and operations of the Company since August 1994, and served as its
Senior Vice President and Chief Financial Officer since December 1992. Prior to
joining Multicare, he was a partner at the public accounting firm of KPMG Peat
Marwick LLP where he was employed for 16 years. Mr. Baker is a Certified Public
Accountant. Mr. Baker has been a member of the Board of Directors since May
1994.

Paul J. Klausner has served as Director of Construction of the Company
since September 1996. Prior to September 1996 Mr. Klausner served as Executive
Vice President, Development since May 1995, as Executive Vice President, General
Counsel since August 1994, and as Senior Vice President, General Counsel since
October 1993. Prior to joining Multicare, Mr. Klausner was engaged in the
private practice of law in New York City since 1981 and had also been a
principal of KMF Partners, a New York based real estate investment and
development firm, from 1986 to 1990. Mr. Klausner has been a member of the Board
of Directors since May 1994.

Bradford C. Burkett was named a Senior Vice President in 1996, has served
as Vice President, General Counsel and Secretary of the Company since May 1995
and joined the Company as its Vice President and Deputy General Counsel in June
1994. Mr. Burkett became Secretary of the Company in August 1994. Prior to June
1994, Mr. Burkett was engaged in the private practice of law with the New York
City firm of Kaye Scholer Fierman Hays & Handler since 1985.

35
<PAGE>
Thomas P. Foy joined the Company in July 1994 as its Senior Vice President,
Business Development and Governmental Affairs. Prior thereto, Mr. Foy served as
Senior Vice President at Hill International, a construction consulting company
commencing in January 1990. Mr. Foy served as a New Jersey State Senator from
1990 to 1992 and a New Jersey State Assemblyman from 1984 to 1990.

Joel Jaffe has served as Senior Vice President, Treasurer of the Company
since May 1995. Prior to joining Multicare, he was a partner at the public
accounting firm of KPMG Peat Marwick LLP where he was employed for 27 years. He
is a Certified Public Accountant.

Robert S. Anderson served as Vice President, Finance of the Company's
predecessor since October 1988 and assumed the same position with the Company in
September 1992. He joined the Company's predecessor in October 1986 as Corporate
Controller. He is a Certified Public Accountant.

Kevin P. Breslin has served as Vice President, Acquisitions of the Company
since May 1995 and joined the Company as its Director of Financial Accounting in
April 1993. Prior to joining the Company, he was employed at KPMG Peat Marwick
LLP for 4 years. He is a Certified Public Accountant.

Ronald G. Clarendon served as Vice President, Human Resources of the
Company's predecessor since August 1991 and assumed the same position with the
Company in September 1992. Prior to 1991, Mr. Clarendon specialized in all
facets of labor relations with Western Union Corporation.

Barbara A. Marte has served as Vice President, Product Development and
Enhancement of the Company since January 1995. Prior to such time, she served as
Director of Subacute Services of the Company since January 1994. Ms. Marte was
previously a Director of Subacute Development for Beverly Enterprises, Inc. from
1991 through 1993. Prior to 1991, for more than five years, Ms. Marte served in
various corporate and marketing positions with Genesis Health Ventures, Inc.

The Company's Board of Directors is divided into three classes--Class I,
Class II and Class III-- which must be as nearly equal in number as possible.
Each director serves for a term ending on the date of the third annual meeting
following the annual meeting at which such director was elected. The terms of
office of Constance B. Girard-diCarlo, Moshael J. Straus and Daniel E. Straus
expire at the 1997 Annual Meeting of Stockholders. The terms of office of Stuart
H. Altman, Menachem Rosenberg and George R. Zoffinger expire at the 1998 Annual
Meeting of Stockholders. The terms of office of Stephen R. Baker, Paul J.
Klausner and Alan D. Solomont expire at the 1999 Annual Meeting of Stockholders.

36
<PAGE>
PRINCIPAL STOCKHOLDERS

STOCK OWNERSHIP

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock on September 15, 1996, and as adjusted to reflect
the Offering for (i) each person who is known by the Company to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock, (ii)
each person who is currently a director of the Company, (iii) all directors and
executive officers of the Company as a group and (iv) the Company's two Co-Chief
Executive Officers and its four other most highly compensated executive officers
during the year ended December 31, 1995. Except as otherwise noted, the address
of all persons is c/o the Company, 411 Hackensack Avenue, Hackensack, New Jersey
07601. To the best of the Company's knowledge, except as indicated, the holders
listed below have sole voting power and investment power over the Common Stock
they beneficially own.

<TABLE>
<CAPTION>
PRIOR TO THE OFFERING AFTER THE OFFERING(4)
-------------------------- ----------------------------
NUMBER OF PERCENT NUMBER OF
NAME OF BENEFICIAL OWNER SHARES(1) OF CLASS SHARES(1) PERCENTAGE
- ---------------------------------------------------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Moshael J. Straus**....................................... 6,797,378(2) 25.3% 6,797,378(2) 22.8%
Daniel E. Straus**........................................ 6,797,378(2) 25.3 6,797,378(2) 22.8
FMR Corp.(3).............................................. 1,500,732 5.6 1,500,732 5.1
82 Devonshire Street
Boston, Massachusetts 02109
Stuart H. Altman.......................................... -- * -- *
Constance B. Girard-diCarlo............................... 4,800 * 4,800 *
Menachem Rosenberg........................................ -- * -- *
Alan D. Solomont.......................................... 16,500 * 16,500 *
George R. Zoffinger....................................... 10,500 * 10,500 *
Stephen R. Baker.......................................... 90,118 * 90,118 *
Paul J. Klausner.......................................... 86,391 * 86,391 *
All current directors and executive officers as a group
(16 persons).............................................. 13,939,601 50.7 13,939,601 45.7
</TABLE>

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

* Less than 1%.

