CRA MANAGED CARE INC, S-1/A, 1996-05-09

CRA MANAGED CARE INC
S-1/A, 1996-05-09
MISC HEALTH & ALLIED SERVICES, NEC

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 9, 1996

REGISTRATION NO. 333-03253
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- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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PRE-EFFECTIVE AMENDMENT NO. 1

TO
FORM S-3

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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CRA MANAGED CARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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8099 04-2658593
MASSACHUSETTS (PRIMARY STANDARD (I.R.S. EMPLOYER
INDUSTRIALCLASSIFICATION IDENTIFICATION NO.)
(STATE OR OTHER CODE NUMBER)
JURISDICTION OF
INCORPORATION OR
ORGANIZATION)

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312 UNION WHARF
BOSTON, MASSACHUSETTS 02109
(617) 367-2163
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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DONALD J. LARSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CRA MANAGED CARE, INC.
312 UNION WHARF
BOSTON, MASSACHUSETTS 02109
(617) 367-2163
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

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COPIES TO:
JAMES WESTRA, ESQUIRE LESLIE E. DAVIS, ESQUIRE
HUTCHINS, WHEELER & DITTMAR TESTA, HURWITZ & THIBEAULT, LLP
A PROFESSIONAL CORPORATION 125 HIGH STREET
101 FEDERAL STREET BOSTON, MASSACHUSETTS 02110
BOSTON, MASSACHUSETTS 02110 (617) 248-7000
(617) 951-6600

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION

MAY 9, 1996

2,500,000 Shares

[LOGO OF CRA MANAGED CARE, INC. APPEARS HERE]

Common Stock

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Of the 2,500,000 shares of Common Stock offered hereby, 1,100,000 are being
sold by CRA Managed Care, Inc. ("CRA" or the "Company") and 1,400,000 are being
sold by certain stockholders of the Company (the "Selling Stockholders"). The
Company will not receive any of the proceeds from the sale of shares of Common
Stock by the Selling Stockholders. The Company's Common Stock is quoted on the
Nasdaq National Market (the "Nasdaq National Market") under the symbol "CRAA."
On May 3, 1996, the last reported sale price of the Company's Common Stock was
$42.38 per share.

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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" APPEARING ON PAGES 6 THROUGH 9.

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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.

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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
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Total(2).......................... $ $ $ $
</TABLE>
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(1) Before deducting expenses of the offering estimated at $600,000 payable by
the Company.

(2) Certain Selling Stockholders have granted the Underwriters a 30-day option
to purchase up to 375,000 additional shares of Common Stock solely to cover
over-allotments, if any. To the extent that the option is exercised, the
Underwriters will offer the additional shares at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Selling Stockholders
will be $ , $ , and $ , respectively. See "Use of Proceeds" and
"Underwriting."

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The shares of Common Stock are offered by the several Underwriters subject to
prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the
offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland on or about
, 1996.

Alex. Brown & Sons
INCORPORATED
Dean Witter Reynolds Inc.
Montgomery Securities
J.P. Morgan & Co.

THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>

[Image of map of the continental United States of America and the State of
Hawaii with dots, circles and a star imprinted in the various states
representing the Company's field case management, specialized cost containment
and corporate offices.]

CRA SERVICE LOCATIONS

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

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND OTHER SELLING
GROUP MEMBERS OR THEIR AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE
WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. This Prospectus contains forward-looking statements that
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Except as otherwise specified, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option.

THE COMPANY

CRA provides field case management and specialized cost containment services
designed to reduce workers' compensation costs. Field case management services
involve working on a one-on-one basis with injured employees and their various
health care professionals, employers and insurance company adjusters to assist
in maximizing medical improvement and, where appropriate, to expedite return to
work. Specialized cost containment services include various techniques designed
to reduce the cost of workers' compensation claims and automobile accident
injury claims. The Company operates one of the largest field case management
organizations in the United States, consisting of 110 field case management
offices with approximately 1,000 field case managers who provide medical
management and return to work services in 49 states and the District of
Columbia. CRA also provides a broad range of higher margin specialized cost
containment services, including utilization management, workers' compensation
network management, telephonic case management and retrospective medical bill
review services. Revenues from specialized cost containment services comprised
approximately 28.5% of revenues for the first quarter of 1996, up from
approximately 25.2% for the corresponding period of the prior year. The Company
markets its services to workers' compensation insurers, third party
administrators, self-insured employers and payors of automobile accident
medical claims through a direct sales and marketing organization consisting of
over 125 dedicated personnel. CRA currently has over 1,200 customers
nationwide.

Workers' compensation is a state-mandated, comprehensive insurance program
that requires employers to fund medical expenses, lost wages and other costs
resulting from work-related injuries and illnesses. According to statistics
published in the 1994 Workers' Compensation Year Book, total workers'
compensation costs to employers were approximately $60 billion in 1992
(excluding costs associated with productivity losses) and approximately $22.8
billion in 1982. Based upon a combination of statistics published in the 1994
Workers' Compensation Year Book and The Fact Book 1994--Property/Casualty
Insurance Facts, the Company estimates that 1992 total workers' compensation
costs to employers was comprised of approximately $22 billion related to
medical costs, approximately $24 billion related to indemnity costs, including
temporary wage replacement and permanent disability payments, and the balance
related to other costs such as legal services and claims administration. The
Company believes that this growth resulted primarily from (i) broader
definitions of work-related injuries and illnesses covered by workers'
compensation laws, (ii) the shifting of medical costs from health insurance
plans to the workers' compensation system, (iii) an aging work force, (iv) the
continued requirement that employers pay all of an employee's cost of medical
treatment, without any employee co-payment or deductible, and a significant
portion of lost wages and non-medical costs, (v) the overall inflation of
medical costs and (vi) the relatively low utilization to date of comprehensive
cost containment programs in the workers' compensation system.

In response to rising workers' compensation costs, insurance carriers and
employers have become increasingly focused on applying managed care techniques
to reduce lost work time, medical costs and other costs associated with
workers' compensation. The Company estimates that the workers' compensation
managed care services industry generated total 1993 revenues of approximately
$2.6 billion. While the industry is fragmented with a large number of
competitors, CRA believes that it is one

3
<PAGE>

of only a small number of companies that offer a comprehensive line of workers'
compensation managed care services on a nationwide basis.

CRA believes that significant opportunities exist in applying managed care
techniques to the workers' compensation marketplace. The Company's objective is
to expand its presence as a national provider of comprehensive managed care
services to workers' compensation payors. CRA's strategy is to (i) continue its
focus on the workers' compensation marketplace where the Company believes that
its specialized skills provide it with a significant competitive advantage,
(ii) leverage its national organization and local market presence to expand its
relationships with national payors who are increasingly seeking national
solutions to their workers' compensation problems, (iii) capitalize on its
traditional customer base by cross-selling specialized cost containment
services to its existing field case management customers, (iv) increase its
marketing of early intervention services to identify promptly cases that have
the potential to result in significant expenses and to take appropriate
measures to control these expenses before they are incurred, (v) take advantage
of recent enabling legislation to apply managed care techniques to the
automobile insurance market, and (vi) expand its product offerings and enhance
its opportunities for growth through strategic acquisitions.

RECENT DEVELOPMENTS

As part of its strategy to expand its product offerings and enhance its
opportunities for growth through strategic acquisitions, the Company has
recently completed two acquisitions and has entered into a definitive agreement
with respect to a third strategic acquisition. On October 24, 1995, CRA
acquired all outstanding capital stock of Alta Pacific Corporation ("Alta
Pacific"), a leading provider of case management services in the state of
Washington. The acquisition of Alta Pacific provides a platform for the
introduction of CRA's specialized cost containment services in the Pacific
Northwest, a region where the Company has historically not maintained a
presence. On April 2, 1996 CRA acquired all outstanding capital stock of FOCUS
Healthcare Management, Inc. ("Focus"), which maintains one of the nation's
largest workers' compensation networks of preferred provider organizations
("PPO"). The acquisition of Focus enables the Company to offer its customers
access to a specialized PPO controlled by the Company. On May 6, 1996 CRA
signed a definitive agreement to acquire all the outstanding capital stock of
QMC3, Inc. ("QMC3"), a leading managed care company servicing the automobile
insurance market. This acquisition positions CRA to capitalize on the
introduction of managed care techniques to the automobile insurance market. See
"Recent Developments."

The Company's executive office is located at 312 Union Wharf, Boston,
Massachusetts 02109, and its telephone number is (617) 367-2163.

RISK FACTORS

The Common Stock offered hereby involves a high degree of risk including,
among others, risks associated with the Company's operations, the market in
which it competes, the implementation of its growth strategy and material
benefits to insiders as a result of this offering. See "Risk Factors."

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company...... 1,100,000 shares
Common Stock offered by the Selling 1,400,000 shares
Stockholders............................
Common Stock to be outstanding after the 8,474,724 shares(1)
offering................................
Use of proceeds.......................... Repayment of short-term debt and
general corporate purposes, including
acquisitions.
Nasdaq National Market symbol............ CRAA
</TABLE>
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(1) Based on the number of shares outstanding as of April 30, 1996. Excludes
options to purchase 664,700 shares at April 30, 1996, with a weighted
average exercise price of $20.23 per share, of which options to purchase
244,000 shares have been granted subject to stockholder approval. See "Risk
Factors---Shares Eligible for Future Sale" and Note 10 to the Consolidated
Financial Statements of the Company.

4
<PAGE>

SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------------------------- ---------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(1) 1995 1996 1996(1)
------- ------- -------- -------- -------- ----------- ------- ------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues............... $58,969 $80,851 $100,546 $121,295 $146,055 $155,556 $34,930 $40,225 $42,283
Gross profit........... 6,458 11,997 14,464 17,499 23,440 26,087 5,385 6,803 7,225
Operating income(2).... 1,965 4,990 4,533 8,746 12,419 13,443 2,708 3,694 3,604
Interest expense....... 78 66 16 4,087 2,484 4,282 1,354 194 568
Provision for income
taxes(3).............. 118 307 355 5,302 3,974 3,930 542 1,453 1,336
Net income (loss)
before extraordinary
items(2)(3)........... $ 1,798 $ 4,677 $ 4,178 $ (713) $ 5,961 $ 5,231 $ 812 $ 2,047 $ 1,717
Weighted average shares
outstanding........... 4,815 6,540 6,540 4,815 7,550 7,550
Pro forma and actual
earnings per share(4). $ 0.57 $ 0.91 $ 0.80 $ 0.17 $ 0.27 $ 0.23
STATISTICAL DATA:
Total number of service
locations............. 93 122 150 160 161 150 160 161
FIELD CASE MANAGEMENT
SERVICES:
Revenues............... $67,366 $ 80,948 $ 92,232 $106,462 $106,462 $26,111 $28,765 $28,765
Percentage of total
revenue............... 83.3% 80.5% 76.0% 72.9% 68.4% 74.8% 71.5% 68.0%
Number of service
locations............. 78 87 102 110 110 102 110 110
SPECIALIZED COST
CONTAINMENT SERVICES:
Revenues............... $13,485 $ 19,598 $ 29,063 $ 39,593 $ 49,094 $ 8,819 $11,460 $13,518
Percentage of total
revenue............... 16.7% 19.5% 24.0% 27.1% 31.6% 25.2% 28.5% 32.0%
Number of service
locations(5).......... 15 35 48 50 51 48 50 51
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------------------
ACTUAL PRO FORMA(1) AS ADJUSTED(6)
------- ------------ --------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................ $ 9,386 $(11,085) $32,602
Total assets............................... 38,911 61,540 75,127
Total debt................................. 9,100 30,208 108
Stockholders' equity....................... 13,720 13,720 57,407
</TABLE>
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(1) Pro forma to give effect to the acquisition of Focus as if such transaction
had occurred on January 1, 1995 for the statement of operations data. The
balance sheet data is pro forma as if the transaction had occurred on March
31, 1996. See "Financial Statements--Consolidated Pro Forma Financial
Statements of CRA Managed Care, Inc. and Focus Healthcare Management, Inc."
(2) In 1994 the Company completed a recapitalization (the "Recapitalization")
pursuant to which the Company redeemed an aggregate of 49.0% of the then
outstanding shares of the Company's Common Stock from its founders with the
proceeds of securities sold to third parties and borrowings under the
Company's bank credit facility. Expenses for the period prior to the
Recapitalization include certain compensation and other expenses, the
levels of which are not comparable to the levels of such expenses for 1994.
Expenses for 1994 include increased investments in management information
systems, personnel and certain other items. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
(3) Prior to the Recapitalization, the Company elected to be taxed as an S
corporation. In connection with the Recapitalization, the Company was
required to change from an S to a C corporation. This change resulted in
the Company recording an incremental tax provision of $3,772,000 in the
first quarter of 1994.
(4) The pro forma earnings per share for the year ended December 31, 1994 and
the Company's pro forma net income for the year ended December 31, 1994 of
$2,753,000 have been computed as if the Company had been subject to federal
and state income taxes during the entire period, based upon an effective
tax rate indicative of the statutory rate in effect during the period.
(5) Most of the Company's specialized cost containment service locations are
located with the Company's field case management offices.
(6) Adjusted to give effect to the application of the estimated net proceeds
of this offering, as described under "Use of Proceeds."

5
<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered by this Prospectus.

Potential Adverse Impact of Government Regulation. Many states, including a
number of those in which the Company transacts business, have licensing and
other regulatory requirements applicable to the Company's business.
Approximately half of the states have enacted laws that require licensing of
businesses which provide medical review services, such as the Company. Some of
these laws apply to medical review of care covered by workers' compensation.
These laws typically establish minimum standards for qualifications of
personnel, confidentiality, internal quality control, and dispute resolution
procedures. These regulatory programs may result in increased costs of
operation for the Company, which may have an adverse impact upon the Company's
ability to compete with other available alternatives for health care cost
control. In addition, new laws regulating the operation of managed care
provider networks have been adopted by a number of states. These laws may
apply to managed care provider networks having contracts with the Company or
to provider networks which the Company has organized and may organize in the
future. To the extent the Company is governed by these regulations, it may be
subject to additional licensing requirements, financial oversight and
procedural standards for beneficiaries and providers. Regulation in the health
care and workers' compensation fields is constantly evolving. The Company is
unable to predict what additional government regulations, if any, affecting
its business may be promulgated in the future. The Company's business may be
adversely affected by failure to comply with existing laws and regulations,
failure to obtain necessary licenses and government approvals or failure to
adapt to new or modified regulatory requirements. Proposals for health care
legislative reforms are regularly considered at the federal and state levels.
To the extent that such proposals affect workers' compensation, such proposals
may adversely affect the Company's business and results of operations. In
addition, changes in workers' compensation laws or regulations may impact
demand for the Company's services, require the Company to develop new or
modified services to meet the demands of the marketplace or modify the fees
that the Company may charge for its services. One of the proposals being
considered is 24-hour health coverage, in which the coverage of traditional
employer-sponsored health plans is combined with workers' compensation
coverage to provide a single insurance plan for work-related and non-work-
related health problems. Incorporating workers' compensation coverage into
conventional health plans may adversely affect the market for the Company's
services. In addition, the automobile insurance industry, like the workers'
compensation industry, is regulated on a state-by-state basis. While
regulatory approval is not required for the Company to offer most of its
services to the automobile insurance market, state regulatory approval is
required in order to offer automobile insurers products that permit them to
direct claimants into a network of medical providers. To date, only Colorado
and New York have legislation that permits such direction of care and QMC3 has
been approved to offer this managed care service to automobile insurers in
Colorado. QMC3, in cooperation with a third party PPO, has been in discussions
for more than a year with the State of New York Insurance Department regarding
approval of this PPO as a certified provider of fully integrated managed care
services to the New York automobile insurance market using QMC3 as its
exclusive utilization review agent. If approved, such an arrangement would be
the first to offer automobile insurance managed care services in New York.
While the Company believes that approval from the State of New York Insurance
Department will be forthcoming, there can be no assurance that New York will
issue such approval. Without such approval, QMC3 and this PPO would not be
permitted to offer fully integrated managed care services to the New York
automobile insurance market. In addition, no assurance can be given that other
states will adopt legislation permitting such direction of care for automobile
accident victims or, if such legislation is adopted, that the Company will be
able to obtain regulatory approval to provide such services. See "Business--
Government Regulation."

Reliance on Data Processing and Licensed Software. Certain aspects of the
Company's business are dependent upon its ability to store, retrieve, process
and manage data and to maintain and upgrade its

6
<PAGE>

data processing capabilities. Interruption of data processing capabilities for
any extended length of time, loss of stored data, programming errors or other
computer problems could have a material adverse effect on the Company's
business and results of operations. The software used by the Company within
its medical bill review operation is licensed from an independent third party
software company pursuant to a non-exclusive license with a three-year term
expiring February 1998 that may be terminated by either party upon six months'
prior written notice. While the Company has historically maintained a good
relationship with the licensor, there can be no assurance that this software
license will not be terminated or that the licensor will renew the license
upon expiration. Although management believes that alternative software would
be available if the existing license were terminated, such termination could
be disruptive and could have a material adverse effect on the Company's
business and results of operations.

Risks Related to Growth Strategy; Fluctuations in Operating Results. The
Company's strategy is to continue its internal growth and, as strategic
opportunities arise in the workers' compensation managed care industry and
other related industries, to pursue additional acquisitions of, or
relationships with, other companies. As a result, the Company is subject to
certain growth-related risks, including the risk that it will be unable to
retain personnel or acquire other resources necessary to service such growth
adequately. Expenses arising from the Company's efforts to increase its market
penetration may have a negative impact on operating results. In addition,
there can be no assurance that any suitable opportunities for future strategic
acquisitions or relationships will arise or, if they do arise, that the
transactions contemplated thereby could be completed. There can be no
assurance that the Company will be able to integrate effectively into the
Company the businesses that the Company has acquired or those that it may
acquire in the future. In addition, such transactions are subject to various
risks generally associated with the acquisition of businesses, including the
financial impact of expenses associated with the integration of businesses and
the diversion of management resources. There can be no assurance that any
recent or future acquisition or other strategic relationship will not have an
adverse impact on the Company's business or results of operations. If suitable
opportunities arise in the future, the Company anticipates that it would
finance such transactions, as well as its internal growth, through working
capital or, in certain instances, through additional debt or equity financing.
There can be no assurance, however, that such debt or equity financing would
be available to the Company on acceptable terms when, and if, suitable
strategic opportunities arise. In addition, the Company's quarterly and annual
results have varied and may vary significantly in the future due to a number
of factors, including the impact of current or proposed governmental
regulations related to the Company's businesses, expenses associated with the
Company's growth strategy, the Company's ability to integrate strategic
acquisitions with existing operations, competitive pressures, the loss of key
management personnel and customer acceptance of current and new products and
services. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Selected Quarterly Operating Results."

Possible Litigation and Legal Liability. The Company, through its
utilization management services, makes recommendations concerning the
appropriateness of providers' proposed medical treatment plans of patients
throughout the country, and it could share in potential liabilities for
adverse medical consequences. The Company does not grant or deny claims for
payment of benefits and the Company does not believe that it engages in the
practice of medicine or the delivery of medical services. There can be no
assurance, however, that the Company will not be subject to claims or
litigation related to the grant or denial of claims for payment of benefits or
allegations that the Company engages in the practice of medicine or the
delivery of medical services. In addition, there can be no assurance that the
Company will not be subject to other litigation that may adversely affect the
Company's business or results of operations. The Company maintains
professional liability insurance and such other coverages as the Company
believes are reasonable in light of the Company's experience to date. There
can be no assurance, however, that such insurance will be sufficient or
available at reasonable cost to protect the Company from liability which might
adversely affect the Company's business or results of operations. See
"Business--Legal Matters."

Competition. The Company faces competition from large insurers, health
maintenance organizations ("HMOs"), PPOs, third party administrators ("TPAs")
and other managed health care

7
<PAGE>

companies. The Company believes that, as managed care techniques continue to
gain acceptance in the workers' compensation marketplace, CRA's competitors
will increasingly consist of nationally focused workers' compensation managed
care service companies, insurance companies, HMOs and other significant
providers of managed care products. Legislative reforms in some states permit
employers to designate health plans such as HMOs and PPOs to cover workers'
compensation claimants. Because many health plans have the ability to manage
medical costs for worker's compensation claimants, such legislation may
intensify competition in the market served by the Company. Many of the
Company's current and potential competitors are significantly larger and have
greater financial and marketing resources than those of the Company, and there
can be no assurance that the Company will continue to maintain its existing
performance or be successful with any new products or in any new geographical
markets it may enter. See "Business--Competition" and "Business--Government
Regulation."

Changes in Market Dynamics. Legislative reforms in some states permit
employers to designate health plans such as HMOs and PPOs to cover workers'
compensation claimants. Because many health plans have the capacity to manage
health care for workers' compensation claimants, such legislation may
intensify competition in the market served by the Company. Within the past few
years, several states have experienced decreases in the number of workers'
compensation claims and the average cost per claim which have been reflected
in workers' compensation insurance premium rate reductions in those states.
The Company believes that declines in workers' compensation costs in these
states are due principally to intensified efforts by payors to manage and
control claim costs, to improved risk management by employers and to
legislative reforms. If declines in workers' compensation costs occur in many
states and persist over the long-term, they may have an adverse impact on the
Company's business and results of operations.

Dependence Upon Key Personnel. The Company is dependent to a substantial
extent upon the continuing efforts and abilities of certain key management
personnel. In addition, the Company faces competition for experienced
employees with professional expertise in the workers' compensation managed
care area. The loss of, or the inability to attract, qualified employees could
have a material adverse effect on the Company's business and results of
operations.

Material Benefit to Insiders. In connection with the sale of the shares
offered hereby, the Selling Stockholders will receive an aggregate of
approximately $59,332,000 in gross proceeds (plus up to an additional
$15,892,500 in gross proceeds if the over-allotment option is exercised in
full), based on the last reported sale price of the Common Stock on May 3,
1996, as reported on the Nasdaq National Market. See "Use of Proceeds" and
"Principal and Selling Stockholders."

Concentration of Ownership. Upon completion of this offering, the Company's
officers, directors, principal stockholders and their respective affiliates
will own approximately 30.7% of the outstanding Common Stock (26.3% of the
outstanding Common Stock if the over-allotment option is exercised in full).
As a result, these stockholders, if acting together, would be able to exert
substantial influence over the Company and matters requiring approval by the
stockholders of the Company, including the election of directors. The voting
power of these stockholders under certain circumstances could have the effect
of delaying or preventing a change in control of the Company. See "Management"
and "Principal and Selling Stockholders."