** See "Management" for position with the Company.

(1) Includes for all directors and executive officers options to purchase an
aggregate of 947,347 shares of Common Stock which are currently exercisable
or will be exercisable within the next sixty days.

(2) Excludes shares owned by the other Co-Chief Executive Officer that the named
Co-Chief Executive Officer has the right to purchase upon the death of such
other Co-Chief Executive Officer.

(3) The following information was provided to the Company by FMR Corp. and is as
of February 14, 1996 (as adjusted to give effect to 50% stock dividend
effected on May 28, 1996): Fidelity Management & Research Company
("Fidelity"), a wholly-owned subsidiary of FMR Corp. and an investment
adviser registered under Section 203 of the Investment Advisers Act of 1940,
is the beneficial owner of 964,704 shares or 3.58% of the Common Stock
outstanding of the Company as a result of acting as investment adviser to
various investment companies registered under Section 8 of the Investment
Company Act of 1940 (the "Funds"). Edward C. Johnson 3d, FMR Corp., through
its control of Fidelity, and the Funds each has sole power to dispose of the
964,704 shares owned by the Funds. Fidelity Management Trust Company, a
wholly-owned subsidiary of FMR Corp. and a bank as defined in Section
3(a)(6) of the Securities Exchange Act of 1934, is the beneficial owner of
536,028 shares or 1.99% of the Common Stock outstanding of the Company as a
result of its serving as investment manager of the institutional account(s).
Edward C. Johnson 3d, and FMR Corp., through its control of Fidelity
Management Trust Company, has sole voting and dispositive power over 536,028
shares of Common Stock owned by the institutional account(s) as reported
above. Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp.,
has the sole power to vote or direct the voting of shares owned directly by
the Funds, which power resides with the Funds' Board of Trustees. Fidelity
carries out the voting of the shares under written guidelines established by
the Fund's Board of Trustees.

(4) Does not include 225,000 shares subject to over-allotment option for each of
Moshael J. Straus and Daniel E. Straus. If the over-allotment option were
fully exercised by the Underwriters, Moshael J. Straus and Daniel E. Straus
would each own 22.0% of the outstanding Common Stock after the offering.

37
<PAGE>
THE REORGANIZATION

Prior to November 18, 1992, the Company's operations had been conducted by
various operating corporations and partnerships owned by the Principal
Stockholders, and the related real property (except in the case of certain
leased facilities) had been owned, either directly or through separate
corporations or partnerships, by the Principal Stockholders. On November 18,
1992, pursuant to a Reorganization and Subscription Agreement among the Company
and the Principal Stockholders (the "Reorganization Agreement"), the Principal
Stockholders transferred to the Company equity interests owned by the Principal
Stockholders in corporations and partnerships engaged in the business of owning,
operating or managing long-term care facilities, as well as related real
property interests owned directly by the Principal Stockholders. Except as
described under "Certain Relationships and Related Transactions," in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, the
interests transferred to the Company by the Principal Stockholders pursuant to
the Reorganization Agreement constitute all of the equity interests and real
property interests relating to such business that were then owned directly or
indirectly by any of the Principal Stockholders. In consideration of such
transfers, The Multicare Companies, Inc. issued its Common Stock to the
Principal Stockholders in proportion to their equity ownership of the Company
prior to the Reorganization.

The Company acquired each of the entities and interests transferred by the
Principal Stockholders subject to related debt and other liabilities. The
Company guaranteed certain existing debt of the operating and real estate
subsidiaries and, pursuant to arrangements among the Company, the Principal
Stockholders and lenders to the operating and real estate subsidiaries, the
Principal Stockholders were released from most outstanding guaranties of the
Company's debt. The Company indemnified the Principal Stockholders against all
liabilities assumed by the Company pursuant to the Reorganization Agreement and
any guarantees of the Company's debt from which the Principal Stockholders were
not released.

38
<PAGE>
DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

The Company is authorized to issue 70,000,000 shares of Common Stock, par
value $.01 per share, and as of September 15, 1996, 26,566,086 shares of Common
Stock are issued and outstanding, of which 14,871,429 are held of record by the
Principal Stockholders. In addition (i) the Company has granted options to
purchase 2,795,456 shares of Common Stock, of which options to purchase
1,010,849 shares are currently exercisable or will be exercisable within the
next sixty days, (ii) 4,975,962 shares of Common Stock are reserved for issuance
upon conversion of the Company's Convertible Debentures and (iii) the Company
has agreed to issue 554,973 shares in connection with the pending A.D.S
acquisition.

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Holders of Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, holders of the Common Stock are entitled to share ratably in the
distribution of all assets remaining after payment of liabilities. Holders of
Common Stock have no preemptive rights to subscribe for additional shares of the
Company and have no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are, and the Common Stock
to be outstanding upon completion of the Offering will be, fully paid and
nonassessable.

The Company has been advised that the Principal Stockholders have entered
into an agreement among themselves that requires each Principal Stockholder to
first offer shares of Common Stock to the other Principal Stockholders prior to
making certain dispositions of Common Stock owned by such Principal Stockholder.

PREFERRED STOCK

The Board of Directors has the authority, without further action by the
stockholders, to issue up to 7,000,000 shares of preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series or the designation of such series. The issuance of preferred stock could
adversely affect the voting power of holders of Common Stock and could have the
effect of delaying, deferring or preventing a change in control of the Company.
The Company has no present plan to issue any shares of preferred stock.

CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BY-LAWS

Certain provisions of the Restated Certificate of Incorporation and By-laws
of the Company summarized below may be deemed to have an anti-takeover effect
and may delay, defer or prevent a tender offer or takeover attempt that a
stockholder might consider in its best interest, including an attempt that might
result in a premium over the market price for the shares held by stockholders.

The Company's Restated Certificate of Incorporation or By-laws provide (i)
that no director may be removed from office during his term except for cause,
(ii) that vacancies on the Board of Directors may be filled only by the
remaining directors and not by the stockholders, (iii) that any action required
or permitted to be taken by the stockholders of the Company may be effected only
at an annual or special meeting of stockholders and stockholder action by
written consent in lieu of a meeting is prohibited, (iv) that special meetings
of stockholders may be called only by a majority of the Board of Directors, or
by the Chairman of the Board of Directors or the President of the Company, (v)
that stockholders are not permitted to call a special meeting or require that
the Board of Directors call a

39
<PAGE>
special meeting of stockholders and (vi) for an advance notice procedure for the
nomination, other than by or at the direction of the Board of Directors, of
candidates for election as directors as well as for other stockholder proposals
to be considered at annual meetings of stockholders. In general, notice of
intent to nominate a director or raise business at such meetings must be
received by the Company not less than 60 or more than 90 days prior to the
anniversary of the previous year's annual meeting and must contain certain
information concerning the person to be nominated or the matters to be brought
before the meeting and concerning the stockholder submitting the proposal. In
addition, the Restated Certificate of Incorporation provides that the Board of
Directors is divided into three classes serving staggered three-year terms. See
"Management."

The foregoing summary is qualified in its entirety by the provisions of the
Company's Restated Certificate of Incorporation and By-laws, copies of which
have been filed with or incorporated by reference as exhibits to the
Registration Statement of which this Prospectus is a part. See "Available
Information."

CERTAIN PROVISIONS OF DELAWARE LAW

Section 203 of the Delaware General Corporation Law prohibits certain
transactions between a Delaware corporation and an "interested stockholder,"
which is defined as a person who, together with any affiliates or associates of
such person, beneficially owns, directly or indirectly, 15% or more of the
outstanding voting shares of a Delaware corporation. This provision prohibits
certain business combinations (defined broadly to include mergers,
consolidations, sales or other dispositions of assets having an aggregate value
in excess of 10% of the consolidated assets of the corporation, and certain
transactions that would increase the interested stockholder's proportionate
share ownership in the corporation) between an interested stockholder and a
corporation for a period of three years after the date the interested
stockholder becomes an interested stockholder, unless (i) the business
combination is approved by the corporation's board of directors prior to the
date the interested stockholder becomes an interested stockholder, (ii) the
interested stockholder acquired at least 85% of the voting stock of the
corporation (other than stock held by directors who are also officers or by
certain employee stock plans) in the transaction in which it became an
interested stockholder, or (iii) the business combination is approved by a
majority of the board of directors and by the affirmative vote of 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.

LIMITATIONS ON DIRECTORS' LIABILITY

The Company's Restated Certificate of Incorporation provides that no
director of the Company shall be liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases or (iv)
for any transaction from which the director derived an improper personal
benefit. The effect of these provisions is to eliminate the rights of the
Company and its stockholders (through stockholders' derivative suits on behalf
of the Company) to recover monetary damages against a director for breach of
fiduciary duty as a director (including breaches resulting from grossly
negligent behavior), except in the situations described above. These provisions
will not limit the liability of directors under Federal securities laws.

40
<PAGE>
UNDERWRITING

Upon the terms and subject to the conditions stated in the Underwriting
Agreement, each Underwriter named below has severally agreed to purchase, and
the Company agreed to sell to such Underwriter, the number of shares of Common
Stock set forth opposite the name of such Underwriter.

<TABLE>
<S> <C>
NAME NUMBER OF
---- SHARES
- -------------------------------------------------------------------------------- -----------
Smith Barney Inc................................................................ 750,000
Cowen & Company................................................................. 750,000
Dean Witter Reynolds Inc........................................................ 750,000
NatWest Securities Limited...................................................... 750,000
-----------
Total......................................................................... 3,000,000
-----------
-----------
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option described
below) if any such shares are taken.

The Underwriters, for whom Smith Barney Inc., Cowen & Company, Dean Witter
Reynolds Inc. and NatWest Securities Limited are acting as the Representatives,
propose to offer part of the shares of Common Stock directly to the public at
the public offering price set forth on the cover page of this Prospectus and
part of the shares to certain dealers at a price which represents a concession
not in excess of $0.52 per share under the public offering price. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $0.10 per share to certain other dealers. After the initial offering of the
shares to the public, the public offering price and such concessions may be
changed by the Representatives.

Moshael J. Straus and Daniel E. Straus have granted to the Underwriters an
option, exercisable for thirty days from the date of this Prospectus, to
purchase, pro rata, up to 450,000 additional shares of Common Stock (225,000
shares each) at the price to public set forth on the cover page of this
Prospectus minus the underwriting discounts and commissions. The Underwriters
may exercise such option solely for the purpose of covering overallotments, if
any, in connection with the offering of the shares of Common Stock offered
hereby. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares of Common Stock set
forth opposite each Underwriter's name in the preceding table bears to the total
number of shares listed in such table.

The Company and its executive officers and directors have agreed that, for
a period of 90 days (and 30 days in the case of certain Principal Stockholders
holding an aggregate of 1,891,158 shares of Common Stock) from the date of this
Prospectus, they will not, without the prior written consent of Smith Barney
Inc., offer, sell, contract to sell, or otherwise dispose of, any shares of
Common Stock of the Company or any securities convertible into, or exercisable
or exchangeable for, Common Stock of the Company.

The Company (and if the over-allotment option is exercised, Moshael J.
Straus and Daniel E. Straus) and the Underwriters have agreed to indemnify each
other against certain liabilities, including liabilities under the Securities
Act.

NatWest Securities Limited, a United Kingdom broker-dealer and a member of
the Securities and Futures Authority Limited, has agreed that, as part of the
distribution of the Common Stock offered hereby and subject to certain
exceptions, it will not offer or sell any Common Stock within the United States,
its territories or possessions or to persons who are citizens thereof or
residents therein. The

41
<PAGE>
Underwriting Agreement does not limit the sale of the Common Stock offered
hereby outside of the United States.