Company Does Not Anticipate Paying Dividends. The Company does not
anticipate paying any cash dividends in the foreseeable future. In addition,
the Credit Facility limits the payment of dividends. Accordingly, it is not
anticipated that holders of the Common Stock will receive any current income
with respect to their shares of Common Stock for the foreseeable future. See
"Dividends."

Potential Adverse Impact of Shares Eligible for Future Sale. Sales of
substantial amounts of Common Stock in the public market following this
offering, or the perception that such sales could occur, could adversely
affect prevailing market prices of the Common Stock. In connection with the
Recapitalization, the Company entered into a registration rights agreement
(the "Registration Rights Agreement") with J.H. Whitney & Co. ("Whitney") and
certain of its affiliates, First Union Corporation

8
<PAGE>

("First Union"), Lois E. Silverman and Donald J. Larson, pursuant to which
such persons and entities are entitled to certain rights with respect to
registration under the Securities Act of 1933, as amended, of approximately
4,502,611 shares of Common Stock. Pursuant to the Registration Rights
Agreement, holders of at least 25.0% of the shares of Common Stock subject to
the Registration Rights Agreement (the "Rightsholders") (excluding Ms.
Silverman and Mr. Larson) have the right to require the Company to register
their Common Stock on up to three occasions. Ms. Silverman has the right to
require the Company to register her shares of Common Stock after the other
Rightsholders (excluding Mr. Larson) have sold Common Stock of the Company
with an aggregate sales price of at least $30,000,000 in one or more
registered offerings. If the Company proposes to register any of its
securities under the Securities Act of 1933, as amended, whether for its own
account or otherwise, the parties to the Registration Rights Agreement
(including Ms. Silverman and Mr. Larson) are entitled to receive notice of
such registration and to include their shares in such registration, subject to
certain conditions and limitations. In addition, the Company has granted to
former stockholders of each of Alta Pacific and QMC3 the right to request
registration of up to 136,150 shares and 249,816 shares, respectively, on one
occasion and to include any of such shares in the Company's registration
statements filed on behalf of the Company or other stockholders of the
Company. To the extent exercised, such rights to register shares of Common
Stock will result in additional shares becoming available to the public
market, which could adversely affect prevailing market prices of the Common
Stock. The Company has agreed to pay fees, costs and expenses of any
registration effected on behalf of the parties to the Registration Rights
Agreement and the former stockholders of Alta Pacific and QMC3 (other than
underwriting discounts and commissions). The shares being sold by certain of
the Selling Stockholders are being registered pursuant to the Registration
Rights Agreement and the registration rights agreement with the former Alta
Pacific stockholders. In addition, the Company, its executive officers and
directors, all current stockholders that are parties to the Registration
Rights Agreement, and the former stockholders of Alta Pacific have agreed to
certain restrictions on their disposition of shares of Common Stock for a
period of 90 days after the date of this Prospectus. See "Underwriting."

Anti-Takeover Effect of Charter Provisions, By-Laws and State Laws; Possible
Adverse Effects of Issuance of Preferred Stock. The Company's Amended and
Restated Articles of Organization and By-Laws, as well as Massachusetts law,
contain provisions that could discourage a proxy contest, make more difficult
the acquisition of a substantial block of the Company's Common Stock, which
could make the payment of a premium to shareholders in connection with a
change in control less likely, and increase the difficulty of removing
incumbent management and board members. In addition, such provisions could
limit the price that investors might be willing to pay in the future for
shares of the Company's Common Stock. The Board of Directors is authorized to
issue, without stockholder approval, Preferred Stock with voting, conversion
and other rights and preferences that could adversely affect the voting power
or other rights of the holders of Common Stock. Although the Company has no
current plans to issue any shares of Preferred Stock, the issuance of
Preferred Stock or rights to purchase Preferred Stock could be used to
discourage an unsolicited acquisition proposal. The Board of Directors is
divided into three "staggered" classes, with each class serving for a term of
three years. Dividing the Board of Directors in this manner increases the
difficulty of removing incumbent members and could discourage a proxy contest
or the acquisition of a substantial block of the Company's Common Stock.
Massachusetts law contains certain anti-takeover provisions, including a so-
called Business Combination Statute that restricts certain stockholders that
own (together with their affiliates) 5.0% or more of the outstanding voting
stock of a Massachusetts corporation from engaging in certain business
combinations with such corporation and a so-called Control Share Statute that
limits any person or entity that has acquired 20% or more of a corporation's
stock from voting such shares unless the corporation's stockholders, other
than such acquiring person or entity, authorize such voting rights by a vote
of the holders of the majority of stock of the corporation entitled to vote on
such matters. Such provisions of Massachusetts law could have the effect of
discouraging a potential acquiror from making an offer for the Common Stock,
which would make the payment of a premium to stockholders in connection with a
change in control less likely, and could increase the difficulty of removing
incumbent management and board members. See "Description of Capital Stock."

9
<PAGE>

RECENT DEVELOPMENTS

As part of CRA's strategy to expand its product offerings and enhance its
opportunities for growth through strategic acquisitions, the Company has
recently completed two acquisitions and has entered into a definitive
agreement with respect to a third strategic acquisition.

On October 24, 1995, CRA acquired all outstanding capital stock of Alta
Pacific in exchange for 136,150 shares of the Company's Common Stock, which
was then valued at $2,900,000. This acquisition was accounted for as a pooling
of interests and was not material from an accounting perspective. Therefore,
the Company restated its opening retained earnings to reflect the net assets
of Alta Pacific. As such, the results for the year ended December 31, 1995
only include the operating results of Alta Pacific subsequent to the
acquisition date. Alta has eight field case management offices in the state of
Washington and last year had revenues of approximately $2,900,000. The
acquisition of Alta Pacific gives CRA an immediate presence in the Pacific
Northwest for the introduction of CRA's specialized cost containment services.

On April 2, 1996, CRA acquired from United HealthCare Corporation all
outstanding capital stock of Focus for $21,000,000 in cash. This acquisition
was funded with amounts borrowed under the Company's senior revolving credit
facility with First Union National Bank of North Carolina ("First Union
Bank"). Focus, based in Brentwood, Tennessee has built and maintains one of
the nation's largest workers' compensation PPO networks, and last year had
annual revenues of approximately $9,900,000. Focus' national PPO network
includes more than 85,000 individual providers and 1,700 hospitals servicing
26 states and the District of Columbia. The acquisition of Focus enables the
Company to provide its customers with cost containment services through a
specialized PPO controlled by the Company.

On May 6, 1996, CRA signed a definitive agreement to acquire all outstanding
capital stock of QMC3 in exchange for 249,816 shares of the Company's Common
Stock, which was then valued at $8,500,000. QMC3 is a leading managed care
services company serving the automobile insurance market, and has been
instrumental in helping to obtain the passage of legislation in Colorado and
New York enabling the mandatory direction of medical care for automobile
accident victims. QMC3 had revenues in 1995 of approximately $2,000,000. The
acquisition of QMC3 positions CRA to capitalize on the introduction of managed
care techniques to the automobile insurance market. This acquisition is
expected to be accounted for as a pooling of interests and is not material to
the Company from an accounting perspective. The closing of the acquisition of
QMC3 is expected to occur prior to the closing of this offering. The agreement
pursuant to which CRA intends to acquire QMC3 contains a number of customary
conditions to closing. While the Company anticipates that such conditions will
be satisfied, there can be no assurance that the acquisition of QMC3 will be
consummated.

10
<PAGE>

USE OF PROCEEDS

The net proceeds from the sale of the 1,100,000 shares of Common Stock
offered by the Company hereby are estimated to be $43,687,000,at an assumed
public offering price of $42.38 per share (the last reported sale price of the
Common Stock on May 3, 1996) and after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by the
Company. Certain affiliates of Whitney have agreed to permit the Company to
sell, in place of such affiliates of Whitney, up to 100,000 shares of Common
Stock upon exercise of the underwriters' over-allotment option. If the over-
allotment option is exercised in full and the Company sells all 100,000
shares, the total proceeds to the Company are estimated to be $47,713,200.

The Company intends to apply the net proceeds it receives from this offering
as follows: (i) repay approximately $30 million of senior debt outstanding
under the $40 million revolving credit facility (the "Credit Facility")
between the Company and First Union Bank, of which $21 million was incurred to
fund the acquisition of Focus, $5 million was incurred to repay the junior
subordinated notes and the balance was incurred to provide working capital;
and (ii) use the balance for working capital and general corporate purposes.
Borrowings under the Credit Facility bear interest at First Union Bank's prime
rate plus an additional percentage of up to 0.375%, or LIBOR plus an
additional percentage of up to 1.875%, depending on certain financial
criteria. The Credit Facility expires by its terms on March 29, 1999. The
Company may from time to time pursue additional strategic acquisitions, and
may use funds held for general corporate purposes to fund such acquisitions in
whole or in part. Pending use of the net proceeds of the offering, the Company
will invest the net proceeds in short-term, investment-grade, interest-bearing
securities.

The Company will not receive any proceeds from the sale of the shares of
Common Stock by the Selling Stockholders. See "Principal and Selling
Stockholders."

PRICE RANGE OF COMMON STOCK

The Common Stock of the Company has been included for quotation in the
Nasdaq National Market under the symbol "CRAA" since the Company's initial
public offering of Common Stock on May 3, 1995. Prior to that time, there was
no public market for the Common Stock. The following tables set forth the high
and low closing prices for the Common Stock for the periods indicated as
reported by the Nasdaq National Market:

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1995:
Second Quarter................................................. $25.00 $16.50
Third Quarter.................................................. $24.50 $19.00
Fourth Quarter................................................. $24.50 $20.75
1996:
First Quarter.................................................. $36.75 $22.13
Second Quarter (through May 3, 1996)........................... $44.88 $34.00
</TABLE>

On May 3, 1996, the last reported sale price was $42.38 per share. As of
April 5, 1996, there were 369 holders of record of the Company's Common Stock.
The Company believes that there are approximately 1,050 beneficial owners of
the Company's Common Stock.

DIVIDEND POLICY

The Company made cash distributions in the form of bonuses and dividends to
its stockholders in prior periods when it was an S corporation. The Credit
Facility limits the payment of cash dividends by the Company in any one year
to an aggregate of 25.0% of the prior year's consolidated net income. In
addition, the Company currently intends to retain all of its earnings for use
in its business and, therefore, does not anticipate paying any cash dividends
in the foreseeable future.

11
<PAGE>

CAPITALIZATION

The following table sets forth (i) the capitalization of the Company at
March 31, 1996, (ii) the pro forma capitalization of the Company at March 31,
1996 giving effect to the consummation of the Focus acquisition and (iii) the
adjusted pro forma capitalization of the Company at March 31, 1996 giving
effect to the sale of 1,100,000 shares of Common Stock offered by the Company
hereby, at an assumed public offering price of $42.38 per share, after
deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company and application of the net proceeds as
described in "Use of Proceeds." This table should be read in conjunction with
the Unaudited Pro Forma Combined Financial Statements and the related Notes
thereto, the Consolidated Financial Statements and related Notes thereto of
the Company and the Financial Statements and Notes thereto of Focus included
elsewhere in this Prospectus. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
--------- ------------ --------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C>
Revolving credit facility and current
portion
of capital leases....................... $ 9,100 $ 30,169 $ 69
Long-term debt:
Capital leases.......................... 39 39
Stockholders' equity:
Preferred Stock, $.01 par value;
1,000,000 shares authorized; no shares
issued and outstanding................. -- -- --
Common Stock, $.01 par value; 10,000,000
shares authorized; 7,373,024 shares
issued and outstanding and 8,473,024
shares issued and outstanding, as
adjusted(3)(4)......................... 74 74 85
Additional paid-in capital.............. 36,852 36,852 80,528
Retained deficit........................ (23,206) (23,206) (23,206)
--------- --------- ---------
Total stockholders' equity........... 13,720 13,720 57,407
--------- --------- ---------
Total capitalization............... $ 22,820 $ 43,928 $ 57,515
========= ========= =========
</TABLE>
- --------
(1) Pro forma to give effect to the acquisition of Focus as if such
transaction had occurred on March 31, 1996. See "Unaudited Pro Forma
Combined Condensed Financial Statements."
(2) Adjusted to give effect to the sale by the Company of 1,100,000 shares of
Common Stock at an assumed offering price of $42.38 per share and the
application of the estimated net proceeds therefrom, as described under
"Use of Proceeds."
(3) Excludes options to purchase 664,700 shares outstanding at April 30, 1996,
with a weighted average exercise price of $20.23 per share, of which
options to purchase 244,000 shares have been granted subject to
stockholder approval. See "Description of Capital Stock" and Note 10 to
the Company's Financial Statements.
(4) The Company's Board of Directors has authorized an increase in the number
of shares of Common Stock which the Company is authorized to issue to
40,000,000. Such increase is subject to the approval of the Company's
stockholders at the Company's Special Meeting in lieu of its Annual
Meeting of Stockholders to be held on May 21, 1996. See "Description of
Capital Stock."

12
<PAGE>

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following table sets forth selected financial data of the Company for
each of the five fiscal years in the period ended December 31, 1995. The
selected financial data below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto included elsewhere in this
Prospectus, which have been audited by Arthur Andersen LLP, independent public
accountants. The statement of operations data set forth below with respect to
years ended December 31, 1993, 1994, and 1995 and the balance sheet data at
December 31, 1994 and 1995 are derived from the financial statements included
elsewhere in this Prospectus. The data presented for the three months ended
March 31, 1995 and 1996 are derived from unaudited consolidated financial
statements and include, in the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the data for such periods. The balance sheet data at December 31, 1993 is also
derived from financial statements audited by Arthur Andersen LLP, but are not
included herein. The statement of operations data for the years ended December
31, 1991 and 1992 and the balance sheet data at December 31, 1991 are derived
from financial statements audited by the Company's predecessor accountants not
included herein.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- -------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues............... $58,969 $80,851 $100,546 $121,295 $146,055 $34,930 $40,225
Cost of services....... 52,421 68,854 86,082 103,796 122,615 29,545 33,422
------- ------- -------- -------- -------- ------- -------
Gross profit........... 6,548 11,997 14,464 17,499 23,440 5,385 6,803
General and
administrative
expenses(1)........... 4,583 7,007 9,931 8,753 11,021 2,677 3,109
Operating income(1).... 1,965 4,990 4,533 8,746 12,419 2,708 3,694
Other expenses:
Interest (income)..... (32) (5) (11) (62) -- -- --
Interest expense...... 78 66 16 4,087 2,484 1,354 194
Other (income)
expense.............. 3 (55) (5) 132 -- -- --
------- ------- -------- -------- -------- ------- -------
Total other
(income) expense.. 49 6 -- 4,157 2,484 1,354 194
Income before income
taxes(1).............. 1,916 4,984 4,533 4,589 9,935 1,354 3,500
Provision for income
taxes(2)
Current year
operations........... 118 307 355 1,530 3,974 542 1,453
Change in tax status.. -- -- -- 3,772 -- -- --
------- ------- -------- -------- -------- ------- -------
Total provision for
income taxes...... 118 307 355 5,302 3,974 542 1,453
------- ------- -------- -------- -------- ------- -------
Net income (loss)
before extraordinary
items(1)(2)........... 1,798 4,677 4,178 (713) 5,961 812 2,047
------- ------- -------- -------- -------- ------- -------
Loss on retirement of
debt, net of taxes.... -- -- -- -- (2,460) -- --
------- ------- -------- -------- -------- ------- -------
Net income (loss)...... $ 1,798 $ 4,677 $ 4,178 $ (713) $ 3,501 $ 812 $ 2,047
======= ======= ======== ======== ======== ======= =======
PRO FORMA AND ACTUAL
EARNINGS PER SHARE:
Net income before ex-
traordinary items(3).. $ 0.57 $ 0.91 $ 0.17 $ 0.27
Loss on retirement of
debt, net of tax...... -- (0.37) -- --
-------- -------- ------- -------
Net income............. $ 0.57 $ 0.54 $ 0.17 $ 0.27
======== ======== ======= =======
Weighted average shares
outstanding........... 4,815 6,540 4,815 7,550
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
BALANCE SHEET DATA: ------- ------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital........ $ 5,366 $ 9,114 $ 12,126 $ 5,609 $ 7,493 $ 5,347 $ 9,386
Total assets........... 11,704 15,894 20,836 31,345 36,556 30,484 38,911
Total debt............. 453 337 -- 44,716 9,300 44,059 9,100
Total stockholders'
equity (deficit)...... 7,616 11,896 15,856 (28,513) 11,660 (27,701) 13,720
</TABLE>
- -------
(1) Expenses for the period prior to the Recapitalization include certain
compensation and other expenses, the levels of which are not comparable to
the levels of such expenses for 1994. Expenses for 1994 include increased
investments in management information systems, personnel and certain other
items. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(2) Prior to the Recapitalization, the Company elected to be taxed as an S
corporation. In connection with the Recapitalization, the Company was
required to change from an S to a C corporation. This change resulted in
the Company recording an incremental net tax provision of $3,772,000 in
the first quarter of 1994.
(3) The pro forma earnings per share for the year ended December 31, 1994 and
the Company's pro forma net income for the year ended December 31, 1994 of
$2,753,000 have been computed as if the Company had been subject to
federal and state income taxes during the entire period, based upon an
effective tax rate indicative of the statutory rate in effect during the
period.

13
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements.

OVERVIEW

The Company operates one of the largest field case management organizations
in the United States, consisting of 110 field case management offices with
approximately 1,000 field case managers who provide medical management and
return to work services in 49 states and the District of Columbia. CRA also
provides a broad range of higher margin specialized cost containment services,
including utilization management, specialized PPO network management,
telephonic case management and retrospective medical bill review services,
that are designed to reduce costs associated with work-related injuries and
automobile accident-related injuries. The Company markets its services to
workers' compensation insurers, third-party administrators, self-insured
employers and payors of automobile accident medical claims through a direct
sales and marketing organization consisting of over 125 dedicated personnel.
CRA currently has over 1,200 customers nationwide.

The Company was founded in 1978 to provide field case management services to
workers' compensation payors. In 1990, as part of its strategy to provide a
comprehensive range of managed care services to its customers and to leverage
its national organization and local office network in field case management,
CRA began introducing specialized cost containment services designed to reduce
the cost of workers' compensation claims. The Company believes that
specialized cost containment services represent an important growth
opportunity for CRA and that the majority of such services generate higher
gross margins than traditional field case management services.

Set forth below for each of the three most recent years, and for the three
months ended March 31, 1995 and 1996, is the percentage of the Company's
revenues generated from its field case management services and its specialized
cost containment services:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- ---------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Field case management services.......... 80.5% 76.0% 72.9% 74.8% 71.5%
Specialized cost containment services... 19.5% 24.0% 27.1% 25.2% 28.5%
</TABLE>

Historically, the Company's field case management revenue growth has
resulted from both local market share gains as well as geographic office
expansion. The Company opened nine new field case management offices in 1993,
15 in 1994 and eight in 1995, all eight of which were opened in connection
with the acquisition of Alta Pacific. The Company believes that its field case
management office network is of sufficient size to serve adequately the needs
of its customers nationwide. As a result, the Company expects that it will
open only two to five new field case management offices per year to satisfy
client needs in selected regions. Revenues from specialized cost containment
services comprised approximately 28.5% of total revenues for the first quarter
of 1996. The Company opened 20 new specialized cost containment locations in
1993, 13 in 1994 and two in 1995.

14
<PAGE>

The Company currently derives most of its revenues on a fee-for-service
basis. Although risk sharing arrangements are not common in today's workers'
compensation managed care services industry, the Company believes that these
arrangements may become more prevalent in the future.

RESULTS OF OPERATIONS

The following table sets forth certain items included in the Company's
statements of operations as a percentage of revenues. The Company's past
operating results are not necessarily indicative of future operating results.

<TABLE>
<CAPTION>
PERCENTAGE OF REVENUE
-----------------------------------
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
------------------- --------------
1993 1994 1995 1995 1996
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Revenues................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services........................... 85.6 85.6 84.0 84.6 83.1
Gross profit............................. 14.4 14.4 16.0 15.4 16.9
General and administrative expenses........ 9.9 7.2 7.5 7.7 7.7
Operating income......................... 4.5 7.2 8.5 7.7 9.2
Other expenses............................. -- 3.4 1.7 3.9 0.5
Provision for income taxes................. 0.3 4.4 2.7 1.6 3.6
Net income (loss).......................... 4.2 (0.6) 2.4 2.3 5.1
</TABLE>

THREE MONTHS ENDED MARCH 31, 1996 AND 1995

Revenues

Revenues increased 15.2% in the first quarter of 1996 to $40,225,000 from
$34,930,000 in the first quarter of 1995. Field case management revenues
increased 10.2% in the first quarter of 1996 to $28,765,000 from $26,111,000
in the first quarter of 1995, while specialized cost containment revenues
increased 30.0% in the first quarter of 1996 to $11,460,000 from $8,819,000 in
the first quarter of 1995, primarily as a result of greater penetration in the
Company's existing service areas. The growth in the Company's revenues is
attributable to the opening of eight field case management offices associated
with the acquisition of Alta Pacific in the fourth quarter of 1995 and growth
in revenues from existing service locations.

Cost of Services

Cost of services increased 13.1% in the first quarter of 1996 to $33,422,000
from $29,545,000 in the first quarter of 1995 due to an increase in revenues.
Cost of services as a percentage of revenue decreased to 83.1% in the first
quarter of 1996 compared to 84.6% in the first quarter of 1995. This
improvement is the result of productivity gains in field case management
services coupled with a continued shift in the Company's revenue mix towards
the specialized cost containment services, especially bill review, which have
higher gross profit margins than field case management revenues.

General and Administrative Expenses

General and administrative expenses increased 16.1% in the first quarter of
1996 to $3,109,000 from $2,677,000 in the first quarter of 1995, or 7.7% as a
percentage of revenue for the first quarter of 1996 and 1995. The increase in
general and administrative expenses in the first three months of 1996 was due
primarily to increased expenditures for marketing initiatives and additional
investments in the information technology group.

Interest Expense

Interest expense decreased $1,160,000 in the first quarter of 1996 to
$194,000 from $1,354,000 in the first quarter of 1995 due primarily to the
repayment of the $17,000,000 principal amount of term loans

15
<PAGE>

(the "Term Loan") and the $21,000,000 principal amount of senior subordinated
notes (the "Senior Subordinated Notes") with the proceeds from the closing of
the sale of Common Stock on May 10, 1995.

Provision for Income Taxes

The Company's provision for income taxes in the first quarter of 1996 of
$1,453,000 resulted in an effective tax rate of 41.5% compared to 40% for the
first quarter of 1995. The Company expects to continue to provide for its
taxes at the higher effective tax rate for the remainder of the year due to
increased profitability and a higher effective state tax rate.

YEARS ENDED DECEMBER 31, 1995 AND 1994

Revenues

Revenues increased 20.4% in 1995 to $146,055,000 from $121,295,000 in 1994.
Field case management revenue increased 15.4% in 1995 to $106,462,000 from
$92,232,000 in 1994, while specialized cost containment revenue grew by 36.2%
in 1995 to $39,593,000 from $29,063,000 in 1994. This growth is attributable
to the opening of 23 new field case management and 15 new specialized cost
containment service locations throughout 1994 and 1995 as well as growth in
revenues from existing service locations. The Company continued to experience
significant revenue growth from its specialized cost containment offerings in
1995, as revenues from the Company's bill review, telephonic case management
and precertification services increased by over 60% from the prior year.

Cost of Services

Cost of services increased 18.1% in 1995 to $122,615,000 from $103,796,000
in 1994. The Company's cost of services consists primarily of salaries and
related benefits, rent, travel, marketing, telephone expenses and other
office-related costs. Cost of services increased in 1995 primarily due to
expenses associated with the opening of additional service locations and
compensation of related personnel. Cost of services as a percentage of revenue
for 1995 decreased to 84.0% versus 85.6% in 1994. This improvement is the
result of productivity gains in field case management services coupled with a
further shift in the Company's revenue mix towards specialized cost
containment services, especially bill review, which historically have higher
gross profit margins than field case management services.

General and Administrative Expenses

General and administrative expenses increased 25.9% in 1995 to $11,021,000
from $8,753,000 in 1994, or 7.5% and 7.2% as a percentage of revenue for 1995
and 1994, respectively. This increase was due primarily to increased expenses
for additional senior corporate management and to significant investments in
management information systems and personnel, national marketing, preferred
provider network development and other administrative functions. These
additions and investments occurred primarily in the second half of 1994.

Other Expenses

Other expenses for 1995 consist entirely of interest expense. Interest
expense for 1995 decreased $1,603,000 to $2,484,000 in 1995 from $4,087,000 in
1994 due to the repayment of debt in connection with the Company's initial
public offering on May 10, 1995.

Provision for Income Taxes

The Company's effective tax rate was 40.3% for 1995 and resulted in a tax
provision of $3,974,000. In connection with the Recapitalization during 1994,
the Company converted from S to C corporation status and was required to
report income on an accrual basis for tax purposes rather than on a cash
basis.

16
<PAGE>

Loss on Retirement of Debt

The Company used the net proceeds ($36,507,000) from the Company's initial
public offering, supplemented by borrowings under the Credit Facility
($5,000,000) to repay fully the Term Loan ($16,250,000) and the former
revolving credit facility ($4,226,000) with First Union Bank and the Senior
Subordinated Notes ($21,000,000) issued to Whitney and First Union. The early
repayment of this debt resulted in the Company recording a loss on the
retirement of debt of $2,460,000 comprised of the write-off of associated
deferred finance costs ($1,772,000), debt discount on the Senior Subordinated
Notes ($2,140,000) and fees associated with the termination of the interest
rate swaps previously required by the former loan agreement ($158,000), offset
by a tax benefit of $1,610,000.

YEARS ENDED DECEMBER 31, 1994 AND 1993

Revenues

Revenues increased 20.6% in 1994 to $121,295,000 from $100,546,000 in 1993.
Field case management revenue increased 13.9% in 1994 to $92,232,000 from
$80,948,000 in 1993, while specialized cost containment revenue grew by 48.3%
in 1994 to $29,063,000 from $19,598,000 in 1993. This growth is attributable
to the opening of 15 new field case management and 13 new specialized cost
containment service locations as well as growth in revenues from existing
service locations. The Company experienced significant revenue growth from its
specialized cost containment offerings in 1994, as revenues from the Company's
bill review, telephonic case management and precertification services more
than doubled from the prior year.

Cost of Services

Cost of services increased 20.6% in 1994 to $103,796,000 from $86,082,000 in
1993. Cost of services as a percentage of revenue remained constant at 85.6%
in 1994 and 1993. The Company's cost of services consists primarily of
salaries and related benefits, rent, travel, marketing, telephone expenses and
other office-related costs. Cost of services increased in 1994 primarily due
to expenses associated with the opening of additional service locations and
compensation of related personnel.

General and Administrative Expenses

General and administrative expenses decreased 11.9% in 1994 to $8,753,000
from $9,931,000 in 1993, or 7.2% and 9.9% as a percentage of revenue for 1994
and 1993, respectively. These amounts include discretionary expenses of
$163,000 and $6,089,000 for 1994 and 1993, respectively, paid to the Company's
stockholders in the form of bonuses and real estate and equipment rental
payments while the Company was an S corporation. Excluding these amounts,
general and administrative expenses increased 123.6% in 1994 to $8,590,000
from $3,842,000 in 1993, and were 7.1% and 3.8% as a percentage of revenue for
1994 and 1993, respectively. This increase was due primarily to increased
expenses for additional senior corporate management and to significant
investments in management information systems and personnel, national
marketing, preferred provider network development and other administrative
functions to support future growth. The increase in such expenses occurred
primarily in the second half of 1994.

Other Expenses

Other expenses consist almost entirely of interest expense. Interest expense
for 1994 increased $4,071,000 to $4,087,000 from $16,000 in 1993 due to the
debt issued in connection with the Recapitalization.

Provision for Income Taxes

In connection with the Recapitalization, the Company converted from S to C
corporation status and was required to report income on an accrual basis for
tax purposes rather than on a cash basis. The

17
<PAGE>

conversion to C corporation status resulted in a total tax liability of
approximately $5,100,000. The Company will discharge this liability through
annual payments of approximately $1,275,000 through 1997. This conversion
resulted in an incremental provision for taxes of $3,772,000 for 1994.
Excluding the effect of being an S corporation prior to the Recapitalization,
the Company's effective tax rate was approximately 41.0%.

SELECTED QUARTERLY OPERATING RESULTS

The following table sets forth certain unaudited quarterly results of
operations for each of the eight quarters ended March 31, 1996. In
management's opinion, this unaudited information has been prepared on the same
basis as the annual financial statements and includes all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the information for the quarters presented, when read in
conjunction with the financial statements and notes thereto included elsewhere
in this Prospectus. The operating results for any quarter are not necessarily
indicative of results for any subsequent quarter.

<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1994 1994 1994 1995 1995 1995 1995 1996
-------- --------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $30,477 $30,962 $31,742 $34,930 $36,125 $36,826 $38,174 $40,225
Cost of services........ 26,125 26,650 26,914 29,545 30,212 30,843 32,015 33,422
------- ------- ------- ------- ------- ------- ------- -------
Gross profit.......... 4,352 4,312 4,828 5,385 5,913 5,983 6,159 6,803
General and administra-
tive expenses.......... 2,039 2,287 2,498 2,677 2,744 2,759 2,841 3,109
------- ------- ------- ------- ------- ------- ------- -------
Operating income...... 2,313 2,025 2,330 2,708 3,169 3,224 3,318 3,694
Other expenses.......... 1,155 1,268 1,300 1,354 655 251 224 194
Provision for income
taxes.................. 498 326 444 542 1,005 1,189 1,238 1,453
------- ------- ------- ------- ------- ------- ------- -------
Net income before ex-
traordinary items ..... -- -- -- 812 1,509 1,784 1,856 2,047
Loss on retirement of
debt, net of taxes..... -- -- -- -- (2,460) -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $ 660 $ 431 $ 586 $ 812 $ (951) $ 1,784 $ 1,856 $ 2,047
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

The Company's quarterly and annual results have varied and may vary
significantly in the future due to a number of factors, including the impact
of current or proposed governmental regulations related to the Company's
businesses, expenses associated with the Company's growth strategy, the
Company's ability to integrate strategic acquisitions with existing
operations, competitive pressures, the loss of key management personnel and
customer acceptance of current and new products and services.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically funded its working capital requirements and
capital expenditures primarily from cash flow generated from operations
supplemented by short-term borrowings under revolving credit facilities. Cash
flows generated from operations were $2,961,000, $5,594,000, $4,114,000 and
$650,000 for the years ended December 31, 1993, 1994, 1995 and for the first
three months of 1996, respectively. During the first three months of 1996,
working capital used $1,920,000 of cash due primarily to an increase in
accounts receivable of $2,654,000 offset by an increase in accounts payable,
accrued expenses and income taxes of $495,000. Accounts receivable increased
due to continued revenue growth

18
<PAGE>

while accounts payable increased due to the timing of payments, primarily the
payment of income taxes. The Company used $575,000 of cash to purchase
property and equipment during the first three months of 1996, the majority of
which was spent on new computer and software technology. The Company believes
cash flow generated from operations will be sufficient to fund the Company's
working capital, capital expenditures and debt service requirements for at
least the next 12 months. To the extent strategic opportunities arise, the
Company anticipates funding any future acquisitions through working capital
and, if necessary, future debt or equity financing.

In 1994, the Company completed the Recapitalization, pursuant to which the
Company redeemed an aggregate of 49.0% of the then outstanding shares of the
Company's Common Stock from its founders with the proceeds of securities sold
to third parties and borrowings under the Company's bank credit facility. On
May 10, 1995, the Company completed its initial public offering of Common
Stock, generating net proceeds to the Company of $36,507,000. These proceeds,
supplemented by borrowings of $5,000,000 under the Credit Facility with First
Union Bank, were used to repay fully the indebtedness incurred in connection
with the Recapitalization.

On April 28, 1995, the Company entered into the $25,000,000 Credit Facility
with First Union Bank. On March 29, 1996, the Company and First Union Bank
signed an amendment to expand the Company's borrowing capacity under the
Credit Facility to $40,000,000 under similar terms and conditions in order to
finance the acquisition of Focus. The Company borrowed $21,000,000 under the
Credit Facility to finance the purchase price of Focus. The Company's
obligations under the Credit Facility are secured by a first priority security
interest in substantially all of the Company's properties and assets. The
Company intends to use a portion of the proceeds from the sale of the shares
of Common Stock offered hereby to repay approximately $30,000,000 principal
amount outstanding under the Credit Facility. See "Use of Proceeds."

On January 16, 1996, the Company retired the $5,000,000 junior subordinated
notes issued in connection with the Recapitalization utilizing borrowings
under the Credit Facility.

The Company's long-term liquidity needs consist of working capital and
capital expenditure requirements, repayment of borrowings under the Credit
Facility and the funding of any future acquisitions. The Company intends to
fund these long-term liquidity needs from cash generated from operations, net
proceeds to the Company from this offering, available borrowings under the
Credit Facility and, if necessary, future debt or equity financings. There can
be no assurance that any future debt or equity financing will be available on
terms favorable to the Company.

19
<PAGE>

BUSINESS

CRA provides field case management and specialized cost containment services
designed to reduce workers' compensation costs. The Company operates one of
the largest field case management organizations in the United States,
consisting of 110 field case management offices with approximately 1,000 field
case managers who provide medical management and return to work services in 49
states and the District of Columbia. CRA also provides a broad range of higher
margin specialized cost containment services, including utilization
management, specialized PPO network management, telephonic case management and
retrospective medical bill review services, that are designed to reduce costs
associated with work-related injuries and automobile accident-related
injuries. Revenues from specialized cost containment services comprised
approximately 28.5% of revenues for the first quarter of 1996, up from
approximately 25.2% for the corresponding period of the prior year. The
Company markets its services to workers' compensation insurers, TPAs, self-
insured employers, and payors of automobile accident medical claims through a
direct sales and marketing organization consisting of over 125 dedicated
personnel. CRA currently has over 1,200 customers nationwide.

INDUSTRY OVERVIEW

Workers' Compensation

Workers' compensation is a state-mandated, comprehensive insurance program
that requires employers to fund medical expenses, lost wages and other costs
resulting from work-related injuries and illnesses. Since their introduction
in the early 1900s, these programs have been expanded to all fifty states and
the District of Columbia. Each state is responsible for implementing and
regulating its own program. Consequently, workers' compensation benefits and
arrangements vary on a state-by-state basis and are often highly complex.

Workers' compensation plans generally require employers to fund all of an
employee's costs of medical treatment and a significant portion of lost wages,
legal fees and other associated costs. Typically, work-related injuries are
broadly defined, and injured or ill employees are entitled to extensive
benefits. Employers are required to provide first-dollar coverage with no co-
payment or deductible due from the injured or ill employee for medical
treatment and, in many states, there is no lifetime limit on expenses.
However, in exchange for providing this coverage for employees, employers are
not subject to litigation by employees for benefits in excess of those
provided by the relevant state statute. In most states, the extensive benefits
coverage (for both medical costs and lost wages) is provided through the
purchase of commercial insurance from private insurance companies,
participation in state-run insurance funds or employer self-insurance.

Provider reimbursement methods vary on a state-by-state basis. A majority of
states have adopted fee schedules pursuant to which all health care providers
are uniformly reimbursed. The fee schedules are set by each state and
generally prescribe the maximum amounts that may be reimbursed for a
designated procedure. In states without fee schedules, health care providers
are reimbursed based on usual, customary and reasonable ("UCR") fees charged
in the particular state in which the services are provided.

According to statistics published in the 1994 Workers' Compensation Year
Book, employers in the United States incurred approximately $60 billion in
total costs of workers' compensation in 1992 (excluding costs associated with
productivity losses) and approximately $22.8 billion in 1982. Based upon a
combination of statistics published in the 1994 Workers' Compensation Year
Book and The Fact Book 1994--Property/Casualty Insurance Facts, the Company
estimates that 1992 total workers' compensation costs to employers was
comprised of approximately $22 billion related to medical costs, approximately
$24 billion related to indemnity costs, including temporary wage replacement
and permanent disability payments, and the balance related to other costs,
such as legal services and claims

20
<PAGE>

administration. Despite various state reforms and employers' increasing
attention to workers' compensation costs, total workers' compensation costs
have increased substantially from 1982 to 1992.

The medical cost component of workers' compensation costs has increased at a
faster rate than the average annual increase in total workers' compensation
costs. Based upon statistics published in the sources named above, the Company
estimates that workers' compensation medical costs increased at a compound
annual rate of 15.9%, and that the medical cost component represented
approximately $5 billion in 1982 and accounted for an estimated 34% of total
workers' compensation medical and indemnity costs. Based upon statistics
published in the sources named above and statistics published in Health Care
Financing Review (Fall 1994), the Company estimates that by 1992, the
estimated $22 billion medical cost component of workers' compensation costs
accounted for approximately 47.8% of total workers' compensation medical and
indemnity costs, or 2.7% of total U.S. health care expenditures.

The Company believes that workers' compensation costs will continue to rise
primarily because of (i) broader definitions of work-related injuries and
illnesses covered by workers' compensation laws, (ii) the shifting of medical
costs from health insurance plans to the workers' compensation system, (iii)
an aging work force, (iv) the continued requirement that employers pay all of
an employee's cost of medical treatment, without any employee co-payment or
deductible, and a significant portion of lost wages and non-medical costs, (v)
the overall inflation of medical costs and (vi) the relatively low utilization
to date of comprehensive cost containment programs in the workers'
compensation system. As workers' compensation costs escalate, the Company
expects that employers will continue to seek and implement strategies and
programs to reduce workers' compensation costs.

Workers' Compensation Managed Care Services

The Company estimates that the workers' compensation managed care services
industry generated approximately $2.6 billion in revenues during 1993,
comprised of field case management and specialized cost containment services.
The workers' compensation managed care services market is served by the
Company and a small number of other competitors that offer a comprehensive
line of workers' compensation managed care services on a nationwide basis. A
large number of additional companies offer some managed care services on a
limited geographic basis. The result is a fragmented market with what the
Company believes is only a small number of companies offering a fully
integrated and comprehensive approach to managing workers' compensation costs
on a nationwide basis.

Workers' compensation managed care services broadly fall into two
categories: field case management services and specialized cost containment
services. Field case management services involve working on a one-on-one basis
with injured employees and their various health care professionals, employers
and insurance company adjusters. Field case management services are designed
both to assist in maximizing medical improvement and, where appropriate, to
expedite return to work. Specialized cost containment services are designed to
reduce the cost of workers' compensation claims through a variety of
techniques such as first report of injury services, utilization management
(precertification, concurrent and retrospective bill review), telephonic case
management, PPO network access, independent medical examinations ("IMEs"),
peer reviews and hospital bill auditing.

Managed care techniques are intended to control the cost of health care
services and to measure the performance of providers through intervention and
on-going review of services proposed and actually provided. Managed care
techniques were originally developed to stem the rising costs of group health
medical care. Historically, employers were slow to apply managed care
techniques to workers' compensation costs primarily because the aggregate
costs are relatively small compared to costs associated with group health
benefits and because state-by-state regulations related to workers'
compensation are far more complex than those related to group health. However,
in recent years, employers and insurance carriers have been increasing their
focus on applying managed care techniques to control their workers'
compensation costs.

21
<PAGE>

Since workers' compensation benefits are mandated by law and are subject to
extensive regulation, payors and employers do not have the same flexibility to
alter benefits as they have with other health benefit programs. In addition,
workers' compensation programs vary from state to state, making it difficult
for payors and multi-state employers to adopt uniform policies to administer,
manage and control the costs of benefits. As a result, managing the cost of
workers' compensation requires approaches that are tailored to the specific
state regulatory environment in which the employer operates. Many states do
not permit employers to restrict a claimant's choice of provider, making it
difficult for employers to utilize managed care approaches characteristic of
the group health insurance market. However, employers in nineteen states
currently have the right to direct employees to a specific primary health care
provider during the onset of a workers' compensation case, subject to the
right of the employee to change physicians after a specific period. Recently,
an increasing number of states have adopted legislation encouraging the use of
workers' compensation managed care organizations ("MCOs") in an effort to
allow employers to control their workers' compensation costs. MCO laws
generally provide employers an opportunity to channel injured employees into
provider networks. In certain states, MCO laws require licensed MCOs to offer
certain specified services, such as utilization management, case management,
peer review and provider bill review. Most of the MCO laws adopted to date
establish a framework within which a company such as CRA can provide its
customers a full range of managed care services for greater cost control.

CRA'S BUSINESS STRATEGY

CRA believes that significant opportunities exist in applying managed care
techniques to the workers' compensation marketplace, which historically has
been under-managed. The Company's objective is to expand its presence as a
national provider of comprehensive managed care services to workers'
compensation payors and payors of automobile accident medical claims. The
Company's strategy for achieving this objective is as follows:

Focus on Workers' Compensation Managed Care. The Company intends to continue
its focus on providing workers' compensation managed care services to workers'
compensation insurers, TPAs and self-insured employers. The Company believes
that to serve this complex market, a core understanding of medical-related
issues, a thorough understanding of return to work issues and techniques, and
an in-depth understanding of the state-by-state regulatory environment is
required. CRA has developed such expertise through its years of serving this
market. CRA believes it can leverage its expertise as a highly skilled
provider of workers' compensation managed care services to further expand its
national market presence and increase its market share.

Increase National Accounts Penetration. The Company intends to increase its
penetration of large, national payors by leveraging its broad-based workers'
compensation expertise and its experience with its existing base of national
accounts. Many large, national insurance carriers and self-insured employers
are seeking workers' compensation managed care service providers that have the
ability to provide services on a nationwide basis. These large payors want a
comprehensive solution to their workers' compensation needs from a service
provider that is adept at understanding and working with many different and
complex state legislative environments. The Company's national organization of
local service locations enables the Company to meet the needs of these large,
national payors while maintaining the local market presence necessary to
monitor changes in state-specific regulations and to facilitate case
resolution through locally provided managed care services.

Cross-Sell Comprehensive Product Offering. The Company intends to capitalize
on the relationships developed through its 110-office field case management
network by aggressively cross-selling its specialized cost containment
services to its existing customer base. CRA believes that it is one of a small
number of companies with a comprehensive offering of workers' compensation
managed care services. The Company complements its extensive field case
management network with 50 service locations nationwide that provide one or
more specialized cost containment services. Of the Company's approximately
1,200 case management customers, only a small percentage are also utilizing
the

22
<PAGE>

Company's specialized cost containment services. The Company believes that
this low utilization rate among CRA's existing customers provides a
significant opportunity to expand CRA's specialized cost containment business.

Emphasize Early Intervention. The Company intends to increase its marketing
of early intervention services, such as first report of injury,
precertification, telephonic case management and access to PPO networks. Early
intervention enables the Company to promptly identify cases that have the
potential to result in significant expenses and to take appropriate measures
to control these expenses before they are incurred. In addition, the Company
believes that providing early intervention services generally results in the
Company obtaining earlier access to claims files, thereby improving the
Company's opportunity to provide the full range of its managed care services.

Leverage Managed Care Expertise to Automobile Insurance Market. The Company
intends to capitalize on the recent introduction of managed care techniques to
the automobile insurance market through the pending acquisition of QMC3, a
leading provider of managed care services to the automobile insurance market.
CRA intends to leverage its existing presence in the automobile insurance
market and its existing office infrastructure to efficiently expand the
geographic coverage of automobile managed care services.

Execute Strategic Acquisitions. The workers' compensation managed care
industry market remains in an early stage of development as payors begin to
embrace the concept of managing their workers' compensation exposure. The
Company will continue to seek strategic acquisitions to further expand its
product offerings and enhance its opportunities for growth. While the Company
currently maintains a broad offering of services, the evolution of the
marketplace may give rise to opportunities in the workers' compensation and
related industries.

SERVICES

CRA's services include both field case management services and specialized
cost containment services.

Field Case Management Services

CRA provides field case management services to the workers' compensation
insurance industry through case managers working at the local level on a one-
on-one basis with injured employees and their various health care
professionals, employers and insurance company adjusters. The Company's
services are designed to assist in maximizing medical improvement and, where
appropriate, to expedite the employees' return to work through medical
management and vocational rehabilitation services.