NatWest Securities Limited has represented and agreed that (i) it has not
offered or sold and will not offer to sell any shares of Common Stock to persons
in the United Kingdom, except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as principal or
agent) for the purpose of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations 1995
or the Financial Services Act 1986 (the "Act"), (ii) it has complied and will
comply with all applicable provisions of the Act with respect to anything done
by it in relation to the shares of Common Stock in, from or otherwise involving
the United Kingdom and (iii) it has only issued or passed on, and will only
issue or pass on, in the United Kingdom, any document which consists of or any
part of listing particulars, supplementary listing particulars, or any other
document required or permitted to be published by listing rules under Part IV of
the Act, to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995
or is a person to whom the document may otherwise lawfully be issued or passed
on.

The Representatives have in the past provided certain investment banking
services to the Company for which they received customary compensation. In
addition, Smith Barney Inc. has served as financial advisor to A.D.S with
respect to the A.D.S acquisition.

LEGAL MATTERS

The validity of the shares of Common Stock being offered hereby will be
passed upon for the Company by Paul, Weiss, Rifkind, Wharton & Garrison, New
York, New York, certain members of which currently own 4,500 shares of Common
Stock. Certain legal matters will be passed upon for the Underwriters by Willkie
Farr & Gallagher, New York, New York.

EXPERTS

The consolidated financial statements and financial statement schedules of
the Company as of December 31, 1994 and 1995, and for each of the years in the
three-year period ended December 31, 1995, in the Company's annual report on
Form 10-K for the year ended December 31, 1995, have been incorporated by
reference herein in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.

The consolidated financial statements of Glenmark Associates, Inc. and its
subsidiaries as of December 31, 1993 and 1994, and for each of the years then
ended included in the Company's Current Report on Form 8-K/A, dated February 12,
1996, and incorporated by reference herein have been audited by Deloitte &
Touche LLP, independent certified public accountants, as stated in their report
which is incorporated herein by reference, and have been so incorporated in
reliance upon the report of such firm given their authority as experts in
accounting and auditing.

The consolidated financial statements of Concord Health Group, Inc. and its
subsidiaries as of June 30, 1994 and 1995, and for each of the three years in
the period ended June 30, 1995, included in the Company's Current Report on Form
8-K/A, dated May 6, 1996, have been incorporated by reference herein in reliance
on the report of Coopers & Lybrand L.L.P., independent accountants, incorporated
herein by reference from such Current Report on Form 8-K/A, and given on the
authority of that firm as experts in accounting and auditing.

42
<PAGE>
The combined financial statements of The A.D.S Group as of December 31,
1995, and for the year then ended have been included herein in reliance on the
report of Landa & Altsher, P.C., independent public accountants, and upon the
authority of said firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement on Form S-3 under the
Securities Act with respect to the Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement
and in the exhibits and schedules thereto. For further information with respect
to the Company and the Common Stock, reference is made to the Registration
Statement and the exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each such instance reference is made to the copy of
such contract or document filed or incorporated by reference as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference. This Registration Statement may be inspected without charge
and copied at prescribed rates at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files periodic reports, proxy and information statements, and other
information with the Commission. For further information with respect to the
Company, reference is hereby made to such reports and other information which
can be inspected and copied at the public reference facilities maintained by the
Commission at Room 1025, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies may also be obtained at prescribed rates from
the Public Reference Section of the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission also maintains a Web site that
contains reports, proxy and information statements, and other information
regarding registrants that file electronically with the Commission. The site may
be accessed at http://www.sec.gov.

In addition, the Company is listed on the New York Stock Exchange and any
reports, proxy and information statements, and other information filed under the
Exchange Act may also be inspected and copied at the offices of the New York
Stock Exchange, 120 Broad Street, New York, New York 10005.

43
<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE

The Company's Annual Reports on Form 10-K and 10-K/A dated June 29, 1996
for the year ended December 31, 1995, its Current Reports on Form 8-K/A dated
February 12, May 6, and June 7, 1996 and its Current Reports on Form 8-K dated
January 16, February 16, June 28 and October 22, 1996, its Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996 and its
Quarterly Report on Form 10-Q/A dated July 2, 1996 are incorporated in this
Prospectus by reference. All documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of this Offering shall be deemed
incorporated by reference into this Prospectus from the date of filing of such
documents (provided, however, that the information referred to in item 402 (a)
(8) of Regulation S-K of the Commission shall not be deemed specifically
incorporated by reference herein). Any statement contained herein or in a
document, all or a portion of which is incorporated or deemed to be incorporated
by reference herein, shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus. The Company will provide without charge
to each person, including any beneficial owner, to whom this Prospectus is
delivered, upon the request of such person, a copy of the foregoing documents
incorporated herein by reference, other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference into the information
that this Prospectus incorporates). Requests shall be directed to The Multicare
Companies, Inc., 411 Hackensack Avenue, Hackensack, New Jersey 07601; Attn:
General Counsel (telephone: (201) 488-8818).

44
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
PAGE
-----------
THE A.D.S GROUP
Independent Auditors' Report............................................................................. F-2
Combined Balance Sheets as of December 31, 1995 and
unaudited as of June 30, 1996......................................................................... F-3
Combined Statements of Income for the year ended December 31,
1995 and unaudited for the six month periods ended
June 30, 1995 and 1996................................................................................ F-4
Combined Statements of Cash Flows for the year ended
December 31, 1995 and unaudited for the
six month periods ended June 30, 1995 and 1996........................................................ F-5
Notes to Combined Financial Statements................................................................... F-6
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors
A.D.S Group
Newton, Massachusetts

We have audited the accompanying combined balance sheet of A.D.S Group as
of December 31, 1995, and the related statements of income, and cash flows for
the year then ended. These financial statements are the responsibility of the
Group's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of A.D.S Group as of December
31, 1995 and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.