CRA's field case management services consist of one-on-one management of a
work-related injury by the Company's approximately 1,000 field case managers
serving 49 states and the District of Columbia from CRA's 110 local field case
management offices. This service typically involves a case with a significant
potential or actual amount of lost work time or a catastrophic injury that
requires detailed management and therefore is referred out by the local
adjuster to the local CRA marketer calling on that office. CRA field case
managers specialize in expediting the injured employee's return to work
through both medical management and vocational rehabilitation by working with
all the interested parties in a work-related injury. Medical management
services provided by CRA's field case managers include coordinating the
efforts of all the health care professionals involved and increasing the
effectiveness of the care being provided by encouraging compliance and active
participation on the part of the injured worker. Vocational rehabilitation
services include job analysis, work capacity assessments, labor market
assessments, job placement assistance and return to work coordination. Field
case management services represented approximately 80.5%, 76.0% and 72.9% of
the Company's revenues for 1993, 1994, and 1995, respectively.

23
<PAGE>

The Company believes that the following factors will contribute to the
continued growth of its field case management services: (i) increased employer
acceptance of field case management techniques due to greater exposure to the
workers' compensation managed care market; (ii) earlier identification of
individuals in need of field case management services due to increased
utilization of the Company's specialized cost containment services,
particularly early intervention services; and (iii) increased market share at
the expense of smaller, undercapitalized competitors.

Specialized Cost Containment Services

In 1990, as part of the Company's strategy of providing a comprehensive
range of services, CRA began broadening its business by providing a number of
additional services focused directly on helping to reduce the medical costs
associated with workers' compensation for its clients. Today, these
specialized cost containment services include first report of injury service,
utilization management (precertification, concurrent and retrospective bill
review), telephonic case management, PPO network access, IMEs, peer reviews
and hospital bill auditing. By adding these services to CRA's traditional
strength and national breadth in field case management, the Company now offers
its clients an integrated workers' compensation managed care program. CRA is
able to offer its services on a combined basis as a full service managed care
program, beginning with the first report of injury and including all managed
care services needed to manage aggressively the medical costs, temporary wage
replacement payments and permanent disability payments associated with a work-
related injury. CRA also offers each of its services on an unbundled basis.
CRA's comprehensive approach to managing workers' compensation costs serves
the needs of a broad range of clients, from local adjusters to national
accounts. In addition to providing specialized cost containment services for
work-related injuries and illnesses, the Company also provides similar
services to payors of automobile accident medical claims and social security
disability advocacy services to payors of long term disability. Specialized
cost containment services collectively represented approximately 19.5%, 24.0%
and 27.1% of the Company's revenues for 1993, 1994 and 1995, respectively.

The Company believes that the demand for specialized cost containment
services will continue to increase due to a number of factors, including (i)
the increasing payor awareness of the availability of these techniques for
managing workers' compensation costs, (ii) the perceived effectiveness of
managed care techniques at reducing costs for group health insurance plans,
(iii) the verifiable nature of the savings that can be obtained by application
of specialized cost containment techniques applicable to workers' compensation
and (iv) the broad applicability of these techniques to all injured employees,
not just severely injured employees likely to be absent from work.

First Report of Injury Service. The Company provides a computerized first
report of injury reporting service in which an employer or claims adjuster
phones in all injuries as soon as they occur to the Company's centralized
service center. Each report is electronically transferred or mailed to the
state agency, the employer and the insurance company. This service assists in
the timely preparation and distribution of state-mandated injury reports and
also provides CRA and its customers with an early intervention tool to
maximize control over workers' compensation claims.

Utilization Management: Precertification and Concurrent Review. CRA's
precertification and concurrent review services are used by clients to ensure
that certain medical procedures are precertified by a CRA registered nurse
and/or physician for medical necessity and appropriateness of treatment before
the medical procedure can be performed. CRA's determinations represent only
recommendations to the customer; the ultimate decision to approve or
disapprove the request is made by the claims adjuster. Precertification calls
are made by either the claimant or the provider to one of CRA's national
utilization management reporting units. Once a treatment plan has been
precertified, a CRA employee performs a follow-up call (concurrent review) at
the end of an approved time period to evaluate compliance and/or discuss
alternative plans.

24
<PAGE>

Utilization Management: Retrospective Bill Review. Through a sophisticated
software program, CRA reviews and reduces its customers' medical bills
(including hospital bills) to either the various state-mandated fee schedules
for workers' compensation claims or a percentage of the UCR rates that exist
in non-fee schedule states. Additionally, this automated retrospective bill
review service enables clients to access certain PPO pricing schedules that
represent additional savings below the fee schedules or UCR rates. The savings
that accrue to CRA's clients for this service can be significant.
Retrospective bill review also creates an important historical database for
provider practice patterns and managed care provider compliance requirements.
CRA provides retrospective bill review service from 29 service locations
throughout the country, 11 of which are operated at a client location using
CRA employees. The Company also establishes arrangements that enable customers
to run the retrospective bill review service in-house by their own employees.

Access to Preferred Provider Networks. CRA provides its clients with access
to PPO networks within all the markets CRA serves through one of its own PPOs,
including its recently acquired Focus subsidiary, or by contracting with
existing national or regional PPOs. These PPOs provide injured workers with
access to quality medical care and pre-negotiated volume discounts, thereby
offering CRA's clients the ability to influence, or in certain states to
direct, their employees into the PPO network as a means of managing their
work-related claims. In addition to providing a vehicle for managing the
workers' compensation process, the discounts associated with these PPO
arrangements generate additional savings through the retrospective bill review
program described above. Focus' national network includes over 85,000
individual providers and 1,700 hospitals covering 26 states and the District
of Columbia.

Telephonic Case Management. This service provides for short-duration (30 to
60 days) telephonic management of workers' compensation claims. The telephonic
case management units accept first reports of injury, negotiate discounts with
hospitals and other providers, identify care alternatives and work with
injured employees to minimize lost time on the job. Each of the telephonic
case management units is staffed with nurses who are experienced in medical
case management. The telephonic case management units represent an important
component of early intervention and act as a referral source of appropriate
cases to CRA's local field case management offices. This service is offered
from four locations across the country.

Independent Medical Exams. IMEs are provided to assess independently the
extent and nature of an employee's injury or illness. CRA provides its clients
with access to independent physicians who perform the IMEs from 12 of the
Company's service locations and, upon completion, prepare reports describing
their findings.

Peer Reviews. This service is provided by a physician, therapist,
chiropractor or other provider who reviews medical files to confirm that the
care being provided appears to be necessary and appropriate. The reviewer does
not meet with the patient, but merely reviews the file as presented.

Hospital Bill Audits. This service is provided by the Company's registered
nurses who review hospital bills for appropriateness, relatedness and medical
necessity. The nurse may subsequently negotiate fees and obtain discounts for
prompt payment or inappropriate charges.

Social Security Disability Advocacy. Social security disability advocacy
services are offered to individuals who are receiving group or individual
long-term disability benefits. Long-term disability insurance carriers refer
individuals to CRA and the Company determines which of these individuals may
be eligible to receive social security disability benefits. CRA then provides
representation services for those appropriate individuals before the Social
Security Administration. When the individuals become entitled to social
security disability benefits, the group long-term disability insurance
carrier's liability is reduced dollar-for-dollar by the amount of the social
security award. This represents significant reserve savings for the insurance
company through benefit integration while also benefiting the disabled worker.

25
<PAGE>

Automobile Insurance Managed Care. The Company, through the proposed
acquisition of QMC3, is expanding its product line to offer an integrated
service to the automobile insurance market which permits insurers to direct
automobile accident victims into networks of medical providers. QMC3 currently
provides this integrated service in Colorado and has produced significant
savings for its insurance company clients since the initiation of its
services. QMC3, in cooperation with a third party PPO, has been in discussions
for more than a year with the State of New York Insurance Department regarding
approval of this PPO as a certified provider of fully integrated managed care
services to the New York automobile insurance market using QMC3 as its
exclusive utilization review agent. If approved, such an arrangement would be
the first to offer automobile insurance managed care services in New York.
Services offered to the automobile insurance market include precertification,
telephonic case management, direction of injured persons into specialized PPO
networks, medical bill review and field case management. See "Risk Factors--
Potential Adverse Impact of Governmental Regulation."

CUSTOMERS

CRA has over 1,200 customers located in approximately 2,500 offices across
the country, including most of the major underwriters of workers' compensation
insurance, large TPAs and self-insured employers. No one customer represents
more than 8% of total revenues. The Company is compensated primarily on a fee-
for-service basis. Although the Company has entered into written agreements
with certain of its customers from time to time, it has not been the Company's
historical practice to enter into written agreements with its customers.
Accordingly, the Company's customers generally can elect to terminate their
relationships with the Company on short notice.

SALES AND MARKETING

The Company actively markets its services primarily to workers' compensation
insurance companies, TPAs and self-insured employers and groups. The Company
also markets to the automobile insurance market, group health and long-term
disability marketplaces, but to a significantly lesser degree. The Company's
marketing organization includes over 125 full-time sales and marketing
personnel. While the majority of CRA's current business is generated from
workers' compensation insurance companies, self-insured employers (often in
connection with a TPA) also have been an important source of business and will
likely become more important in the future as larger corporations continue to
evaluate self-insuring their workers' compensation programs.

Marketing of CRA's services occurs at both the local insurance company
adjuster level for much of the field case management business as well as the
corporate level for national managed care accounts and self-insured
corporations where a more sophisticated sales presentation is required. The
local marketing to insurance company adjusters for field case management
referrals has been a critically important component of the Company's marketing
strategy because of the decision-making authority that resides at the adjuster
level and the relationship-driven nature of that portion of the business.
However, with the advent of comprehensive managed care legislation, a more
proactive environment for workers' compensation change and a more
sophisticated product offered by CRA, the Company's marketing of national
headquarters offices of insurance companies and self-insured companies likely
will increase. CRA has a dedicated staff of national accounts salespeople
responsible for marketing and coordinating a full selection of services to
corporate offices.

QUALITY ASSURANCE

The Company regularly evaluates its quality of service delivery by means of
audits which focus on compliance with special instructions, completion of
activities in a timely fashion, quality of reporting, identification of
savings, accuracy of billing and professionalism in contacts with health care
providers and the effectiveness of the Company's services. Audits are
conducted on a nationwide basis for a particular customer or on a local office
basis by selecting random files for review. A detailed report is generated
outlining the audit findings and providing specific recommendations for
service delivery improvements. When appropriate, follow-up audits are
conducted to ensure that recommendations from the initial audit have been
implemented.

26
<PAGE>

COMPETITION

The workers' compensation managed care services market is fragmented, with a
large number of competitors. CRA competes with numerous companies, including
national managed care providers, insurance companies and HMOs. CRA's primary
competitors are companies that offer one or more workers' compensation managed
care services on a national basis. The Company also competes with numerous
smaller companies which generally provide unbundled services on a local level
where such companies often have a relationship with a local adjuster. Several
large workers' compensation insurance carriers offer managed care services for
their insurance customers either through the insurance carrier's own personnel
or by outsourcing various services to providers such as CRA. The Company also
competes to some degree with large HMOs, which, CRA believes, have
historically focused their networks primarily on controlling health care costs
rather than managing the process of returning an injured employee to work.

The Company believes that, as managed care techniques continue to gain
acceptance in the workers' compensation marketplace, CRA's competitors will
increasingly consist of nationally focused workers' compensation managed care
service companies, insurance companies, HMOs and other significant providers
of managed care products. Many of the Company's current and potential
competitors are significantly larger and have greater financial and marketing
resources than those of the Company.

Within the past few years, several states have experienced decreases in
workers' compensation insurance premium rates. To date, the Company's business
has continued to grow in those states which have experienced declines in
workers' compensation premium rates. The Company believes that managed care
and return to work services will continue to be necessary in the future to
sustain and increase workers' compensation cost savings.

The Company competes on the basis of its specialized knowledge and expertise
in the workers' compensation managed care services industry, effectiveness of
services, ability to offer a range of services in multiple markets,
information systems and price.

DATA PROCESSING

The Company uses computer systems to provide certain of its services and to
provide accounting statements and financial reports. The Company uses licensed
software from national vendors to maintain its financial records and perform
other general business. The software used by the Company within its
retrospective bill review operation is licensed from an independent third
party software company pursuant to a non-exclusive license with a three-year
term expiring February 1998, that may be terminated by either party upon six
months' prior written notice.

GOVERNMENT REGULATION

General

The Company's business is conducted within a regulated environment. The
Company's activities are regulated principally at the state level, which means
that the Company must comply with regulatory requirements which differ from
state to state. Although the laws affecting the Company's operations vary
widely from state to state, these laws fall into four principal categories:
(i) workers' compensation laws that restrict the methods and procedures that
the Company may employ in its workers' compensation managed care programs,
(ii) laws that require licensing of businesses, such as the Company, that
provide medical review services, (iii) laws regulating the operation of
managed care provider networks and (iv) proposed laws which, if adopted, would
have as their objective the reform of the health care system as a whole, such
as proposals to implement 24-hour health coverage using a single insurance
plan for work-related and non-work-related health problems. Laws and
regulations affecting the Company's operations change frequently. The Company
believes that it is in material compliance with regulatory requirements
applicable to its business.

27
<PAGE>

Workers' Compensation Legislation

In performing workers' compensation managed care services, the Company must
comply with state workers' compensation laws. Workers' compensation laws
require employers to assume financial responsibility for medical costs, a
portion of lost wages and related legal costs of work-related illnesses and
injuries. These laws establish the rights of workers to receive benefits and
to appeal benefit denials. The workers' compensation laws also regulate the
methods and procedures which the Company may employ in its workers'
compensation managed care programs. For example, workers' compensation laws
prohibit medical copayments and deductibles by employees. In addition, certain
states restrict employers' rights to select health care providers and
establish maximum fee levels for treatment of injured workers. See "--Industry
Overview."

In several states, recent workers' compensation reform legislation has eased
to some degree these regulatory restraints on managed care for injured
workers. Legislative reforms in some states permit employers to designate
health plans such as HMOs and PPOs to cover workers' compensation claimants.
Because many health plans have the capacity to manage health care for workers'
compensation claimants, such legislation may intensify competition in the
market served by the Company.

Within the past few years, several states have experienced decreases in the
number of workers' compensation claims and the cost per claim, which have been
reflected in workers' compensation insurance premium rate reductions in those
states. The Company believes that these declines in workers' compensation
costs are due principally to intensified efforts by payors to manage and
control claims costs, to improve risk management by employers and to
legislative reforms. If declines in workers' compensation costs occur in many
states and persist over the long-term, such declines may have an adverse
impact upon the Company's business and results of operations.

Specialized Cost Containment Services

Many of the Company's specialized cost containment services include review
of requests for medical care or therapy. Approximately half of the states have
enacted laws that require licensing of businesses, such as the Company, that
provide medical review services. Some of these laws apply to medical review of
care covered by workers' compensation. These laws typically establish minimum
standards for qualifications of personnel, confidentiality, internal quality
control, and dispute resolution procedures. These regulatory programs may
result in increased costs of operation for the Company, which may have an
adverse impact upon the Company's ability to compete with other available
alternatives for health care cost control.

Use of Provider Networks

The Company's ability to provide comprehensive workers' compensation managed
care services depends in part on its ability to contract with or create
networks of health care providers which share the Company's objectives. For
some of its clients, the Company offers injured workers access to networks of
providers who are selected by the Company for quality of care and pricing. New
laws regulating the operation of managed care provider networks have been
adopted by a number of states. These laws may apply to managed care provider
networks having contracts with the Company or to provider networks which the
Company may organize or acquire. To the extent the Company is governed by
these regulations, it may be subject to additional licensing requirements,
financial oversight and procedural standards for beneficiaries and providers.

Automobile Insurance Legislation

The automobile insurance industry, like the workers' compensation industry,
is regulated on a state-by-state basis. While regulatory approval is not
required for the Company to offer most of its services to the automobile
insurance market, state regulatory approval is required in order to offer
automobile

28
<PAGE>

insurers products that permit them to direct claimants into a network of
medical providers. To date, only Colorado and New York have legislation that
permits such direction of care and QMC3 has been approved to offer this
managed care service to automobile insurers in Colorado. QMC3, in cooperation
with a third party PPO, has been in discussions for more than a year with the
State of New York Insurance Department regarding approval of this PPO as a
certified provider of fully integrated managed care services to the New York
automobile insurance market using QMC3 as its exclusive utilization review
agent. If approved, such an arrangement would be the first to offer automobile
insurance managed care services in New York. While the Company believes that
approval from the State of New York Insurance Department will be forthcoming,
there can be no assurance that New York will issue such approval. Without such
approval, QMC3 and this PPO would not be permitted to offer fully integrated
managed care services to the New York automobile insurance market. In
addition, no assurance can be given that other states will adopt legislation
permitting such direction of care for automobile accident victims or, if such
legislation is adopted, that the Company will be able to obtain regulatory
approval to provide such services.

Health Care Reform

Increasing health care costs have caused the federal government and many
states to advance health care reform proposals. One of the proposals being
considered is 24-hour health coverage, in which the coverage of traditional
employer-sponsored health plans is combined with workers' compensation
coverage to provide a single insurance plan for work-related and non-work-
related health problems. Incorporating workers' compensation coverage into
conventional health plans may adversely affect the market for the Company's
services.

EMPLOYEES

As of March 31, 1996, the Company had approximately 2,120 employees. None of
CRA's employees is represented by a labor union. The Company has experienced
no work stoppages and believes that its employee relations are good.

PROPERTIES

The Company's principal corporate office is located in Boston,
Massachusetts. The Company leases the 11,000 square feet of space at this site
pursuant to a lease agreement expiring in 2003. The Company also leases all of
its offices located in 43 states and two Canadian provinces. Thirteen of the
Company's offices are leased from Colonial Realty Trust, of which Ms.
Silverman and Mr. Larson are the trustees and beneficiaries. The Company
believes that its facilities are adequate for its current needs and that
suitable additional space will be available as required.

LEGAL MATTERS

The Company is party to certain claims and litigation in the ordinary course
of business. The Company is not involved in any legal proceeding that it
believes will result, individually or in the aggregate, in a material adverse
effect upon its financial condition or results of operations.

29
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

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

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Executive Officers
Donald J. Larson(1)............ 45 President, Chief Executive Officer and
Director
Joseph F. Pesce................ 47 Vice President--Finance and Administration,
Chief Financial Officer and Treasurer
John A. McCarthy, Jr........... 37 Vice President--Cost Containment Services
and Corporate Development
Anne E. Kirby.................. 42 Vice President--Marketing and Product
Development
Directors
Lois E. Silverman.............. 55 Chairman of the Board
George H. Conrades(2).......... 57 Director
Jeffrey R. Jay, M.D.(1)........ 37 Director
William Laverack, Jr.(1)(2).... 39 Director
Mitchell T. Rabkin, M.D........ 65 Director
</TABLE>
- --------
(1) Member of Compensation Committee.
(2)Member of Audit Committee.

EXECUTIVE OFFICERS

Mr. Larson, a founder of the Company, has served as President and Chief
Executive Officer of the Company since January 1, 1996 and as President and
Chief Operating Officer of the Company since 1988. Prior to founding the
Company, Mr. Larson held the position of New England Regional Manager at
IntraCorp. Inc., a division of Cigna Corporation. Mr. Larson is a graduate of
Boston College and Boston University.

Mr. Pesce has served as Vice President--Finance and Administration, Chief
Financial Officer and Treasurer of the Company since October 1994. From
October 1981 to September 1994, Mr. Pesce held various financial positions
with Computervision Corporation and its predecessor Prime Computer, Inc.,
including Director of Corporate Planning and Analysis, Director of Leasing,
Corporate Controller, Treasurer and, most recently, Vice President--Finance
and Chief Financial Officer. Prior to October 1981, Mr. Pesce held various
financial positions with Compugraphic Corporation and GCA Corporation. Mr.
Pesce is a graduate of Boston College and the Wharton School of Finance at the
University of Pennsylvania.

Mr. McCarthy has served as Vice President--Cost Containment Services and
Corporate Development since August 1994. From June 1992 to July 1994, Mr.
McCarthy was Senior Vice President and Chief Financial Officer of MedChem
Products, Inc., a manufacturer of specialty medical products. From March 1989
to June 1992, Mr. McCarthy was a Partner at Kaufman & Company, an investment
banking firm. From August 1987 to February 1989, Mr. McCarthy was an Associate
at Morgan Stanley & Co. Incorporated, an investment banking firm. Mr. McCarthy
is a graduate of Lehigh University and Harvard Business School.

Ms. Kirby joined the Company in July 1979 and has served as Vice President--
Marketing and Product Development since March 1990. From 1979 to 1990, Ms.
Kirby served the Company in a variety of roles

30
<PAGE>

on a local and regional level, including Regional Vice President for the New
England area. Prior to joining the Company, Ms. Kirby worked as a clinical
nurse for Massachusetts General Hospital and managed a group medical practice
in two different specialty areas. Ms. Kirby is a graduate of Boston College
and the St. Louis University Accelerated Curriculum in Nursing.

DIRECTORS

Ms. Silverman, a founder of the Company, has served as the Chairman of the
Board since March 1994 and served as its Chief Executive Officer from 1988
through January 1, 1996. Prior to founding the Company, Ms. Silverman held the
position of Northeast Regional Manager at IntraCorp., a division of Cigna
Corporation. Ms. Silverman also serves as Trustee and Officer of Beth Israel
Hospital and Overseer of Tufts Medical School. Ms. Silverman is a graduate of
Beth Israel School of Nursing. Ms. Silverman is also a director of Sun
Healthcare Group, Inc.

Mr. Conrades has served as a Director of the Company since June 1994. Mr.
Conrades has been President and Chief Executive Officer of BBN Corporation
since 1994 and has been Chairman of the Board of BBN Corporation since
November 1995. From 1992 to 1994, Mr. Conrades was a partner in
Conrades/Reilly Associates, a business consulting company. From 1961 to 1992,
Mr. Conrades held a number of management positions with International Business
Machines Corp., most recently as Senior Vice President for Corporate Marketing
and Services. Mr. Conrades is also a director of BBN Corporation, Westinghouse
Electric Corp. and Pioneer Companies, Inc.

Dr. Jay has served as a Director of the Company since March 1994. Dr. Jay
has been a General Partner of J. H. Whitney & Co., a private investment firm,
since 1993. From 1988 to 1993, Dr. Jay worked for Canaan Partners, a venture
capital firm. Dr. Jay is a graduate of Harvard Business School and received
his M.D. from the Boston University School of Medicine. Dr. Jay also serves as
a director of Advance Paradigm, Inc. and Medicon, Inc.

Mr. Laverack has served as a Director of the Company since March 1994. Mr.
Laverack has been a General Partner of J. H. Whitney & Co., a private
investment firm, since 1993. From 1991 to 1993, Mr. Laverack served as a
Managing Director of Gleacher & Co., Inc., an investment banking firm. From
1985 to 1991, Mr. Laverack served as a Principal in the merchant banking
department of Morgan Stanley & Co. Incorporated, an investment banking firm.
Mr. Laverack is a graduate of Harvard College and Harvard Business School.

Dr. Rabkin has served as a Director of the Company since February 1995.
Since 1966, Dr. Rabkin has been Chief Executive Officer of Boston's Beth
Israel Hospital, where he currently holds the rank of Professor of Medicine.
Dr. Rabkin is a graduate of Harvard College and received his M.D. from Harvard
Medical School.

Mr. Larson, Whitney, the Whitney Equity Fund and the Whitney Debt Fund have
agreed to vote their shares in favor of the reelection of Ms. Silverman as a
director of the Company for so long as Ms. Silverman continues to hold,
directly or indirectly, at least 407,490 shares.

DIRECTOR ELECTION AND COMPENSATION

The number of Directors on the Board is currently fixed at six. The
Company's Board of Directors is divided into three classes. The members of
each class of Directors serve for staggered three-year terms. The Board is
comprised of two Class I Directors (Mr. Conrades and Dr. Jay), two Class II
Directors (Mr. Larson and Mr. Rabkin) and two Class III Directors (Mr.
Laverack and Ms. Silverman), whose initial terms will expire upon the election
and qualification of Directors at the annual meeting of stockholders held
following the years ending December 31, 1995, 1996 and 1997, respectively. At
each annual meeting of stockholders, one class of Directors will be elected
for a term of three years. At the Special Meeting in lieu of the Company's
1996 Annual Meeting of Stockholders to be held on May 21, 1996, the
stockholders

31
<PAGE>

will consider a proposal to reelect the Class I Directors, Mr. Conrades and
Dr. Jay, for a term expiring December 31, 1999. See "Description of Capital
Stock--Massachusetts Law and Certain Charter and By-Law Provisions; Anti-
Takeover Effects."

Outside directors are reimbursed for their reasonable out-of-pocket expenses
incurred in attending meetings. Messrs. Conrades and Rabkin are paid $2,000
for each meeting of the Board of Directors that they attend. The Company has
granted to each of Mr. Conrades and Dr. Rabkin non-qualified options under the
Company's 1994 Non-Qualified Stock Option Plan for Non-Employee Directors (the
"Non-Employee Director Plan"), on June 6, 1994 and January 17, 1995,
respectively, to purchase 23,500 shares of Common Stock at an exercise price
of $5.89 per share. See "--Stock Option Plans."

EXECUTIVE COMPENSATION

The following table sets forth for the year ended December 31, 1995, the
compensation paid by the Company to the Company's Chief Executive Officer and
each of the Company's four most highly compensated executive officers (other
than the Chief Executive Officer) whose total annual salary and bonus exceeded
$100,000 for all services rendered in all capacities to the Company and its
subsidiaries for the Company's fiscal year ended December 31, 1995 (the "Named
Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------------------------ ------------
SECURITIES
UNDERLYING
NAME AND OTHER ANNUAL OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION SARS(#)(2) COMPENSATION(3)
- ------------------ ---- -------- -------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Lois E. Silverman
Chairman of the Board 1995 $250,000 $87,500 -- -- $4,620
and Chief Executive
Officer(1)............. 1994 258,654 -- -- -- 3,880
Donald J. Larson
President and Chief 1995 $250,000 $87,500 -- -- $4,620
Operating Officer(1)... 1994 258,654 98,000(4) -- -- 3,880
Joseph F. Pesce
Vice President--Finance
and Administrative,
Chief Financial Officer 1995 $225,000 $134,375 $1,575(5) 9,700 $2,250
and Treasurer.......... 1994 50,000(6) 50,000(7) -- 47,000 --
John A. McCarthy, Jr.
Vice President--
Corporate 1995 $144,192 $56,250 $586(5) 28,500 $1,484
Development............ 1994 59,231(6) 15,000 -- 23,500 --
Anne E. Kirby 1995 $140,400 $52,500 $586(5) 5,000 $2,868
Vice President--
Marketing.............. 1994 137,554 15,000 -- 47,000 3,051
</TABLE>
- --------

(1) Ms. Silverman resigned her position as Chief Executive Officer effective
January 1, 1996 and Mr. Larson was elected as Chief Executive Officer
effective as of that date.

(2) Represents the number of shares of Common Stock issuable upon exercise of
options granted to the Named Executive Officers in 1995.

(3) Represents matching contributions by the Company to its 401(k) Plan.

(4) This amount was paid by the Company to Mr. Larson as a bonus in connection
with the Recapitalization.

(5) Represents the discount received on the purchase of stock pursuant to the
CRA Managed Care, Inc. 1995 Employee Stock Purchase Plan.

(6) Messrs. Pesce and McCarthy joined the Company in October 1994 and August
1994, respectively. On an annualized basis, such individuals would have
been paid cash compensation in excess of the amounts shown in the table
for 1994.

(7) Does not include an additional $25,000 paid to Mr. Pesce in consideration
of certain benefits forfeited upon termination of his prior employment.

32
<PAGE>

EMPLOYMENT AGREEMENTS

Lois E. Silverman and Donald J. Larson are each party to separate employment
agreements with the Company, dated as of March 8, 1994 (the "Employment
Agreements"). Mr. Larson agreed to devote his full time and best efforts to
the performance of his duties to the Company. The Employment Agreements have
initial terms of five years unless earlier terminated as provided therein; Ms.
Silverman may terminate her Employment Agreement as of March 8, 1997, if
notice is provided one year prior to such date. The terms of the Employment
Agreements may be automatically renewed for additional one year terms, subject
to limitations contained therein. The Company may terminate Ms. Silverman
and/or Mr. Larson for cause, as defined therein, and Ms. Silverman and Mr.
Larson may terminate their respective Employment Agreements for Good Reason,
as defined therein. The Employment Agreements contain provisions pursuant to
which Ms. Silverman and Mr. Larson agree not to disclose any proprietary
information of the Company and also agree not to compete with the Company (in
the U.S., Canada or any other country in which the Company does business, or
took steps to do business before termination of their employment), or solicit
its employees, for the term of the Employment Agreements and up to two years
after termination of employment, for any reason. Mr. Larson is to receive an
annual salary of $250,000 and is allowed to participate in a bonus plan (the
"Executive Bonus Plan"). Both Ms. Silverman and Mr. Larson also receive
similar benefits made available by the Company to its executive employees.

Ms. Silverman's employment agreement was amended as of January 24, 1996 in
connection with her resignation as Chief Executive Officer of the Company
(effective January 1, 1996). In connection with this amendment, Whitney and
its affiliates and Mr. Larson have agreed to vote their shares of Common Stock
in favor of electing Ms. Silverman as a director of the Company, so long as
she continues to hold at least one-third of the number of shares of Common
Stock of the Company which she held on January 24, 1996. Ms. Silverman
continues in the role as Chairman of the Board of Directors of the Company and
remains subject to the termination rights contained in her employment
agreement. Ms. Silverman is entitled to receive an annual salary at the rate
of $250,000 per year during the six month period commencing January 1, 1996
and thereafter an annual salary at the rate of $100,000. Ms. Silverman is no
longer entitled to participate in the Executive Bonus Plan. Ms. Silverman was
also granted one demand registration right under the Registration Rights
Agreement, subject to certain conditions and limitations.

The Company hired Joseph F. Pesce as its Chief Financial Officer commencing
October 3, 1994 pursuant to an offer letter dated September 9, 1994. In such
letter, the Company agreed to pay Mr. Pesce salary at the annual rate of
$200,000 during 1994 and at the annual rate of $225,000 during 1995. Mr. Pesce
also received a $50,000 bonus at the commencement of his employment with the
Company and $25,000 cash compensation in consideration of certain benefits
forfeited upon termination of his prior employment. Mr. Pesce received a
$50,000 bonus upon attainment of certain performance criteria in 1995.

The Company entered into letter agreements, dated June 30, 1995, with each
of Mr. Pesce, Mr. McCarthy and Ms. Kirby, pursuant to which such individuals
are entitled to receive one year's salary, along with certain other benefits,
in the event the employment of such individuals is terminated (i) by the
Company without Cause (as defined therein), (ii) by said employee with Good
Reason (as defined therein) or (iii) upon a change in control of the Company
whereupon said employees are not offered employment by any successor entity on
substantially the same terms and responsibilities he or she had immediately
prior to such change in control.

EXECUTIVE BONUS PLAN

The Company maintains an Executive Bonus Plan pursuant to which members of
senior management are entitled to receive bonuses in amounts equal to varying
percentages of their annual salaries, depending on the Company's achievement
of certain earnings per share targets established annually by the Board of
Directors. Under the plan, each participant is entitled to a bonus of 25% of
the participant's base salary if 95% of the target is achieved, with no bonus
being paid below the 95% target. The bonus increases on a straight-line basis
to 50% of base salary if 100% of the target is achieved and up to 100% of base
salary if certain overperformance targets are achieved.

33
<PAGE>

STOCK OPTION PLANS

1994 TIME ACCELERATED RESTRICTED STOCK OPTION PLAN

The Company's 1994 Time Accelerated Restricted Stock Option Plan (the "1994
Stock Option Plan") provides for the grant of options to acquire up to 376,000
shares of Common Stock, in such amounts, on such terms and to such officers
and other key employees as the administrators of the 1994 Stock Option Plan
may select. The Board of Directors has authorized, subject to stockholder
approval, an increase in the number of shares reserved for issuance upon
exercise of options granted under the 1994 Stock Option Plan from 376,000 to
976,000 shares. Options granted under the 1994 Stock Option Plan are not
intended to qualify as Incentive Stock Options under the Code. The 1994 Stock
Option Plan is administered by the Board of Directors of the Company and
provides that all of the options shall have a per share exercise price equal
to the fair market value of the Common Stock on the date of such grant, as
determined by the Board of Directors. As of April 30, 1996, options to
purchase 617,700 shares of Common Stock at an average exercise price of $21.32
per share had been granted and were outstanding under the 1994 Stock Option
Plan and 2,950 options had been exercised.

Options granted under the 1994 Stock Option Plan become fully exercisable no
later than the tenth anniversary of the date of grant and no option may have a
term in excess of ten years and six months from the date of grant. The stock
option agreements pursuant to which options have been granted under the 1994
Stock Option Plan provide for accelerated vesting each year with respect to
ten to twenty percent of the shares subject to the option in the event certain
financial tests are met, commencing with respect to the fiscal year ended
December 31, 1994. The Board of Directors may accelerate all options upon a
sale or conveyance of all or substantially all of the assets, or a change in
control of the Company, which includes, among other events, the acquisition by
any person who owned less than 10.0% of the outstanding Common Stock becoming
the beneficial owner of at least 51.0% of the Common Stock. Options are
exercisable only while the optionee remains an employee of the Company or for
30 calendar days thereafter. If any optionee becomes disabled or dies while in
the employ of the Company, the option remains exercisable until the last day
of the sixth month following disability, or until the last day of the twelfth
month following death, unless such options expire earlier by their own terms.
Options which are exercisable following termination of employment are
exercisable only to the extent that the optionee was entitled to exercise such
options on the date of such termination. All options are non-transferable
other than by will or the laws of descent and distribution. All recipients of
options under the 1994 Stock Option Plan to date were required to execute a
Non-Competition and Non-Disclosure Agreement as a condition to any such option
grant. On April 30, 1996, options were exercisable to purchase 109,940 shares
of Common Stock.

1994 NON-QUALIFIED STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

The Company's 1994 Non-Qualified Stock Option Plan for Non-Employee
Directors (the "Non-Employee Director Plan") provides for the grant of options
to acquire up to 94,000 shares of Common Stock, in such amounts, on such terms
and to such non-employee Directors as the administrators of the Non-Employee
Director Plan may select, in accordance with the terms of the Non-Employee
Director Plan. Options granted under the Non-Employee Director Plan are not
intended to qualify as Incentive Stock Options under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). The Non-Employee
Director Plan is administered by a committee of the Board of Directors of the
Company, consisting of two or more members appointed by the Board of Directors
of the Company, all of whom shall be "disinterested persons" (as defined in
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended),
which selects the optionees and determines the number of shares, vesting
schedule and duration of each option (not to exceed 10 years). Options granted
under the Non-Employee Director Plan must have an exercise price equal to the
fair market value of the Common Stock of the Company, as determined by such
committee, on the date of grant. As of April 30, 1996, options to purchase
47,000 shares of Common Stock at an exercise price of $5.89 per share were
granted under the Non-Employee

34
<PAGE>

Director Plan, all of which were outstanding and 15,666 of which were
exercisable. Options granted under the Non-Employee Director Plan
automatically vest no later than 10 years from the date of grant; however,
pursuant to separate option agreements between the Company and its optionees
under the Non-Employee Director Plan, the options granted to date become
exercisable as to 33 1/3% of the shares covered thereby on each anniversary of
the grant date. If an optionee dies while serving as a director of the
Company, quits or is terminated as a director (other than for cause), the
option, to the extent exercisable at the time of the optionee's death or
termination of directorship, remains exercisable for a period of ten years
from the date of grant. The Non-Employee Director Plan provides that all
options will fully vest upon the sale of all or substantially all of the stock
or assets of the Company. All options are non-transferable other than: (i) by
the laws of descent and distribution; (ii) pursuant to a qualified domestic
order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder; or (iii) to a trust created for the
benefit of the optionee or members of his or her family.

The following table sets forth certain information concerning grants of
stock options made during the fiscal year ended December 31, 1995 to the Named
Executive Officers:

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENTAGE OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS/SARS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM (2)
OPTIONS/SARS IN FISCAL BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#)(1) YEAR ($/SH) DATE 5%($) 10%($)
---- -------------- ------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Lois E. Silverman....... -- -- -- -- -- --
Donald J. Larson ....... -- -- -- -- -- --
4,700 3.85% $ 5.89 7/31/05 $18,537 $ 47,710
5,000 4.10 22.75 4/24/06 76,196 196,040
------ ----- ---------- -----------
Joseph F. Pesce(3)...... 9,700 7.95 94,733 234,750
23,500 19.26 5.89 7/31/05 92,685 238,549
5,000 4.10 22.75 4/24/06 76,196 196,040
------ ----- ---------- -----------
John A. McCarthy,
Jr.(3)................. 28,500 23.36 168,881 434,589
Anne E. Kirby(4)........ 5,000 4.10 22.75 4/24/06 76,196 196,040
</TABLE>
- ------------

(1) These options provide for accelerated vesting each year with respect to
ten to twenty percent of the shares subject to the option in the event
certain financial tests are met, commencing with respect to the fiscal
year ended December 31, 1995.

(2) The potential realizable value of the options reported above was
calculated by assuming 5% and 10% annual rates of appreciation above the
exercise price of the Common Stock from the date of grant of the options
until the expiration of the options. These assumed annual rates of
appreciation were used in compliance with the rules of the Securities and
Exchange Commission and are not intended to forecast future price
appreciation of the Common Stock of the Company or to take into account
the immediate increase in potential realizable value that will occur. The
actual value realized from the options could be higher or lower than the
values reported above, depending upon the future appreciation or
depreciation of the Common Stock during the option period, the
optionholder's continued employment through the option period and the
timing of exercise of the options.

(3) Does not include options to purchase 20,000 shares at $22.12 per share and
25,000 shares at $36.12 per share granted after December 31, 1995.

(4) Does not include options to purchase 10,000 shares at $36.12 per share
granted after December 31, 1995.

35
<PAGE>

The following table sets forth certain information concerning the stock
options exercised during the year ended December 31, 1995 and the number and
value of unexercised stock options held by each of the Named Executive
Officers as of December 31, 1995:

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR

AND FISCAL YEAR-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
SHARES
ACQUIRED NUMBER OF SECURITIES VALUE OF UNEXERCISED
ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
EXERCISE REALIZED OPTIONS/SARS AT FISCAL OPTIONS/SARS
(#) ($) YEAR-END(#) AT FISCAL YEAR END ($)(1)
-------- -------- ------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lois E. Silverman ...... -- -- -- -- -- --
Donald J. Larson........ -- -- -- -- -- --
Joseph F. Pesce......... -- -- 20,740 35,960 $315,544 $510,881
John A. McCarthy, Jr. .. -- -- 15,100 36,900 225,389 525,907
Anne E. Kirby........... -- -- 19,800 32,200 300,518 450,777
George H. Conrades...... -- -- 7,833 15,667 125,215 250,433
Mitchell T. Rabkin...... -- -- -- 23,500 -- 375,648
</TABLE>
- ------------

(1) The amounts set forth represent the difference between the fair market
value of the Common Stock underlying the options at December 31, 1995
($21.88 per share) and the exercise price of the options ($5.89 for
options granted on or prior to January 31, 1995 and $22.75 for options
granted on October 24, 1995), multiplied by the applicable number of
options.

1995 EMPLOYEE STOCK PURCHASE PLAN

The 1995 Employee Stock Purchase Plan (the "1995 Purchase Plan") for
employees of the Company was adopted by the Board of Directors in March 1995
and approved by the stockholders of the Company on April 28, 1995. The 1995
Purchase Plan authorizes the issuance of a maximum of 235,000 shares of Common
Stock pursuant to the exercise of nontransferable options granted to
participating employees.

The 1995 Purchase Plan is administered by the Compensation Committee of the
Board of Directors. All employees of the Company whose customary employment is
20 hours or more per week and have been employed by the Company for at least
six months are eligible to participate in the 1995 Purchase Plan. Employees
who own 5.0% or more of the Company's stock and directors who are not
employees of the Company may not participate in the 1995 Purchase Plan. To
participate in the 1995 Purchase Plan, an employee must authorize the Company
in writing to deduct an amount (not less than 1.0% nor more than 10.0% of a
participant's base compensation, and in any event not more than $12,500) from
his or her pay during six month periods commencing on January 1 and July 1 of
each year (each a "Purchase Period"). The exercise price for shares purchased
under the 1995 Purchase Plan for each Purchase Period is the lesser of 85.0%
of the fair market value of the Common Stock on the first or last business day
of the Purchase Period. The fair market value will be the closing selling
price of the Common Stock as quoted on the Nasdaq National Market. If an
employee is not a participant on the last day of a Purchase Period, such
employee is not entitled to purchase any shares during such Purchase Period,
and the amount of his or her accumulated payroll deduction will be refunded to
the employee. An employee's rights under the 1995 Purchase Plan terminate upon
his or her voluntary withdrawal from the Plan at any time or upon termination
of employment.

Common Stock for the 1995 Purchase Plan will be made available either from
authorized but unissued shares of Common Stock or from the shares of Common
Stock reacquired by the Company, including shares repurchased in the open
market. The Company issued 18,299 shares of Common Stock at a price of $18.73
per share for the first Purchase Period ended December 31, 1995.

36
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee was established in March 1994 and currently
consists of Donald J. Larson, President and Chief Operating Officer of the
Company, William Laverack, Jr. and Jeffrey R. Jay. Although Mr. Larson
participated in deliberations of the Compensation Committee regarding
compensation of other executive officers, he did not participate in
deliberations relating to his own compensation. See "Certain Transactions."

On March 8, 1994, the Company completed the Recapitalization, pursuant to
which the Company redeemed an aggregate of 49.0% of the then outstanding
shares of Common Stock from Ms. Silverman and Mr. Larson for a total
consideration of $28,260,000 and $27,152,000, respectively, consisting of cash
and an aggregate of $5,000,000 in 10.0% Junior Subordinated Notes due 2002. To
finance these redemptions and related expenses, the Company (i) issued 604,537
shares of Common Stock at $4.15 per share and 1,698,463 shares of Series A
Convertible Preferred Stock, $.01 par value per share, at $5.89 per share
representing, in the aggregate, 49.0% of the Company's capital stock on a
fully-diluted basis (giving effect to the conversion of the Series A
Convertible Preferred Stock into shares of Common Stock on a one-for-one
basis) to Whitney, the Whitney Equity Fund and First Union Corporation ("First
Union"); (ii) borrowed $17,000,000 in term loans and $5,000,000 in revolving
credit under a loan agreement, dated March 8, 1991, with First Union National
Bank of North Carolina; and (iii) issued $19,000,000 principal amount of
10.101% Senior Subordinated Notes due March 8, 2001 to the Whitney Debt Fund
and $2,000,000 principal amount of Senior Subordinated Notes to First Union.
Dr. Jay and Mr. Laverack are general partners of Whitney, the Whitney Equity
Fund and the Whitney Debt Fund. The Company entered into the Recapitalization
in order to provide liquidity to the Company's founders, Ms. Silverman and Mr.
Larson. Management of the Company also believed that the Recapitalization, by
aligning the organizational and capital structure of the Company with that of
other private companies with professional investors, would allow the Company
to (i) attract experienced and qualified outside directors, such as Mr.
Conrades and Dr. Rabkin who, based on their prior business or related
experience, could assist management with operational issues as well as the
strategic direction of the Company; (ii) access the financial and managerial
advice and experience of J.H. Whitney & Co., a private investment firm, which
has invested in other similarly situated companies; and (iii) make the Company
more attractive to other professional investors, to the extent the Company
needs to raise additional capital, who would not ordinarily invest in a
closely-held company.

In connection with the Recapitalization, the Company entered into a
Stockholders' Agreement (the "Stockholders' Agreement") and a Registration
Rights Agreement (the "Registration Rights Agreement") with Whitney, the
Whitney Equity Fund, the Whitney Debt Fund, First Union, Ms. Silverman and Mr.
Larson. Upon the closing of the initial public offering of Common Stock in
May, 1995, the Stockholders' Agreement terminated.

Ms. Silverman and Mr. Larson are the trustees and beneficiaries of Colonial
Realty Trust, which leases thirteen office spaces to the Company for an annual
aggregate consideration of $726,000. In connection with the Recapitalization,
the Company renegotiated all of its leases with Colonial Realty Trust to what
the Company believes were fair market rental rates at the time of the
Recapitalization.

Whitney was paid an equity placement fee of $500,000 in connection with the
issuance of the Preferred Stock, a debt placement fee of $630,000 in
connection with the issuance of the Senior Subordinated Notes and a management
fee of $100,000 for 1994. The Company's obligation to pay Whitney a management
fee was terminated effective as of January 1, 1995.

401(K) PLAN

The Company has a defined contribution plan (the "401(k) Plan") pursuant to
which employees at least 21 years of age and who have completed at least 6
months of service are eligible to participate. Participants in the 401(k) Plan
may not contribute more than the greater of a specified statutory amount or
15% of his or her pre-tax total compensation. The 401(k) Plan permits, but
does not require, additional contributions to the 401(k) Plan by the Company.
Eligible employees are 100% vested in their own contributions.