LANDA & ALTSHER, P.C.

Randolph, Massachusetts
June 7, 1996

F-2
<PAGE>
A.D.S GROUP
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<S> <C> <C>
DECEMBER 31, 1995 JUNE 30, 1996
------------------ ---------------
(UNAUDITED)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents................................................. $ 3,923 $ 4,956
Marketable securities..................................................... 878 897
Accounts receivable--patients (net of allowance for doubtful accounts of
$950 in 1995 and $867 in 1996).............................................. 8,460 9,098
Notes receivable--related parties......................................... 1,500 1,500
Prepaid expenses and other current assets................................. 688 707
---------- ---------------
Total current assets................................................... 15,449 17,158
---------- ---------------
RESTRICTED CASH............................................................. 462 655
---------- ---------------
PROPERTY, PLANT AND EQUIPMENT:
Land, building and improvements........................................... 31,385 31,402
Equipment and property held under capital leases.......................... 6,489 6,721
Motor vehicles............................................................ 254 253
---------- ---------------
Total.................................................................. 38,128 38,376
Less: accumulated depreciation............................................ 9,084 9,792
---------- ---------------
Property, plant and equipment, net..................................... 29,044 28,584
---------- ---------------
DUE FROM RELATED PARTIES.................................................... 1,126 1,537
---------- ---------------
INVESTMENTS IN UNCOMBINED SUBSIDIARIES...................................... 2,275 2,383
---------- ---------------
OTHER ASSETS................................................................ 1,318 2,304
---------- ---------------
TOTAL ASSETS................................................................ $ 49,674 $ 52,621
---------- ---------------
---------- ---------------
LIABILITIES AND OWNERS' EQUITY

CURRENT LIABILITIES:
Demand notes payable...................................................... $ 1,296 $ 1,231
Accounts payable.......................................................... 3,039 2,975
Due to third party payors................................................. 823 1,857
Accrued liabilities....................................................... 2,577 2,546
Deferred revenue.......................................................... 131 62
Current portion of long-term debt......................................... 1,032 1,141
---------- ---------------
Total current liabilities.............................................. 8,898 9,812
---------- ---------------
LONG-TERM DEBT, net of current portion...................................... 27,499 26,837
---------- ---------------
OWNERS' EQUITY:
Common stock, 1,932 shares authorized at $0 and $1 par value,
18 shares issued and outstanding....................................... 324 324
Additional Paid-in-Capital................................................ 2,358 2,358
Retained Earnings and Partners' Capital................................... 10,583 13,257
Unrealized Gain on Marketable Securities.................................. 12 33
---------- ---------------
TOTAL OWNERS' EQUITY........................................................ 13,277 15,972
---------- ---------------
TOTAL LIABILITIES AND OWNERS' EQUITY........................................ $ 49,674 $ 52,621
---------- ---------------
---------- ---------------
</TABLE>

See accompanying notes to combined financial statements.

F-3
<PAGE>
A.D.S GROUP
COMBINED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)

<TABLE>
<S> <C> <C> <C>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, 1995 1995 1996
------------------ --------- ---------
(UNAUDITED)
REVENUES:
Net patient service revenues........................................ $ 55,875 $ 27,402 $ 28,429
Other operating revenues............................................ 10,147 5,006 6,309
---------- --------- ---------
Net revenues..................................................... 66,022 32,408 34,738
---------- --------- ---------
EXPENSES:
Facility operating expenses:
Salaries, wages and benefits..................................... 36,101 18,339 18,848
Other operating expenses......................................... 18,614 8,724 9,223
Corporate, general and administrative............................... 3,521 1,308 1,723
Depreciation and amortization....................................... 1,486 756 732
---------- --------- ---------
Total expenses................................................. 59,722 29,127 30,526
---------- --------- ---------

INCOME FROM OPERATIONS................................................ 6,300 3,281 4,212
---------- --------- ---------
OTHER INCOME (EXPENSE):
Investment income................................................... 291 79 149
Interest expense.................................................... (2,616) (1,285) (1,307)
Income from uncombined subsidiaries................................. 190 176 308
---------- --------- ---------
Total other income (expense)..................................... (2,135) (1,030) (850)
---------- --------- ---------
INCOME BEFORE INCOME TAXES............................................ 4,165 2,251 3,362
INCOME TAX EXPENSE.................................................... 51 22 40
---------- --------- ---------
NET INCOME............................................................ 4,114 2,229 3,322
RETAINED EARNINGS AND PARTNERS' CAPITAL-- BEGINNING OF PERIOD......... 10,339 10,339 10,583
DISTRIBUTIONS......................................................... (3,870) (1,355) (648)
---------- --------- ---------
RETAINED EARNINGS AND PARTNERS' CAPITAL--
END OF PERIOD....................................................... $ 10,583 $ 11,213 $ 13,257
---------- --------- ---------
---------- --------- ---------
</TABLE>

See accompanying notes to combined financial statements.