37
<PAGE>

CERTAIN TRANSACTIONS

As discussed above under "Compensation Committee Interlocks and Insider
Participation," the Company completed the Recapitalization on March 8, 1994,
which involved a number of transactions with certain of the Company's
principal stockholders and directors. For a more detailed description, see
"Management--Compensation Committee Interlocks and Insider Participation."

In connection with the Recapitalization, the Company entered into a
Stockholders' Agreement and the Registration Rights Agreement with Whitney,
the Whitney Equity Fund, the Whitney Debt Fund, First Union, Ms. Silverman and
Mr. Larson.

The Stockholders' Agreement provided for, among other things, restrictions
on transfer of shares, rights of first refusal, tag along rights and election
of directors. The Company's current directors were elected pursuant to the
terms of the Stockholders' Agreement, which requires all the parties to this
agreement to vote their shares of the Company's capital stock in favor of a
board of directors consisting of one member designated by each of Whitney, the
Whitney Equity Fund, Ms. Silverman and Mr. Larson, plus from one to three
additional outside directors selected by the members of the Board designated
by Whitney, the Whitney Equity Fund, Ms. Silverman and Mr. Larson. Upon the
closing of the initial public offering of Common Stock in May, 1995, the
Stockholders' Agreement terminated.

Pursuant to the Registration Rights Agreement, holders of at least 25.0% of
the shares of Common Stock subject to the Registration Rights Agreement
(excluding Ms. Silverman and Mr. Larson) may require the Company to effect the
registration of shares of Common Stock held by such parties for sale to the
public on three occasions, subject to certain conditions and limitations. In
addition, under the terms of the Registration Rights Agreement, if the Company
proposes to register any of its securities under the Securities Act of 1933,
as amended, whether for its own account or otherwise, the parties to the
Registration Rights Agreement (including Ms. Silverman and Mr. Larson) are
entitled to receive notice of such registration and to include their shares
therein, subject to certain conditions and limitations. The Company has agreed
to pay fees, costs and expenses of any registration effected on behalf of the
parties to the Registration Rights Agreement (other than underwriting
discounts and commissions).

38
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 30, 1996 (except as noted
below) and as adjusted to reflect the sale by the Company of the shares of
Common Stock offered hereby (assuming no exercise of the Underwriters' over-
allotment option), (i) by each person (or group of affiliated persons) known
by the Company to be the beneficial owner of more than 5% of the outstanding
Common Stock, (ii) each Director, (iii) the Company's Chief Executive Officer
and the Company's other named executive officers (as determined in accordance
with the rules of the Securities and Exchange Commission), (iv) all Selling
Stockholders, and (v) all of the Company's executive officers and Directors as
a group. Except as indicated in the footnotes to this table, the Company
believes that the persons named in this table have sole voting and investment
power with respect to all the shares of Common Stock indicated.

<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES OF COMMON STOCK
BENEFICIALLY OWNED PRIOR BENEFICIALLY OWNED AFTER
TO THE OFFERING (1) THE OFFERING (1)
------------------------------ ------------------------------
NUMBER PERCENTAGE OF NUMBER PERCENTAGE OF
OF OUTSTANDING SHARES TO OF OUTSTANDING
NAME SHARES SHARES BE OFFERED SHARES SHARES
---- -------------- --------------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Lois E. Silverman(2).... 622,470 8.4% 300,000 322,470 3.8%
Donald J. Larson(3)..... 1,174,530 15.8% 150,000 1,024,530 12.0%
Joseph F. Pesce(4)...... 22,240 * 20,740 1,500 *
John A. McCarthy,
Jr.(5)................. 15,286 * 15,100 186 *
Anne E. Kirby(6)........ 20,986 * 19,800 1,186 *
George H. Conrades(7)... 15,666 * -- 15,666 *
Jeffrey R. Jay, M.D.(8). 2,075,581 27.8% 826,285 1,249,296 14.6%
William Laverack,
Jr.(8)................. 2,075,581 27.8% 826,285 1,249,296 14.6%
Mitchell T. Rabkin,
M.D.(9)................ 8,033 * -- 8,033 *
J.H. Whitney & Co.(10).. 2,075,581 27.8% 826,285 1,249,296 14.6%
Morgan Stanley Group,
Inc.(11)............... 467,400 6.3% -- 467,400 5.5%
Morgan Stanley Asset
Management, Inc.(12)... 467,400 6.3% -- 467,400 5.5%
Michael J. Spilde(13)... 68,075 * 34,037 34,038 *
Laurence G. Ernst(14)... 68,075 * 34,038 34,037 *
All executive officers
and directors as a
group (9 persons)(15).. 3,954,792 53.1% 1,400,000 2,622,867 30.7%
</TABLE>
- --------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes general voting power
and/or investment power with respect to securities. Shares of Common
Stock subject to options and warrants currently exercisable or
exercisable within 60 days of April 30, 1996 are deemed outstanding for
computing the percentage of any other person. Except as otherwise
specified below, the persons named in the table above have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) The address of this stockholder is c/o CRA Managed Care, Inc., 312 Union
Wharf, Boston, Massachusetts 02109. Includes 23,500 shares held of record
by The Michael E. Silverman 1995 Irrevocable Trust dated March 13, 1995
and 23,500 shares held of record by The Susan E. Bender 1995 Irrevocable
Trust dated March 13, 1995. Includes 250,000 shares held of record by the
Lois and Norman Silverman 1996 Charitable Remainder Unitrust, all of which
shares are being sold in this offering by such trust.
(3) The address of this stockholder is c/o CRA Managed Care, Inc., 312 Union
Wharf, Boston, Massachusetts 02109. Includes 18,750 shares held of record
by trusts created for the benefit of Mr. Larson's children.
(4) Includes 20,740 shares of Common Stock issuable pursuant to currently
exercisable stock options.
(5) Includes 15,100 shares of Common Stock issuable pursuant to currently
exercisable stock options.
(6) Includes 19,800 shares of Common Stock issuable pursuant to currently
exercisable stock options.
(7) Includes 15,666 shares of Common Stock issuable pursuant to currently
exercisable stock options.

39
<PAGE>

(8) The address of these directors is c/o J.H. Whitney & Co., 177 Broad
Street, Stamford, Connecticut 06901. Consists of 2,075,581 shares held of
record by Whitney, Whitney Subordinated Debt Fund, L.P. (the "Whitney
Debt Fund") and Whitney 1990 Equity Fund, L.P. (the "Whitney Equity
Fund") that Dr. Jay and Mr. Laverack may be deemed to beneficially own
due to their relationship with such entities. Such beneficial ownership
is disclaimed by both Dr. Jay and Mr. Laverack.
(9) Includes 7,833 shares of Common Stock issuable pursuant to currently
exercisable stock options.
(10) The address of this stockholder is 177 Broad Street, Stamford,
Connecticut 06901, Attention: Jeffrey R. Jay, M.D. These shares are held
of record by Whitney and its affiliates as follows: (i) Whitney--305,726
shares of Common Stock; (ii) the Whitney Equity Fund--1,222,893 shares of
Common Stock; and (iii) the Whitney Debt Fund--546,962 shares of Common
Stock.
(11) The address of this stockholder is 1585 Broadway, New York, New York
10036. Ownership based upon Schedule 13G filed on or before February 14,
1996.
(12) The address of this stockholder is 1221 Avenue of the Americas, New York,
New York 10020. Ownership based upon Schedule 13G filed on or before
February 14, 1996.
(13) The address of this stockholder is 9642 48th Avenue, S.W., Seattle,
Washington 98136.
(14) The address of this stockholder is c/o Gordon Thomas Hunnewell, 1201
Pacific Avenue, Suite 2200, Tacoma, Washington 98402.
(15) Includes 79,139 shares of Common Stock issuable pursuant to currently
exercisable stock options. Includes 2,075,581 shares held of record by
Whitney, the Whitney Equity Fund and the Whitney Debt Fund that Dr. Jay
and Mr. Laverack may be deemed to beneficially own due to their
relationship with such entities. Such beneficial ownership is disclaimed
by both Dr. Jay and Mr. Laverack.

40
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The description of the capital stock below is qualified in its entirety by
reference to the Company's Articles of Organization, as amended (the
"Articles") and the By-Laws of the Company, as amended (the "By-Laws"), copies
of which are on file with the Securities and Exchange Commission.

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

The Company is authorized to issue up to 10,000,000 shares of Common Stock,
$.01 par value per share and 1,000,000 shares of Preferred Stock, $.01 par
value per share. Immediately prior to this Offering, the Company had shares of
Common Stock, and no shares of Preferred Stock, issued and outstanding. The
Company's Board of Directors has authorized an increase of the number of
shares of Common Stock which the Company is authorized to issue from
10,000,000 shares to 40,000,000 shares. Such increase is subject to the
approval of the Company's stockholders at the Company's Special Meeting in
lieu of its 1996 Annual Meeting of Stockholders to be held on May 21, 1996.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share of Common
Stock held of record by such holder on all matters on which stockholders
generally are entitled to vote under Massachusetts law. Voting rights are not
cumulative, so that the holders of a majority of the voting power of the
Company could elect all the directors standing for election at any annual or
special meeting of the stockholders, and the holders of the remaining shares
may not be able to elect any director.

The holders of the Common Stock are entitled to receive ratably dividends
only when and if declared by the Board of Directors of the Company out of
funds legally available for payment thereof. The ability of the Board of
Directors to declare or pay dividends on Common Stock or to cause the Company
to repurchase shares of its capital stock may be subject to restrictions or
limitations contained in the provisions of any series of Preferred Stock which
may hereafter be issued by the Company.

Upon the liquidation, dissolution or winding up of the Company, or any
distribution of its assets, the holders of the Common Stock will be entitled
to receive ratably the assets of the Company available after the payment of
all debts and other liabilities and after the holders of any series of
Preferred Stock which may be issued have received the preferential amount
fixed by the Board of Directors for such shares.

The holders of Common Stock will have no preemptive rights to purchase
shares of capital stock of the Company. Shares of Common Stock will not be
subject to any redemption provisions and will not be convertible into any
other securities or property. The rights, preferences and privileges of the
holder of Common Stock are subject to, and may be adversely affected by, the
rights of the holders of the shares of any series of Preferred Stock which the
Company may designate and issue in the future. All outstanding shares of
Common Stock are fully-paid and non-assessable and the shares of Common Stock
offered by the Company in the offering, when issued, will be fully-paid and
non-assessable.

PREFERRED STOCK

Pursuant to the Articles, the Board of Directors is authorized, subject to
any limitations prescribed by law, without further stockholder approval, to
issue shares of Preferred Stock in one or more classes or one or more series
within each class. Each such series of Preferred Stock shall have such rights,
preferences, privileges and restrictions, including voting rights, dividend
rights, conversion rights and redemption privileges and liquidation
preferences, as shall be determined by the Board of Directors.

41
<PAGE>

acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from acquiring, a majority of the outstanding voting stock of the Company.

MASSACHUSETTS LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS; ANTI-TAKEOVER
EFFECTS

The Company is subject to Chapter 110F of the Massachusetts General Laws, an
anti-takeover law. Under Chapter 110F, a Massachusetts corporation with more
than 200 stockholders may not engage in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person becomes an interested stockholder, unless (i)
the interested stockholder obtains the approval of the Board of Directors
prior to becoming an interested stockholder, (ii) the interested stockholder
acquires 90.0% of the outstanding voting stock of the corporation (excluding
shares held by certain affiliates of the corporation) at the time it becomes
an interested stockholder or (iii) the business combination is approved by
both the Board of Directors and the holders of two-thirds of the outstanding
voting stock of the corporation (excluding shares held by the interested
stockholder). An "interested stockholder" is a person who, together with
affiliates and associates, owns (or, in certain cases, at any time within the
prior three years did own) 5.0% or more of the outstanding voting stock of the
corporation. A "business combination" includes a merger, certain stock or
asset sales, and certain other specified transactions resulting in a financial
benefit to the interested stockholder.

The By-Laws include a provision excluding the Company from the applicability
of Chapter 110D of the Massachusetts General Laws, which regulates the
acquisition of so-called "control shares." A control share acquisition is the
acquisition of shares which, when added to shares already owned, would (but
for the statute) entitle the acquiring person to vote at least 20% of a
corporation's stock. Shares acquired in such a transaction would, under the
statute, have no voting rights unless a majority of non-interested
stockholders voted to grant such voting rights. In general, the person
acquiring such shares, officers of the Company and those directors of the
Company who are also employees, are not permitted to vote on whether such
voting rights shall be granted. The Board of Directors may amend the By-Laws
at any time to subject the Company to this statute prospectively.

Massachusetts General Laws Chapter 156B, Section 50A requires that a
publicly held Massachusetts corporation have a classified board of directors
consisting of three classes as nearly equal in size as possible, unless the
corporation elects not to be covered by Section 50A. The Company's By-Laws
contain provisions which give effect to Section 50A. See "Management--
Executive Officers and Directors."

The By-Laws provide that the directors and officers of the Company generally
shall be indemnified by the Company to the fullest extent authorized by
Massachusetts law, as it now exists or may in the future be amended, against
all expenses and liabilities reasonably incurred in connection with service
for or on behalf of the Company. In addition, the Articles provide that the
directors of the Company will not be personally liable to the Company or its
stockholders for monetary damages for certain breaches of their fiduciary duty
as directors, unless they violated their duty of loyalty to the Company or its
stockholders, acted in bad faith, knowingly or intentionally violated the law,
authorized illegal dividends or redemptions, approved certain loans to
insiders or derived an improper benefit from their action as directors.

The Company's By-Laws provide that special meetings of stockholders may be
called only by the Chief Executive Officer or President, by a majority of the
Board of Directors or by the Clerk upon the written request of the holders of
at least 40% of the Company's outstanding Common Stock.

In addition, the Articles provide that shares of the Company's Preferred
Stock may be issued in the future without stockholder approval and upon such
terms and conditions, and having such rights, privileges and preferences, as
the Board of Directors may determine. See "--Preferred Stock."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is First Union
National Bank of North Carolina.

42
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 8,474,724 shares of
Common Stock outstanding. Of these shares, 5,207,281 shares will be freely
tradeable by persons other than "affiliates" of the Company without
restriction under the Securities Act. All the 3,267,443 remaining shares of
Common Stock outstanding will be "restricted securities" (the "Restricted
Shares") within the meaning of Rule 144 under the Securities Act and may not
be sold in the absence of registration under the Securities Act unless an
exemption from registration is available. Subject to their agreement with the
Underwriters described below, the holders of the Restricted Shares may, in
certain circumstances, be eligible to sell such shares in the public market
pursuant to Rule 144 promulgated under the Securities Act.

None of the Restricted Shares will be eligible for sale in the public market
immediately after this offering pursuant to Rule 144(k). Following the
expiration of or release from the Lock-up Agreements, approximately 3,196,296
Restricted Shares will become eligible for immediate sale, subject, generally,
to compliance with Rule 144. The remainder of the Restricted Shares held by
existing stockholders (including those subject to Lock-up Agreements) will
become eligible for sale at various times over a period of less than two
years. In addition, the Company has filed Registration Statements on Form S-8
in order to register shares of Common Stock issuable upon exercise of stock
options granted to certain employees and directors of the Company and shares
of Common Stock issuable pursuant to the Company's Employee Stock Purchase
Plan. Following this offering, up to an additional 628,111 registered shares
may be issued pursuant to such plans, all of which will be freely tradeable
when issued to persons other than affiliates of the Company.

In general, under Rule 144 any holder of Restricted Shares, including an
affiliate of the Company (as such term is defined under Rule 144), as to which
at least two years have elapsed since the later of the date of their
acquisition from the Company or an affiliate of the Company, is entitled to
sell, within any three month period, a number of Restricted Shares that does
not exceed the greater of (i) 1% of the then outstanding shares of Common
Stock (approximately 84,747 shares immediately after the completion of this
offering) or (ii) the average weekly trading volume in the Common Stock in the
over-the-counter market during the four calendar weeks preceding the date on
which notice of the sale is filed with the Securities and Exchange Commission.
Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about
the Company. Further, a person who is not, and has not been, an affiliate of
the Company at any time during the three months preceding a sale and who holds
Restricted Shares as to which at least three years have elapsed since the
later of their acquisition from the Company or an affiliate of the Company is
entitled to sell such Restricted Shares under Rule 144(k) without regard to
volume limitations, manner of sale provisions, notice requirements or the
availability of current public information concerning the Company.

Sales of substantial amounts of Common Stock of the Company in the public
market, or the perception that such sale could occur, could adversely affect
trading prices and could impair the Company's future ability to raise capital
through the sale of its equity securities. See "Risk Factors."

The Company and holders of approximately 2,690,942 shares of Common Stock,
including the executive officers and directors of the Company, have agreed,
pursuant to Lock-up Agreements (or, in the case of the Company, the
Underwriting Agreement), that they will not, directly or indirectly, without
the prior written consent of the Representatives, on behalf of the
Underwriters, offer, sell, offer to sell, contract to sell, grant any option
to purchase or otherwise sell or dispose (or announce any offer, sale, offer
of sale, contract of sale, grant of any option to purchase or other sale or
disposition) of shares of Common Stock beneficially owned by them, or any
securities convertible into or exercisable or exchangeable therefor, for a
period of 90 days from the date of this Prospectus. See "Underwriting."

43
<PAGE>

REGISTRATION RIGHTS

In connection with the Recapitalization, the Company entered into the
Registration Rights Agreement with Whitney and certain of its affiliates,
First Union, Lois E. Silverman and Donald J. Larson, pursuant to which such
persons and entities are entitled to certain rights with respect to
registration under the Securities Act of 1933, as amended, of approximately
4,502,611 shares of Common Stock. Pursuant to the Registration Rights
Agreement, holders of at least 25.0% of the shares of Common Stock subject to
the Registration Rights Agreement (the "Rightsholders") (excluding Ms.
Silverman and Mr. Larson) have the right to require the Company to register
their Common Stock on up to three occasions. Ms. Silverman has the right to
require the Company to register her shares of Common Stock after the other
Rightsholders (excluding Mr. Larson) have sold Common Stock of the Company
with an aggregate sales price of at least $30,000,000 in one or more
registered offerings. If the Company proposes to register any of its
securities under the Securities Act of 1933, as amended, whether for its own
account or otherwise, the parties to the Registration Rights Agreement
(including Ms. Silverman and Mr. Larson) are entitled to receive notice of
such registration and to include their shares in such registration, subject to
certain conditions and limitations. In addition, the Company has granted to
former stockholders of each of Alta Pacific and QMC3 the right to request
registration of up to 136,150 shares and 249,816 shares, respectively, on one
occasion and to include any of such shares in the Company's registration
statements filed on behalf of the Company or other stockholders of the
Company. To the extent exercised, such rights to register shares of Common
Stock will result in additional shares becoming available to the public
market, which could adversely affect prevailing market prices of the Common
Stock. The Company has agreed to pay fees, costs and expenses of any
registration effected on behalf of the parties to the Registration Rights
Agreement and the former stockholders of Alta Pacific and QMC3 (other than
underwriting discounts and commissions). The shares being sold by certain of
the Selling Stockholders are being registered pursuant to the Registration
Rights Agreement and the registration rights agreement with the former Alta
Pacific stockholders. In addition, the Company, its executive officers and
directors, all current stockholders that are parties to the Registration
Rights Agreement, and the former stockholders of Alta Pacific have agreed to
certain restrictions on their disposition of shares of Common Stock for a
period of 90 days after the date of this Prospectus. See "Underwriting."

44
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated, Dean Witter Reynolds Inc., J.P. Morgan
Securities Inc. and Montgomery Securities have severally agreed to purchase
from the Company the following respective numbers of shares of Common Stock at
the public offering price less the underwriting discounts and commissions set
forth on the cover page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Alex. Brown & Sons Incorporated......................................
Dean Witter Reynolds Inc.............................................
Montgomery Securities................................................
J.P. Morgan Securities Inc...........................................
---------
Total................................................................ 2,500,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any of such shares
are purchased.

The Company and the Selling Stockholders have been advised by the
Representatives of the Underwriters that the Underwriters propose to offer the
shares of Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain other dealers. After the public offering, the offering price and other
selling terms may be changed by the Representatives of the Underwriters.

The Selling Stockholders have granted to the Underwriters an option,
exercisable not later than 30 days after the date of this Prospectus, to
purchase up to 375,000 additional shares of Common Stock at the public
offering price less the underwriting discounts and commissions set forth on
the cover page of this Prospectus. To the extent that the Underwriters
exercise such option, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage thereof that the number of shares
of Common Stock to be purchased by it shown in the above table bears to
2,500,000, and the Company will be obligated, pursuant to the option, to sell
such shares to the Underwriters. The Underwriters may exercise such option
only to cover over-allotments made in connection with the sale of Common Stock
offered hereby. If purchased, the Underwriters will offer such additional
shares on the same terms as those on which the 2,500,000 shares are being
offered.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.

The Company and holders of approximately 2,690,942 shares of Common Stock,
including the executive officers and directors of the Company, have agreed not
to offer, sell or otherwise dispose of any shares of such Common Stock for a
period of 90 days after the date of this Prospectus without the prior written
consent of Alex. Brown & Sons Incorporated on behalf of the Representatives of
the Underwriters.

In connection with this offering, certain Underwriters and selling group
members (if any) or their respective affiliates who are qualified registered
market makers on the Nasdaq National Market may engage in passive market
making on the Nasdaq National Market in accordance with Rule 10b-6A under the
Exchange Act during the two business day period before the commencement of the
offers or sales of the Common Stock. The passive market making transactions
must comply with applicable volume and price limits and be identified as such.
In general, a passive market maker may display its bid at a price not in

45
<PAGE>

excess of the highest independent bid for such security; if all independent
bids are lowered before the passive market maker's bid, however, such bid must
then be lowered when certain purchase limits are exceeded.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Hutchins, Wheeler &
Dittmar, A Professional Corporation, Boston, Massachusetts. James Westra, who
is a stockholder of Hutchins, Wheeler & Dittmar, is Assistant Clerk of the
Company. Attorneys at Hutchins, Wheeler & Dittmar, A Professional Corporation,
own an aggregate of 1,500 shares of the Company's Common Stock. Certain legal
matters in connection with this offering will be passed upon for the
Underwriters by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.

EXPERTS

The financial statements of the Company and Focus as of December 31, 1993,
1994 and 1995 and for the years then ended included in this Prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as set
forth in their report thereon appearing elsewhere herein, and have been so
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.

Upon the recommendation of the Company's Board of Directors, effective
December 5, 1994, the Company engaged Arthur Andersen LLP to serve as the
Company's independent accountants, dismissing KPMG Peat Marwick LLP. KPMG Peat
Marwick LLP's report on the Company's financial statements for the years ended
December 31, 1992 and 1993 did not contain an adverse opinion or disclaimer of
opinion nor were any reports qualified or modified as to uncertainty, audit
scope or accounting principles. The change in independent accountants did not
result from any disagreement between the Company and KPMG Peat Marwick LLP on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure.

ADDITIONAL INFORMATION

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 reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Judiciary Plaza, Washington, D.C. 20549, and at
the Commission's Regional Offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, NW, Room 1024, Judiciary Plaza,
Washington, D.C. 20549, at prescribed rates.

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act of 1933, as amended, with respect to the Common
Stock offered hereby. This prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which have been
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and such Common Stock,
reference is hereby made to the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents
of any contract or any other document are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference to such exhibit. Copies of the
Registration Statement and the exhibits may be inspected, without charge at
the offices of the Commission, or obtained at prescribed rates from the Public
Reference Section of the Commission at the address set forth above.

46
<PAGE>

CRA MANAGED CARE, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.................................. F-2
CONSOLIDATED FINANCIAL STATEMENTS OF CRA MANAGED CARE, INC.
Balance Sheets.......................................................... F-3
Statements of Operations................................................ F-4
Statements of Cash Flows................................................ F-5
Statements of Stockholders' Equity (Deficit)............................ F-6
Notes to Financial Statements........................................... F-7
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.................................. F-19
FINANCIAL STATEMENTS OF FOCUS HEALTHCARE MANAGEMENT, INC.
Balance Sheets.......................................................... F-20
Statements of Operations................................................ F-21
Statements of Shareholder's Equity (Deficit)............................ F-22
Statements of Cash Flows................................................ F-23
Notes to Financial Statements........................................... F-24
CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS OF CRA MANAGED CARE, INC. AND
FOCUS HEALTHCARE MANAGEMENT, INC. (UNAUDITED):
Consolidated Pro Forma Balance Sheet.................................... F-27
Consolidated Pro Forma Statement of Operations.......................... F-28
Notes to Pro Forma Financial Statements................................. F-29
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of
CRA Managed Care, Inc.:

We have audited the accompanying balance sheets of CRA Managed Care, Inc. (a
Massachusetts corporation) as of December 31, 1994 and 1995, and the related
statements of operations, stockholders' equity (deficit) and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CRA Managed Care, Inc. as
of December 31, 1994 and 1995 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.

Arthur Andersen LLP
Boston, Massachusetts
January 23, 1996

F-2
<PAGE>

CRA MANAGED CARE, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1994 1995 1996
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 2,197,000 $ 3,005,000 $ 2,893,000
Accounts receivable, less allowance
for doubtful accounts of $380,000,
$430,000 and $500,000
respectively...................... 20,654,000 26,380,000 28,964,000
Prepaid expenses................... 394,000 629,000 664,000
Prepaid taxes...................... 1,084,000 319,000 --
------------ ------------ ------------
Total current assets............. 24,329,000 30,333,000 32,521,000
Property and equipment, at cost...... 8,890,000 11,732,000 12,307,000
Less: Accumulated depreciation and
amortization........................ 4,071,000 5,864,000 6,317,000
------------ ------------ ------------
Net property and equipment....... 4,819,000 5,868,000 5,990,000
Other assets:
Deferred finance costs, net of
accumulated amortization.......... 1,890,000 -- --
Other assets....................... 307,000 355,000 400,000
------------ ------------ ------------
Total other assets............... 2,197,000 355,000 400,000
------------ ------------ ------------
$ 31,345,000 $ 36,556,000 $ 38,911,000
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Revolving credit facilities........ $ 4,716,000 $ 4,300,000 $ 9,100,000
Current portion of long-term debt.. 2,500,000 5,000,000 --
Accrued interest expense........... 627,000 18,000 118,000
Accounts payable and accrued
expenses.......................... 5,074,000 5,927,000 6,646,000
Accrued payroll and related
expenses.......................... 5,803,000 7,595,000 6,262,000
Accrued income taxes............... -- -- 1,009,000
------------ ------------ ------------
Total current liabilities........ 18,720,000 22,840,000 23,135,000
Long-term debt....................... 37,500,000 -- --
Long-term deferred tax liabilities... 3,638,000 2,056,000 2,056,000
Commitments and contingencies (Notes
8 and 12)
Stockholders' equity (deficit):
Preferred Stock--$.01 par value,
none, none and
1,000,000 authorized; none issued
and outstanding................... -- -- --
Convertible Preferred Stock--Series
A, no par value; 1,698,463, none
and none authorized; 1,698,483,
none and none issued and
outstanding, respectively......... 9,249,000 -- --
Common Stock--$.01 par value; none,
10,000,000 and 10,000,000
authorized; none, 7,372,424 and
7,373,024 shares issued and
outstanding, respectively......... -- 74,000 74,000
Common Stock--Class A, no par
value; 10,000,000, none and none
authorized; 4,700,000, none and
none shares issued and
outstanding, respectively......... 1,000 -- --
Paid-in capital.................... -- 36,839,000 36,852,000
Retained earnings (deficit)........ 3,103,000 (25,253,000) (23,206,000)
Less: Treasury stock, 1,698,463,
none and none shares,
respectively...................... (40,866,000) -- --
------------ ------------ ------------
Total stockholders' equity
(deficit)....................... (28,513,000) 11,660,000 13,720,000
------------ ------------ ------------
$ 31,345,000 $ 36,556,000 $ 38,911,000
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE>

CRA MANAGED CARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------- -----------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................ $100,546,000 $121,295,000 $146,055,000 $34,930,000 $40,225,000
Cost of services........ 86,082,000 103,796,000 122,615,000 29,545,000 33,422,000
------------ ------------ ------------ ----------- -----------
Gross profit........ 14,464,000 17,499,000 23,440,000 5,385,000 6,803,000
General and
administrative
expenses............... 9,931,000 8,753,000 11,021,000 2,677,000 3,109,000
------------ ------------ ------------ ----------- -----------
Operating income.... 4,533,000 8,746,000 12,419,000 2,708,000 3,694,000
Other (income) expense:
Interest (income)..... (11,000) (62,000) -- -- --
Interest expense...... 16,000 4,087,000 2,484,000 1,354,000 194,000
Other (income)
expense.............. (5,000) 132,000 -- -- --
------------ ------------ ------------ ----------- -----------
Total other (income)
expense............ -- 4,157,000 2,484,000 1,354,000 194,000
Income before income
taxes.............. 4,533,000 4,589,000 9,935,000 1,354,000 3,500,000
Provision for income
taxes
Current year
operations........... 355,000 1,530,000 3,974,000 542,000 1,453,000
Change in tax status.. -- 3,772,000 -- -- --
------------ ------------ ------------ ----------- -----------
Total provision for
income taxes....... 355,000 5,302,000 3,974,000 542,000 1,453,000
------------ ------------ ------------ ----------- -----------
Net income (loss) before
extraordinary items 4,178,000 (713,000) 5,961,000 812,000 2,047,000
Loss on retirement of
debt, net of taxes of
$1,610,000............. -- -- (2,460,000) -- --
------------ ------------ ------------ ----------- -----------
Net income (loss)....... $ 4,178,000 $ (713,000) $ 3,501,000 $ 812,000 $ 2,047,000
============ ============ ============ =========== ===========
Actual and pro forma
earnings
per share:
Pro forma net income
(Note 2)............. 2,753,000
============
Net income before
extraordinary items.. $ 0.57 $ 0.91 $ 0.17 $ 0.27
Loss on retirement of
debt, net of tax..... -- (0.37) -- --
------------ ------------ ----------- -----------
Net income............ $ 0.57 $ 0.54 $ 0.17 $ 0.27
============ ============ =========== ===========
Weighted average
shares outstanding... 4,815,000 6,540,000 4,815,000 7,550,000
============ ============ =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>

CRA MANAGED CARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operations:
Net income (loss)...... $ 4,178,000 $ (713,000) $ 3,501,000 $ 812,000 $ 2,047,000
Items not requiring
cash:
Depreciation of
property and
equipment............. 847,000 1,274,000 1,601,000 412,000 453,000
Provision for doubtful
accounts.............. 15,000 353,000 186,000 -- 70,000
Amortization of
deferred finance
costs and debt
discount.............. -- 521,000 228,000 170,000 --
Loss on retirement of
debt.................. -- -- 3,912,000 -- --
Loss on disposal of
fixed assets.......... 1,000 134,000 -- -- --
Provision for deferred
tax income taxes...... 244,000 2,758,000 208,000 -- --
Change in assets and
liabilities:
Accounts receivable.... (3,848,000) (4,730,000) (5,570,000) (701,000) (2,654,000)
Prepaid expenses and
deposits.............. 311,000 (1,407,000) 344,000 178,000 239,000
Accounts payable,
accrued expenses and
income taxes.......... 1,213,000 7,404,000 (296,000) (1,016,000) 495,000
----------- ------------ ------------ ----------- -----------
Cash flows from
operations.......... 2,961,000 5,594,000 4,114,000 (145,000) 650,000
Cash flows from
investing activities:
Purchase of property
and equipment......... (1,763,000) (2,788,000) (2,492,000) (744,000) (575,000)
Proceeds from sale of
property and
equipment............. 24,000 13,000 -- -- --
Cash surrender value of
life insurance........ (22,000) (23,000) (12,000) -- --
----------- ------------ ------------ ----------- -----------
Cash flows used for
investing
activities.......... (1,761,000) (2,798,000) (2,504,000) (744,000) (575,000)
Cash flows from
financing activities:
Payments of note
payable to bank and
overdraft............. (337,000) -- -- -- --
Dividends paid......... (218,000) -- -- -- --
Borrowings (payments)
under revolving credit
facilities, net....... -- 4,716,000 (416,000) (489,000) 4,800,000
Proceeds from the
issuance of Term Loan. -- 17,000,000 -- -- --
Payments on Term Loan.. -- (750,000) (16,250,000) (250,000) --
Proceeds from issuance
of Senior Subordinated
Notes................. -- 21,000,000 -- -- --
Payments on the Senior
Subordinated Notes.... -- -- (21,000,000) -- --
Proceeds from issuance
of Junior Subordinated
Notes................. -- 5,000,000 -- -- --
Payment on Junior
Subordinated Notes.... -- -- -- -- (5,000,000)
Proceeds from the
issuance of Preferred
Stock................. -- 10,000,000 -- -- --
Proceeds from the sale
of Common Stock....... -- -- 40,250,000 -- --
Proceeds for the sale
of Common Stock under
the employee stock
purchase plan and
stock option plan..... -- -- 357,000 -- 13,000
Costs associated with
the issuance of debt.. -- (2,154,000) -- -- --
Costs associated with
the issuance of
Preferred Stock....... -- (751,000) -- -- --
Costs associated with
the sale of Common
Stock................. -- -- (3,743,000) -- --
Repurchase of Common
Stock................. -- (55,412,000) -- -- --
----------- ------------ ------------ ----------- -----------
Cash flows used for
financing
activities.......... (555,000) (1,351,000) (802,000) (739,000) (187,000)
----------- ------------ ------------ ----------- -----------
Net increase in cash and
cash equivalents....... 645,000 1,445,000 808,000 (1,628,000) (112,000)
Cash and cash
equivalents, beginning
of year................ 107,000 752,000 2,197,000 2,197,000 3,005,000
----------- ------------ ------------ ----------- -----------
Cash and cash
equivalents, end of
period................. $ 752,000 $ 2,197,000 $ 3,005,000 $ 569,000 $ 2,893,000
=========== ============ ============ =========== ===========
Supplemental disclosure
of cash flow
information:
Interest paid.......... $ 16,000 $ 2,902,000 $ 2,865,000 $ 1,716,000 $ 94,000
Income taxes paid...... $ 48,000 $ 3,690,000 $ 3,392,000 $ 206,000 $ 125,000
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>

CRA MANAGED CARE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)

<TABLE>
<CAPTION>
SERIES A
CONVERTIBLE CLASS A $0.01 PAR VALUE
PREFERRED STOCK COMMON STOCK COMMON STOCK
------------------------ ------------------- -----------------
NUMBER NUMBER NUMBER PAID-IN RETAINED
OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE CAPITAL EARNINGS
----------- ----------- ---------- ------- --------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December
31, 1992......... -- $ -- 4,700,000 $ 1,000 -- $ -- $ -- $ 11,895,000
Dividends on
Common Stock.... -- -- -- -- -- -- -- (218,000)
Net income...... -- -- -- -- -- -- -- 4,178,000
----------- ----------- ---------- ------- --------- ------- ----------- ------------
Balance December
31, 1993......... -- -- 4,700,000 1,000 -- -- -- 15,855,000
=========== =========== ========== ======= ========= ======= =========== ============
Treasury stock
purchase........ -- -- -- -- -- -- -- --
Treasury stock
reissuance...... -- -- -- -- -- -- -- (12,039,000)
Issuance of
Preferred Stock. 1,698,463 9,249,000 -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- (713,000)
----------- ----------- ---------- ------- --------- ------- ----------- ------------
Balance December
31, 1994......... 1,698,463 9,249,000 4,700,000 1,000 -- -- -- 3,103,000
=========== =========== ========== ======= ========= ======= =========== ============
Conversion of
Convertible
Preferred Stock
into Class A
Common Stock.... (1,698,463) (9,249,000) -- -- -- -- -- (31,617,000)
Conversion of
Class A Common
Stock into $0.01
par value Common
Stock........... -- -- (4,700,000) (1,000) 4,700,000 47,000 -- (46,000)
Sale of Common
Stock at initial
public offering. -- -- -- -- 2,515,625 25,000 36,482,000 --
Common Stock
issued
for the
acquisition of
Alta Pacific
Corporation..... -- -- -- -- 136,150 2,000 -- (194,000)
Common Stock
issued under
employee stock
purchase plan
and stock option
plan............ -- -- -- -- 20,649 -- 357,000 --
Net income...... -- -- -- -- -- -- -- 3,501,000
----------- ----------- ---------- ------- --------- ------- ----------- ------------
Balance December
31, 1995......... -- -- -- -- 7,372,424 74,000 36,839,000 (25,253,000)
=========== =========== ========== ======= ========= ======= =========== ============
Common Stock
issued under
employee stock
purchase plan
and stock option
plan............ -- -- -- -- 600 -- 13,000 --
Net income...... -- -- -- -- -- -- -- 2,047,000
----------- ----------- ---------- ------- --------- ------- ----------- ------------
Balance March 31,
1996............. -- $ -- -- $ -- 7,373,024 $74,000 $36,852,000 $(23,206,000)
=========== =========== ========== ======= ========= ======= =========== ============
<CAPTION>
SERIES A
TREASURY STOCK TOTAL
------------------------- STOCKHOLDERS'
NUMBER EQUITY
OF SHARES VALUE (DEFICIT)
----------- ------------- --------------
<S> <C> <C> <C>
Balance December
31, 1992......... -- $ -- $ 11,896,000
Dividends on
Common Stock.... -- -- (218,000)
Net income...... -- -- 4,178,000
----------- ------------- --------------
Balance December
31, 1993......... -- -- 15,856,000
=========== ============= ==============
Treasury stock
purchase........ (2,303,000) (55,412,000) (55,412,000)
Treasury stock
reissuance...... 604,537 14,546,000 2,507,000
Issuance of
Preferred Stock. -- -- 9,249,000
Net loss........ -- -- (713,000)
----------- ------------- --------------
Balance December
31, 1994......... (1,698,463) (40,866,000) (28,513,000)
=========== ============= ==============
Conversion of
Convertible
Preferred Stock
into Class A
Common Stock.... 1,698,463 40,866,000 --
Conversion of
Class A Common
Stock into $0.01
par value Common
Stock........... -- -- --
Sale of Common
Stock at initial
public offering. -- -- 36,507,000
Common Stock
issued
for the
acquisition of
Alta Pacific
Corporation..... -- -- (192,000)
Common Stock
issued under
employee stock
purchase plan
and stock option
plan............ -- -- 357,000
Net income...... -- -- 3,501,000
----------- ------------- --------------
Balance December
31, 1995......... -- -- 11,660,000
=========== ============= ==============
Common Stock
issued under
employee stock
purchase plan
and stock option
plan............ -- -- 13,000
Net income...... -- -- 2,047,000
----------- ------------- --------------
Balance March 31,
1996............. -- $ -- $ 13,720,000
=========== ============= ==============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE>

CRA MANAGED CARE, INC.

NOTES TO FINANCIAL STATEMENTS

(1) ORGANIZATION AND CAPITALIZATION

CRA Managed Care, Inc. (the "Company") was founded in 1978 and is a provider
of field case management and specialized cost containment services designed to
reduce workers' compensation costs. On March 8, 1994 the Company completed a
recapitalization (the "Recapitalization"), which included the repurchase of
2,303,000 shares of Common Stock from the two principal stockholders of the
Company for $55,412,000; and the sale of 1) 1,698,463 shares of Series A
Preferred Stock for $10,000,000 to J.H. Whitney & Co. and affiliated companies
("Whitney", $9,000,000) and the First Union Corporation ("First Union",
$1,000,000), with each share being convertible into one share of Common Stock,
2) $17,000,000 principal amount of term loans (the "Term Loan") and a
$10,000,000 revolving credit facility (the "Former Revolving Credit Facility")
due March 31, 1999 at an interest rate of the Base Rate plus 1 1/2% or LIBOR
plus 3% to First Union Bank of North Carolina ("First Union Bank"), 3)
$21,000,000 principal amount of senior subordinated promissory notes (the
"Senior Subordinated Notes") due March 8, 2001 at an interest rate of the
10.101% to Whitney ($19,000,000) and First Union ($2,000,000), and
4) $5,000,000 principal amount of junior subordinated notes (the "Junior
Subordinated Notes") due March 9, 2002 at an interest rate of 10.0% to the
Company's two principal stockholders.

The Company incurred costs of $2,905,000 in connection with the
Recapitalization of which $751,000 was assigned to the issuance of the
Preferred Stock and $2,154,000 to the issuance of the debt. Furthermore, the
Company issued 604,537 shares of Common Stock from its treasury stock to
Whitney (546,962 shares) and First Union (57,575 shares) in connection with
the issuance of the Senior Subordinated Notes. The Company assigned a value of
$2,507,000 to these shares which was recorded as debt discount on the Senior
Subordinated Notes.

On March 15, 1995 the Board of Directors voted to restate the Company's
Amended and Restated Articles of Organization. The effect of the restatement
was (i) to increase to 10,000,000 the number of authorized shares of Common
Stock, to change the par value of the Common Stock to $.01 per share and to
create a new class of preferred stock, $.01 par value.

On May 10, 1995, the Company completed its initial public offering of
2,515,625 shares of its Common Stock, including the exercise of the
underwriters over-allotment option, at a price of $16.00 per share, generating
net proceeds to the Company of $36,507,000. These proceeds, supplemented by
borrowings of $5,000,000 under a new credit facility (the "Credit Facility")
with First Union Bank were used to repay fully the Term Loan ($16,250,000) and
the Former Revolving Credit Facility ($4,226,000) with First Union Bank and
the Senior Subordinated Notes ($21,000,000) issued to Whitney and First Union.
The early repayment of this debt resulted in the Company recording a net loss
on the retirement of debt of $2,460,000 comprised of the write-off of
associated deferred finance costs ($1,772,000), debt discount on the Senior
Subordinated Notes ($2,140,000) and fees associated with the termination of
the interest rate swaps previously required by the former loan agreement
($158,000), offset by a tax benefit of $1,610,000.

On October 23, 1995, the Company acquired Alta Pacific Corporation, a
workers' compensation case management company with eight offices in the state
of Washington, with revenues of approximately $3,000,000, in a pooling
transaction for 136,150 shares of Common Stock, or approximately $2,900,000 in
value, based upon the market value of the stock on the acquisition date. This
acquisition was not material and the Company restated its opening retained
earnings to reflect the net assets of Alta Pacific Corporation. As such, the
results for the year ended December 31, 1995 include the operating results of
Alta Pacific Corporation subsequent to the acquisition date.

F-7
<PAGE>

CRA MANAGED CARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

On April 2, 1996, the Company purchased Focus HealthCare Management, Inc.
("Focus") from United HealthCare Corporation for $21,000,000 in cash. Focus,
based in Brentwood, Tennessee, has annual sales of approximately $10,000,000
and employs 115 people. On March 29, 1996, in order to finance this
acquisition, the Company and First Union Bank signed an amendment to expand
the Company's borrowing capacity under the Credit Facility to $40,000,000
under similar terms and conditions.

(2) ACTUAL, PRO FORMA AND SUPPLEMENTAL PRO FORMA EARNINGS PER SHARE

(a) Earnings per share

Earnings per share for the year ended December 31, 1995 and the three months
ended March 31, 1995 and 1996 has been calculated based on the weighted
average number of shares of Common Stock and Common Stock equivalents
outstanding during the year. Earnings per share for the year ended December
31, 1993 has not been presented as it is not meaningful.

(b) Pro forma earnings per share

Pro forma earnings per share for the year ended December 31, 1994 has been
calculated as if the Company had been subject to federal and state income
taxes for the period based upon an effective tax rate indicative of the
statutory rates in effect during the period (prior to the Recapitalization on
March 8, 1994, the Company elected to be taxed as an S corporation on a cash
basis, and accordingly, was not subject to federal income taxes and certain
state income tax jurisdictions).

Supplemental pro forma earnings per share has been calculated as if the
Company repaid the Term Loan, Former Revolving Credit Facility and Senior
Subordinated Notes at the beginning of 1995 utilizing the net proceeds
($36,507,000) from its sale of Common Stock and borrowings under the Credit
Facility ($5,000,000). The weighted average number of shares (7,376,000) is
the actual weighted average number of common shares and common share
equivalents outstanding plus the impact of the 2,515,625 shares of Common
Stock that were sold on May 10, 1995. Supplemental pro forma net income and
earnings per share for the year ended December 31, 1995 would have been
$6,871,000 or $0.93 per share.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents.

(b) Revenue Recognition

The Company recognizes revenue primarily as services have been rendered
based upon time and expenses incurred. A certain portion of the Company's
revenues are derived from fee schedule auditing which is based on the number
of charges reviewed, and to a limited extent, based on a percentage of savings
achieved for the Company's customers. Accounts receivable at December 31,
1994, December 31, 1995 and March 31, 1996 include $3,734,000, $4,350,000 and
$4,350,000, respectively, of unbilled accounts receivable relating to services
rendered prior to the period-end but not invoiced until after the period-end.