F-4
<PAGE>
A.D.S GROUP
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1995 1995 1996
--------------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................... $ 4,114 $ 2,229 $ 3,322
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.......................................... 1,486 758 732
Gain on sales of marketable securities................................. (66) -- --
Income from uncombined subsidiaries.................................... (190) (176) (308)
Provision for bad debts................................................ 606 72 100
Loss on sale and abandonment of property............................... 14 -- --
Changes in assets and liabilities:
Accounts receivable................................................. (420) 347 (738)
Prepaid expenses and other current assets........................... (258) (435) (1,049)
Accounts payable and accrued liabilities............................ 1,020 366 (75)
Due to third party payors........................................... 285 1,705 1,034
Deferred revenue.................................................... (50) (50) (69)
--------------- --------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................................. 6,541 4,816 2,949
--------------- --------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment................................ (604) (254) (247)
Proceeds from disposal of property....................................... 1 -- --
Purchase of marketable securities........................................ (730) -- --
Proceeds from sales of marketable securities............................. 1,270 10 --
Deposits to reserve for replacement...................................... (98) (352) (193)
Additions to construction in progress.................................... (34) -- --
Advances on notes to related parties..................................... (1,500) -- --
Repayment of related party notes......................................... 100 -- --
--------------- --------- -------
NET CASH USED BY INVESTING ACTIVITIES...................................... (1,595) (596) (440)
--------------- --------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt....................................................... 4,798 560 815
Repayment of debt and capitalized lease obligations...................... (3,811) (726) (1,432)
Deferred charges......................................................... (76) -- --
Deposits to pledge account............................................... (238) -- --
Due from related parties................................................. (919) (903) (411)
Distributions............................................................ (3,670) (1,205) (448)
--------------- --------- -------
NET CASH USED BY FINANCING ACTIVITIES...................................... (3,916) (2,274) (1,476)
--------------- --------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................... 1,030 1,946 1,033
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........................... 2,893 2,893 3,923
--------------- --------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................. $ 3,923 $ 4,839 $ 4,956
--------------- --------- -------
--------------- --------- -------
</TABLE>

See accompanying notes to combined financial statements.

F-5
<PAGE>
A.D.S GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)

The A.D.S Group, with offices in Newton and Andover Massachusetts, is a
management, development, and consulting organization committed to building
networks of post acute eldercare services in local communities around New
England. The A.D.S Group owns, operates and manages skilled nursing facilities
which provide long-term care and specialty medical services in Massachusetts,
Ohio and Connecticut. In addition, the A.D.S Group manages assisted living
communities and manages hospital based subacute units located in hospitals
throughout Massachusetts, and provides home services through a network of
providers.

NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION

The A.D.S Group ("the Group") financial statements are the combined
financial statements of the following selected entities under common control and
ownership (the Corporation) and which are the object of an impending sale: A.D.S
Berkshire Management, Inc., A.D.S Consulting, Inc., A.D.S Management, Inc.,
A.D.S Senior Housing, Inc., Senior Source, Inc., A.D.S Palm Chelmsford, Inc.,
A.D.S Reservoir Waltham, Inc., ASL, Inc. and Arcadia Associates, Nursing and
Retirement Centers of the Andovers, Inc. and North Andover Associates, Prescott
Nursing Home, Inc. and Prescott Nursing Home Associates, Solomont Brookline
Limited Partnership, Westford Nursing and Retirement Center Limited Partnership,
and Willow Manor Nursing Home, Inc.

All significant intercompany transactions and accounts of the Group have
been eliminated in combination.

The financial information as of June 30, 1996 and for the six month periods
ended June 30, 1995 and 1996 are unaudited and have been prepared in conformity
with the accounting principles and practices as reflected in the Group's audited
annual combined financial statements. The unaudited combined financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position as of June 30,
1996 and the operating results and cash flows for the six month periods ended
June 30, 1995 and 1996. Results for interim periods are not necessarily
indicative of those to be expected for the year.

The combined financial statements also include selected entities accounted
for under the equity method. The stockholders/owners of the Group have a
financial interest in these entities ranging from 20% - 50%.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future, they may
ultimately differ from actual results.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Cash and cash equivalents: The Group considers all short-term debt
securities purchased with an original maturity of three months or less to be
cash equivalents. The Group maintains cash and cash equivalent balances in
several federally insured regional financial institutions. Amounts in these
institutions exceeding federally insured limits totaled $5,273 at December 31,
1995. Cash and cash equivalent balances approximate their fair values.

F-6
<PAGE>
A.D.S GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
b. Net Patient service revenues: Net patient service revenues are reported
at the estimated net realizable amounts. Third-party payor revenues included in
net patient service revenues are recorded as indicated in Note 3. The Group
extends unsecured credit to their private patients and patients covered under
third party payor arrangements.

c. Property, plant and equipment: Land, building, improvements, equipment
and motor vehicles are recorded at cost. Depreciation of building and
improvements is calculated using the straight-line and accelerated methods over
the estimated useful lives that range from five to forty years. Depreciation of
equipment and motor vehicles is calculated using the straight-line and
accelerated methods over the estimated useful lives that range from three to ten
years. Depreciation charged to operations amounted to $1,355.

d. Marketable securities: The Group determines the appropriate
classification of securities at the time of purchase. If the Group has the
ability at the time of purchase to hold securities until maturity or on a
long-term basis, they are classified as investments and carried at historical
cost. Securities to be held for indefinite periods of time and not intended to
be held to maturity or on a long-term basis are classified as available for sale
and carried at market value.

Realized gains and losses on disposition are based on the net proceeds and
the book value of the securities sold and are recognized in the statement of
income. Unrealized gains and losses on investment securities available for sale
are based on the differences between book value and market value of each
security. These unrealized gains and losses are charged to equity.

e. Income taxes: The corporations have elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code. Under those provisions,
the Corporations do not pay federal tax on their taxable income. Consequently,
the stockholders are liable for income taxes on their respective share of the
Corporations' taxable income. An income tax provision of $51 has been recorded
in 1995, related to state income taxes.

The partnerships are not tax paying entities for purposes of federal and
state income taxes. Federal and state income taxes are computed on each
partner's total income from all sources.

NOTE 3--NET PATIENT SERVICE REVENUES FROM THIRD PARTY PAYORS

SUMMARY OF THE PAYMENT ARRANGEMENTS WITH THIRD PARTY PAYORS

Medicaid--Prospective Rate System--The Group receives reimbursement from
the Commonwealth of Massachusetts under the prospective rate of payment system
for the care and services rendered to publicly-aided patients in long-term care
facilities pursuant to regulations promulgated by the Massachusetts Rate Setting
Commission (MRSC). Under the regulations, the current year rates are calculated
utilizing base year costs adjusted for inflation. The base year costs are
subject to audit which could result in a retroactive rate adjustment for the
current year.

The MRSC regulations provide for a "lookback" provision for new facilities
whereby final rates will be calculated based on actual costs. The "lookback"
provision is applicable until the facility operates for a calendar year at full
licensure. The cost report for the first year of full license will be

F-7
<PAGE>
A.D.S GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)

NOTE 3--NET PATIENT SERVICE REVENUES FROM THIRD PARTY PAYORS--(CONTINUED)
audited by the MRSC and, the results of which, will be the basis for the
reimbursement for future years subject to a cost adjustment factor.

The Group has received amended rates as a result of the audit of prior base
year costs. These amended rates resulted in a retroactive adjustment due from
the Commonwealth of Massachusetts of $416. Management also estimates that the
Group has underspent the OBRA component of the rate resulting in a retroactive
adjustment due the Commonwealth of Massachusetts of $587. A provision has been
made in the accompanying financial statements under the caption "Due to Third
Party Payors" on the combined balance sheet.

Medicare--The Group receives reimbursement for the care of certain patients
under the federally sponsored Medicare program through an insurance
intermediary. During the year, an interim rate is assigned based upon the cost
experience of a prior year modified by its current regulations, and the Group is
paid at this rate during the year. A cost report is filed with, and audited by,
the insurance intermediary. A final rate which may be subject to cost
limitations is then established and final settlement of the difference is called
for under the regulations.

NOTE 4--MARKETABLE SECURITIES

Marketable securities at December 31, 1995 are comprised of securities
available for sale, in conjunction with the adoption of Statement of Financial
Accounting Standards (SFAS) No.115 "Accounting for Certain Investments in Debt
and Equity Securities", resulting in investment securities being carried at
market value. Marketable securities consist of the following:

<TABLE>
<S> <C> <C> <C>
DECEMBER 31, 1995
-------------------------------------
MARKET UNREALIZED
COST VALUE GAIN
--------- ----------- -------------
1) Short-term Government
Portfolio Mutual Funds................................... $ 609 $ 627 $ 18
2) Equity Portfolio
Mutual Funds............................................. 188 194 6
3) Equity Portfolio............................................ 56 57 1
--------- ----------- -----
$ 853 $ 878 $ 25
--------- ----------- -----
--------- ----------- -----
</TABLE>

Proceeds from the sales and maturities of investment securities available
for sale were $1,270. Gross gains and losses on those sales and maturities were
$85 and $19, respectively. Included in equity at December 31, 1995 is $12 of net
unrealized gains on investment securities available for sale.

NOTE 5--RELATED PARTY TRANSACTIONS

The Group has entered into the following transactions with related parties:

a) Related party loans which bear no interest and have no fixed repayment
terms amounted to $1,126 at December 31, 1995.

F-8
<PAGE>
A.D.S GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)

NOTE 5--RELATED PARTY TRANSACTIONS--(CONTINUED)
b) Notes receivable--stockholders--at December 31, 1995 consists of four
$375 demand notes due from various stockholders of the Group. The notes are
secured by stockholders' capital stock with interest payable semi-annually
beginning April 30, 1996 at the Federal short-term rate.

(c) The Group provided services to affiliates of the owners of the Group
(included in Other Operating Revenues) during 1995 as follows:

<TABLE>
<S> <C>
1995
---------

Management fees....................................................... $ 1,052

Administrative and central office..................................... 879

Development fees...................................................... 609

Other fees............................................................ 63
---------

Total.......................................................... $ 2,603
---------
---------
</TABLE>

NOTE 6--INVESTMENTS IN UNCOMBINED SUBSIDIARIES

The following selected entities have been accounted for using the equity
method:

<TABLE>
<S> <C>
OWNERSHIP
PERCENTAGE
-------------
Courtyard Nursing Care Partnership................................... 33%
Charlton Nursing Care Center......................................... 20%
The Recuperative Center Limited Partnership.......................... 48%
Hingham Healthcare Limited Partnership............................... 50%
</TABLE>

<TABLE>
<S> <C>
DECEMBER 31, 1995
------------------
Current assets........................................................... $ 15,980
Noncurrent assets........................................................ 38,906
Current liabilities...................................................... 5,448
Noncurrent liabilities................................................... 46,153
</TABLE>

Operating results include the proportionate share of income from affiliates
since the respective dates of investments. Summarized information for these
selected entities is as follows:

<TABLE>
<S> <C>
YEAR ENDED
DECEMBER 31, 1995
------------------
Revenue.................................................................. $ 30,298
Operating expenses....................................................... 29,298
Net income............................................................... 1,000
</TABLE>

F-9
<PAGE>
A.D.S GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)

NOTE 7--LONG-TERM DEBT

Long-term debt of the Group at December 31, 1995 is as follows:

a) Lines of Credit: The Group has lines of credit with several regional
financial institutions with aggregate outstanding balances of $2,145, $1,296 of
which is payable on demand with the remaining notes maturing through August
1998. Security for the lines of credit range from the business assets of the
entity obligated under the notes to the personal guarantee of stockholders.
Interest rates on the obligations range from prime to prime plus 100 basis
points. The Group has unused credit lines available of approximately $2,000.

b) Chattel Notes: The Group is obligated on $44 of chattel notes, secured
by motor vehicles, payable in monthly installments of $2 in the aggregate with
interest ranging from 3.9% to 8.75% with various maturity dates through January
1999. The Group has also obtained financing for multiple equipment purchases
from one regional financial institution amounting to $189 payable in monthly
principal installments of $10 plus interest at a weighted average rate of 8.75%
through December 1998.

c) Mortgages: Mortgage notes payable at December 31, 1995 are summarized as
follows:

<TABLE>
<S> <C>
Bank note, prime plus 1%, due February 2005....................................... $ 1,455
Bank note, prime plus 1%, due December 2002....................................... 6,954
HUD insured note, 9%, due December 2018........................................... 2,379
Bank note, prime plus 1%, due January 1999........................................ 8,064
HUD insured note, 9.375%, due November 2033....................................... 6,720
Industrial Revenue Bonds, 78% of prime, due April 2005............................ 292
Bank note, LIBOR plus 2.5%, due October 2000...................................... 1,497
---------
$ 27,361
---------
---------
</TABLE>

The above bank and HUD insured notes call for monthly debt service payments
of approximately $313, in the aggregate. In addition to debt service payments
the HUD insured mortgages require aggregate monthly deposits to a reserve for
replacements of $8. The industrial revenue bonds call for quarterly redemptions
of $8 plus interest.

d) The Group has entered into capitalized lease obligations for various
equipment which expire through 1998, with a remaining obligation of $88 at
December 31, 1995.

Maturities of long-term debt for the five years succeeding December 31,
1995 are as follows:

Certain mortgages require the maintenance of replacement reserves or a
pledged collateral account. These accounts, which are held by the respective
mortgagees in the amount of $462 are presented in the accompanying combined
balance sheet as "Restricted Cash".

F-10
<PAGE>
A.D.S GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)

NOTE 8--COMMITMENTS AND CONTINGENCIES

The Group is committed under non-cancelable operating leases for its
corporate offices and two nursing facilities. Minimum rental commitments under
non-cancelable leases at December 31, 1995 are summarized as follows:

<TABLE>
<S> <C>
OPERATING
-----------
1996.............................................................................. $ 1,367
1997.............................................................................. 1,393
1998.............................................................................. 1,455
1999.............................................................................. 1,457
2000.............................................................................. 1,497
Thereafter........................................................................ 5,567
-----------
$ 12,736
-----------
-----------
</TABLE>

Rent expenses relating to operations amounted to $1,299 for 1995.

The Group is contingently liable through either stand-by letters of credit
or security agreements on Group assets for approximately $12,500 at December 31,
1995.

Pursuant to the Commonwealth of Massachusetts Medical Assistance Program
regulations, the members of the Group are considered to be under common
ownership and consequently all members of the Group are contingently liable for
recoupment of liabilities of other members of the Group.

A significant portion of the Group's net revenues and accounts receivable
are derived from services reimbursable under the Medicaid and the Medicare
programs. There are numerous healthcare reform proposals being considered on the
federal and state levels. Although no reform legislation changes have been
implemented, the current proposals for the Medicare program include a shift to a
prospective payment system, a limit on interim payments for ancillary services,
a reduction of reimbursement for capital costs, a continued freeze on routine
cost limits, and salary equivalency limits for occupational and speech
therapies. In addition, current Medicaid proposals being considered include the
elimination of the Boren amendment and the establishment of state block grants.
The Company cannot predict at this time whether any of these proposals will be
adopted or, if adopted and implemented, what effect such proposals would have on
the Group.

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 Group in the form of higher prices. When faced with
increases in operating costs, the Group has increased its charges for services.
The Group'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.

F-11
<PAGE>
A.D.S GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)

NOTE 9--SUPPLEMENTAL CASH FLOW DISCLOSURE AND OTHER

<TABLE>
<S> <C>
Interest payments net of amounts capitalized....................................... $ 2,518
---------
---------
</TABLE>

The following are noncash items excluded from the combined statement of
cash flows:

<TABLE>
<S> <C>
Additions to property, plant and equipment........................................ $ (50)
Transfer of property, plant and equipment to an affiliate......................... 9
Transfer of assets to an affiliate................................................ 81
Disposal of property, plant and equipment......................................... 8
Debt assumed...................................................................... 45
Transfer of debt.................................................................. (10)
Amount due related parties........................................................ (84)
Cash infusion from stockholder.................................................... 1,655
Capital contributions to uncombined subsidiaries.................................. (1,655)
Distributions from uncombined subsidiaries........................................ 200
Distributions to stockholders from uncombined subsidiaries........................ (200)
</TABLE>

As noted above, additional paid-in-capital increased by $1,655 during 1995.
Distributions against retained earnings and partners' capital were $3,870 in
1995.

$1,840 of accruals for compensation are included in accrued liabilities at
December 31, 1995.

NOTE 10--NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) issued Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of", which becomes effective for fiscal years beginning after
December 15, 1995. The Group adopted this statement effective January 1, 1996.
The implementation of such statement did not have a material effect on the
Group's combined financial statements.

NOTE 11--SUBSEQUENT EVENTS (UNAUDITED)

Effective June 17, 1996, management has announced the pending sale of the
Group to The Multicare Companies, Inc. It is anticipated that the transaction
will be concluded by the end of 1996.

F-12
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON
STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS
OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................... 3
Risk Factors..................................... 6
Recent Developments.............................. 11
Use of Proceeds.................................. 13
Price Range of Common Stock...................... 13
Dividend Policy.................................. 13
Capitalization................................... 14
Selected Consolidated Financial Data............. 15
Unaudited Pro Forma Condensed
Consolidated Financial Statements............... 17
Business......................................... 23
Management....................................... 34
Principal Stockholders........................... 37
The Reorganization............................... 38
Description of Capital Stock..................... 39
Underwriting..................................... 41
Legal Matters.................................... 42
Experts.......................................... 42
Available Information............................ 43
Incorporation of Documents by Reference.......... 44
Index to Consolidated Financial Statements....... F-1

</TABLE>

3,000,000 SHARES

[LOGO]

COMMON STOCK

-------------------
PROSPECTUS
OCTOBER 24, 1996
-------------------

SMITH BARNEY INC.
COWEN & COMPANY
DEAN WITTER REYNOLDS INC.
NATWEST SECURITIES LIMITED

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