F-8
<PAGE>

CRA MANAGED CARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(c) Depreciation

The Company provides for depreciation on property and equipment using
straight-line and accelerated methods by charges to operations in amounts that
allocate the cost of depreciable assets over their estimated lives as follows:

<TABLE>
<CAPTION>
ASSET CLASSIFICATION ESTIMATED USEFUL LIFE
-------------------- ---------------------
<S> <C>
Furniture and fixtures 7 Years
Office equipment 3-5 Years
Automobiles 5 Years
Leasehold improvements The shorter of the
life of lease or asset life
</TABLE>

(d) Deferred finance costs

Costs of $2,154,000 associated with the debt issued in connection with the
Recapitalization was allocated to each debt instrument and was being amortized
as interest expense over the life of the debt instruments with lives ranging
from five to six years. All deferred finance costs were written off as a
result of the early retirement of debt in connection with the sale of Common
Stock on May 10, 1995.

(e) Income Taxes

Prior to the Recapitalization, the Company had elected "S" corporation
status under Section 1362 of the Internal Revenue Code. Accordingly, the
Company was not liable for federal income taxes as income was taxed directly
to the Company's stockholders. However, certain states in which the Company
conducts its operations did not recognize "S" corporation status. As a result,
the Company had provided for state income tax for these states.

In connection with the Recapitalization, the Company was required to change
from an "S" corporation to a "C" corporation and to report income on an
accrual basis for tax purposes as opposed to a cash basis. This change
resulted in the Company recording an incremental tax provision of $3,772,000.

The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("FASB 109"), for the year ended December 31,
1993 which required a change from the deferred method to the asset and
liability method of accounting for income taxes. Under the asset and liability
method, deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory rates applicable to
future years to differences between the financial statement carrying amounts
and the tax bases of existing assets and liabilities. Under FASB 109, the
effect on deferred taxes of a change in tax rates is recognized as income in
the period that includes the enactment date.

The adoption of FASB 109 did not impact the Company's statement of
operations for the year ended December 31, 1993 and there was no cumulative
effect as of the date of adoption.

(f) Foreign Currency Translation

All assets and liabilities of the Company's Canadian office are translated
at the year-end exchange rate while revenues and expenses are translated at
the average exchange rate for the year.

(g) Use of Estimates

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and

F-9
<PAGE>

CRA MANAGED CARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

(4) REVOLVING CREDIT FACILITIES

(a) Credit Facility

On April 28, 1995, the Company entered into the $25,000,000 Credit Facility
with First Union Bank. On March 29, 1996, the Company and First Union Bank
signed an amendment to expand the Company's borrowing capacity under the
Credit Facility to $40,000,000 under similar terms and conditions in order to
finance the acquisition of Focus. Interest on borrowings under the Credit
Facility will be payable, at the Company's option, at the First Union Bank's
prime rate plus an additional percentage of up to 0.375%, or LIBOR plus an
additional percentage of up to 1.875%, depending on certain financial
criteria. At December 31, 1995 and March 31, 1996, the Company had borrowings
under the Credit Facility of $4,300,000 and $9,100,000, respectively at an
average rate of interest of 7.361% and 6.88%, respectively.

The Credit Facility contains customary covenants, including, without
limitation, restrictions on the incurrence of indebtedness, the sale of
assets, certain mergers and acquisitions, the payment of dividends on the
Company's capital stock, the repurchase or redemption of capital stock,
transactions with affiliates, investments, capital expenditures and changes in
control of the Company. Under the Credit Facility, the Company is also
required to satisfy certain financial covenants, such as cash flow, capital
expenditures and other financial ratio tests including current ratios and
interest expense coverage ratios. The Company was in compliance with all such
covenants during 1995. The ability of the Company to meet its debt service
requirements and to comply with such covenants is dependent upon the Company's
future performance, which is subject to financial, economic, competitive and
other factors affecting the Company, some of which are beyond its control. The
entire $40,000,000 of revolving credit is available for borrowing by the
Company provided that the Company is prohibited from borrowing under the
Credit Facility in order to finance the acquisition of other businesses unless
the Company will have, immediately following any such acquisition, at least
$5,000,000 available for additional working capital borrowings under the
Credit Facility. The Company's obligations under the Credit Facility are
secured by a first priority security interest in substantially all of the
Company's properties and assets.

The Company is required to pay First Union Bank a facility fee of 0.25% to
0.375% per annum, depending on certain financial criteria, on the unused
portion of the Credit Facility as well as a quarterly agent fee of $3,750,
payable in advance.

(b) Former Revolving Credit Facility

As part of the Recapitalization, the Company obtained the Former Revolving
Credit Facility of $10,000,000 and the Term Loan of $17,000,000 (see below)
through First Union Bank pursuant to a loan agreement (the "Former Loan
Agreement"). The Former Revolving Credit Facility permitted borrowings by the
Company of up to a maximum of $10,000,000, subject to certain borrowing base
requirements, until maturity on March 31, 1999 at an interest rate of the Base
Rate plus 1 1/2% or LIBOR plus 3% (9.375% at December 31, 1994). At December
31, 1994, the Company had borrowings of $4,716,000.

Under the Former Loan Agreement, the Company was required to satisfy certain
financial covenants, such as cash flow, capital expenditures and other
financial ratio tests including current ratios and interest expense coverage
ratios. The Company complied with or obtained waivers relative to the
financial covenants through March 31, 1995.

F-10
<PAGE>

CRA MANAGED CARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The Company was required to pay First Union Bank a facility fee of 0.5% per
annum on the unused portion of the Former Revolving Credit Facility, quarterly
in arrears, as well as a yearly agent fee of $25,000.
For the years ended December 31, 1993, 1994 and 1995, the weighted average
borrowings under these revolving credit facilities were $250,000, $3,404,000
and $4,903,000, respectively and the weighted average interest rates were
6.43%, 7.39% and 8.55%, respectively.

(5) LONG-TERM DEBT

<TABLE>
<CAPTION>
DECEMBER 31,
-------------- MARCH 31,
1994 1995 1996
------- ------ ---------
<S> <C> <C> <C>
Term Loan, less current portion of $2,500,000......... $13,750 $ -- $--
Senior Subordinated Notes, net of unamortized debt
discount of $2,250,000............................... 18,750 -- --
Junior Subordinated Notes, less current portion of
$5,000,000........................................... 5,000 -- --
------- ------ ----
$37,500 $ -- $--
======= ====== ====
</TABLE>

(a) Term Loan

Pursuant to the Former Loan Agreement with First Union Bank, the Company
obtained a $17,000,000 Term Loan due March 31, 1999 at an interest rate of the
Base Rate plus 1 1/2% or LIBOR plus 3% (9.375% at December 31, 1994). The Term
Loan required quarterly principal payments of $250,000 beginning June 30, 1994
through March 31, 1995, $750,000 beginning June 30, 1995 through March 31,
1997, $1,000,000 beginning June 30, 1997 through December 31, 1998 and a final
payment of $3,000,000 on March 31, 1999. The Term Loan was repaid in full on
May 10, 1995.

As required by the Former Loan Agreement, the Company entered into an
interest rate swap that limited LIBOR to 8% on $8,500,000 of Term Loan
borrowings through June 14, 1997. In order to mitigate the up front cost of
this interest rate swap, the Company entered into another interest rate swap,
which also matured on June 14, 1997. This swap set the LIBOR floor on
$3,250,000 of these borrowings at 8%. These agreements resulted in the Company
recording additional interest expense of approximately $53,000 and $13,000 for
the years ended December 31, 1994 and 1995, respectively. These financial
instruments were terminated at a cost of $158,000 during the second quarter of
1995 due to the repayment of the debt and this cost is included in Loss on
Retirement of Debt.

(b) Senior Subordinated Notes

The Company issued $21,000,000, principal amount, of Senior Subordinated
Notes due March 8, 2001 at an interest rate of the 10.101% to Whitney
($19,000,000) and First Union ($2,000,000). Furthermore, the Company issued
604,538 shares of its treasury stock to Whitney (546,963 shares) and First
Union (57,575 shares) in connection with the issuance of the Senior
Subordinated Notes, to which the Company assigned a value of $2,507,000 at the
date of issuance, which was reflected as debt discount on the Senior
Subordinated Notes and was being amortized as interest expense over the life of
the debt. The Senior Subordinated Notes were repaid in full on May 10, 1995 and
the associated debt discount was written off and was included in Loss on
Retirement of Debt.

Similar to the Former Loan Agreement, the Senior Subordinated Notes agreement
also required the Company to satisfy certain financial covenants. The Company
complied with or obtained waivers relative to such financial covenants.

F-11
<PAGE>

CRA MANAGED CARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

In connection with the repurchase of 2,303,000 shares of Common Stock from
the two principal stockholders of the Company as part of the Recapitalization,
the Company issued $5,000,000, principal amount, of Junior Subordinated Notes
due March 9, 2002 at an interest rate of 10.0%. On January 16, 1996 the
Company retired the 10% Junior Subordinated Notes utilizing borrowings under
the Credit Facility.

(6) INCOME TAXES

The provision for income taxes consisted of the following for the years
ended December 31, 1993, 1994 and 1995:

<TABLE>
<CAPTION>
1993 1994 1995
-------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal.................................. $ -- $1,777,000 $1,658,000
State.................................... 111,000 767,000 498,000
-------- ---------- ----------
111,000 2,544,000 2,156,000
Deferred:
Federal.................................. -- 2,822,000 166,000
State.................................... 244,000 (64,000) 42,000
-------- ---------- ----------
244,000 2,758,000 208,000
-------- ---------- ----------
Total.................................. $355,000 $5,302,000 $2,364,000
======== ========== ==========
</TABLE>

Significant items making up deferred tax liabilities and deferred tax assets
were as follows at December 31:

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Deferred Tax Assets:
Allowance for doubtful accounts................... $ 152,000 $ 169,000
Accrued expenses.................................. 564,000 452,000
---------- ----------
$ 716,000 $ 621,000
========== ==========
Deferred Tax liabilities:
Book to tax depreciation.......................... $ 52,000 $ 180,000
Change in tax status.............................. 4,302,000 2,497,000
---------- ----------
$4,354,000 $2,677,000
========== ==========
</TABLE>

A reconciliation of the federal statutory rate to the Company's effective
tax rate for the years ended December 31, 1994 and 1995 is as follows:

<TABLE>
<CAPTION>
1994 % 1995 %
---------- ---- ---------- ----
<S> <C> <C> <C> <C>
Tax provision at federal statutory rate..... $1,560,000 34.0% $1,994,000 34.0%
Income prior to Recapitalization, taxed as
an
S corporation.............................. (352,000) (7.7) -- --
State taxes, net of federal income tax bene-
fit........................................ 228,000 5.0 356,000 6.1
Items not deductible for tax purposes and
other items................................ 94,000 2.0 14,000 0.2
---------- ---- ---------- ----
$1,530,000 33.3% $2,364,000 40.3%
========== ==== ========== ====
</TABLE>

F-12
<PAGE>

CRA MANAGED CARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Prior to the Recapitalization, the Company was an S corporation under
Section 1362 of the Internal Revenue Code. The tax provision in prior years
resulted from certain states that do not recognize S corporation status.

In connection with the Recapitalization, the Company was required to change
from an S corporation to a C corporation and to report income on an accrual
basis for tax purposes as opposed to a cash basis. This change resulted in the
Company recording an incremental tax provision of $3,772,000.

(7) STOCKHOLDERS' EQUITY

(a) Preferred Stock

Pursuant to the Articles of Organization, the Board of Directors is
authorized, subject to any limitations prescribed by law, without further
stockholder approval, to issue shares of Preferred Stock in one or more
classes or one or more series within each class. Each such series of Preferred
Stock shall have such rights, preferences, privileges and restrictions,
including voting rights, dividend rights, conversion rights and redemption
privileges and liquidation preferences, as shall be determined by the Board of
Directors.

The Company has granted the Board of Directors authority to designate and
issue Preferred Stock and to determine its rights and preferences to eliminate
delays associated with a stockholder vote on specific issues. The issuances of
Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of the
Company.

(b) Convertible Preferred Stock

Each share of the Series A Convertible Preferred Stock could have been
converted by the holder into a share of Class A Common Stock, subject to
certain antidilution adjustments. The holders of the Series A Convertible
Preferred Stock were entitled to receive dividends or distributions on an as-
converted basis equal to amounts declared by the Company on its Common Stock.
The holders of Series A Convertible Preferred Stock were entitled to vote with
the holders of Class A Common Stock on an as converted basis.

The Company could require the conversion of all outstanding Series A
Convertible Preferred Stock in connection with a qualified initial public
offering. The Company exercised this option in connection with the sale of
Common Stock on May 10, 1995 and subsequently canceled, retired and eliminated
all shares of Series A Convertible Preferred Stock from the Company's
authorized shares.

All shares of Class A Common Stock were converted into $.01 par value Common
Stock in connection with the sale of Common Stock on May 10, 1995 and the
Company subsequently canceled, retired and eliminated all shares of Class A
Common Stock from the Company's authorized shares.

(8) COMMITMENTS

The Company leases certain office facilities and office equipment from
related parties under leases that expire on various dates through December 31,
2003. Certain leases require the Company to pay increases in operating costs
and real estate taxes. In addition, the Company leases certain office
facilities from unrelated parties under operating lease agreements that expire
on various dates to July 31, 2000.

F-13
<PAGE>

CRA MANAGED CARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Certain motor vehicles are leased from unrelated parties under
noncancellable operating leases that expire on various dates through December
31, 1997. During 1993, the Company purchased from a related party, office
equipment that had been leased. The purchase price was the estimated fair
value of the equipment.

The following is a schedule of rent expense by major category for the years
ended December 31:

<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Facilities--related parties............... $1,310,000 $ 714,000 $ 726,000
Facilities--unrelated parties............. 2,121,000 2,673,000 3,199,000
---------- ---------- ----------
3,431,000 3,387,000 3,925,000
Office equipment--unrelated parties....... 121,000 150,000 190,000
Computer equipment--related parties....... 369,000 -- --
Automobiles--unrelated parties............ 1,798,000 2,181,000 2,638,000
---------- ---------- ----------
Total rent expense...................... $5,719,000 $5,718,000 $6,753,000
========== ========== ==========
</TABLE>

The following is a schedule of future minimum lease payments under
noncancellable operating leases for the years ending December 31:

<TABLE>
<CAPTION>
RELATED UNRELATED
YEAR PARTIES PARTIES TOTAL
---- ---------- ----------- -----------
<S> <C> <C> <C>
1996................................... $ 726,000 $ 4,872,000 $ 5,598,000
1997................................... 726,000 3,559,000 4,285,000
1998................................... 726,000 1,877,000 2,603,000
1999................................... 726,000 1,022,000 1,748,000
2000................................... 726,000 537,000 1,263,000
Thereafter.............................. 2,179,000 227,000 2,406,000
---------- ----------- -----------
$5,809,000 $12,094,000 $17,903,000
========== =========== ===========
</TABLE>

(9) EMPLOYEE RETIREMENT PLANS AND SALARY CONTINUATION PROGRAMS

(a) Profit Sharing Plan

All employees who were at least 21 years of age and had completed 12 months
of service in which they worked at least 1,000 hours were eligible to
participate in the Profit Sharing Plan. The Company made discretionary
contributions to this plan each year out of its profits. Qualified employees
were entitled to receive 100% of the contributions upon retirement, death or
disability. The amount contributed to the plan was determined by the Company's
Board of Directors, and participants could not contribute directly to the
plan.

The Company elected not to contribute to the Profit Sharing Plan for the
year ended December 31, 1994 and made contributions of $144,000 for the year
ended December 31, 1993. This plan was terminated and contributions made to
the plan were consolidated and combined with the 401(k) Plan.

(b) 401(k) Plan

The Company has a defined contribution plan (the "401(k) Plan") pursuant to
which employees who are at least 21 years of age and who have completed at
least six months of service are eligible to

F-14
<PAGE>

CRA MANAGED CARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
participate. Participants in the 401(k) Plan may not contribute more than the
lesser of a specified statutory amount or 15% of his or her pre-tax total
compensation. The 401(k) Plan permits, but does not require, additional
contributions to the 401(k) Plan by the Company. Employees are 100% vested in
their own contributions while Company contributions vest 20% after three years
and vest an additional 20% each year thereafter.

Under the 401(k) Plan, the Company has the option of matching up to 50% of
participants' pretax contributions up to a maximum of 6% of compensation. For
the years ended December 31, 1993, 1994 and 1995, respectively, the Board of
Directors has elected to match 50% of 4% of compensation.

The Company made net contributions to this plan of $439,000, $518,000 and
$581,000 for the years ended December 31, 1993, 1994 and 1995, respectively.

The Company's subsidiary, Alta Pacific Corporation has a defined
contribution plan (the "Alta Pacific 401(k) Profit Sharing Plan") pursuant to
which employees of Alta Pacific Corporation who are at least 21 years of age
and who have completed at least six months of service are eligible to
participate. Participants in the Alta Pacific 401(k) Plan may not contribute
more than the specified statutory amount. The Alta Pacific Profit Sharing
401(k) Plan permits, but does not require, additional contributions to the
Alta Pacific 401(k) Profit Sharing Plan by Alta Pacific Corporation. Alta
Pacific Corporation does not make contributions for any employees unless they
have worked at least 1,000 hours. Employees are 100% vested in their own
contributions while contributions by Alta Pacific Corporation vest 20% after
two years and 20% each year thereafter.

Alta Pacific Corporation made contributions to this plan of $93,000, $64,000
and $73,000 for the years ended December 31, 1993, 1994 and 1995,
respectively. It is expected that this plan will be terminated and
contributions made to the plan will be consolidated and combined with the
401(k) Plan.

(d) Employment Agreements

Lois E. Silverman and Donald J. Larson are each party to separate employment
agreements with the Company, dated as of March 8, 1994 (the "Employment
Agreements"). The Employment Agreements have initial terms of five years
unless earlier terminated as provided therein; Ms. Silverman may terminate her
Employment Agreement as of March 8, 1997, if notice is provided one year prior
to such date. The terms of the Employment Agreements may be automatically
renewed for additional one year terms, subject to limitations contained
therein. The Company may terminate Ms. Silverman and/or Mr. Larson for cause,
as defined therein, and Ms. Silverman and Mr. Larson may terminate their
respective Employment Agreements for Good Reason, as defined therein. The
Employment Agreements contain provisions pursuant to which Ms. Silverman and
Mr. Larson agree not to disclose any proprietary information of the Company
and also agree not to compete with the Company (in the U.S., Canada or any
other country in which the Company does business, or took steps to do business
before termination of their employment), or solicit its employees, for the
term of the Employment Agreements and up to two years after termination of
employment, for any reason.

Three other executive officers have been afforded continuation of salary
protection for one year if their employment with the Company is terminated
without cause.

F-15
<PAGE>

CRA MANAGED CARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(10) STOCK PLANS

(a) 1994 Non-Qualified Stock Option Plan for Non-Employee Directors.

The Non-Employee Director Plan (the "Director Plan") provides for the grant
of options to acquire up to 94,000 shares of Common Stock, in such amounts, on
such terms and to such non-employee Directors as the administrators of the
Director Plan may select, in accordance with the terms of the Director Plan.
Options granted under the Director Plan are not intended to qualify as
Incentive Stock Options under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). The Director Plan is administered by a
committee of the Board of Directors of the Company, consisting of two or more
members appointed by the Board of Directors of the Company, which selects the
optionees and determines the number of shares, vesting schedule and duration
of each option (not to exceed 10 years). Options granted under the Director
Plan must have an exercise price equal to the fair value of the Common Stock
of the Company, as determined by such committee, on the date of grant. As of
December 31, 1995, options to purchase 47,000 shares of Common Stock at an
exercise price of $5.89 per share had been granted under the Director Plan,
all of which were outstanding and 7,833 of which were exercisable.

Options granted under the Director Plan automatically vest no later than 10
years from the date of grant; however, pursuant to separate option agreements
between the Company and its optionees under the Director Plan, the options
granted to date become vested ratably over a three year period on the
anniversary of the grant date. Upon the sale of all stock or assets of the
Company, the options fully vest and become exercisable immediately.

(b) 1994 Time Accelerated Restricted Stock Option Plan.

The Company's 1994 Time Accelerated Restricted Stock Option Plan (the "1994
Stock Option Plan") provides for the grant of options to acquire up to 376,000
shares of Common Stock, in such amounts, on such terms and to such officers
and other key employees as the administrators of the 1994 Stock Option Plan
may select. Options granted under the 1994 Stock Option Plan are not intended
to qualify as Incentive Stock Options under the Code. The 1994 Stock Option
Plan is administered by the Board of Directors of the Company and provides
that all of the options shall have a per share exercise price equal to the
fair market value of the Common Stock on the date of such grant, as determined
by the Board of Directors. At December 31, 1995, options to purchase 338,200
shares of Common Stock at an average exercise price of $10.57 per share were
outstanding, of which 109,940 were exercisable.

Options granted under the 1994 Stock Option Plan become fully exercisable no
later than the tenth anniversary of the date of grant, and no option may have
a term in excess of ten years and six months from the date of grant. The stock
option agreements pursuant to which options have been granted under the 1994
Stock Option Plan provide for accelerated vesting each year of 10% to 20% of
the shares subject to the option in the event certain financial tests are met,
commencing with respect to the fiscal year ended December 31, 1994. The Board
of Directors may accelerate all options upon a sale or conveyance of all or
substantially all of the assets, or a change in control of the Company, which
includes, among other events, the acquisition by any person who owned less
than 10% of the outstanding Common Stock becoming the beneficial owner of at
least 51% of the Common Stock. All recipients of options under the 1994 Stock
Option Plan to date were required to execute a Non-Competition and Non-
Disclosure Agreement as a condition to any such option grant.

F-16
<PAGE>

CRA MANAGED CARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SUMMARY OF STOCK OPTION PLAN ACTIVITY

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
---------------------
RESERVED PRICE PER
SHARES NUMBER SHARE
-------- ------- ------------
<S> <C> <C> <C>
Balance December 31, 1993.................... -- -- $--
Reserved................................... 470,000 -- --
Granted.................................... -- 251,450 $ 5.89
Exercised.................................. -- -- --
Canceled................................... -- -- --
------- ------- ------------
Balance December 31, 1994.................... 470,000 251,450 $ 5.89
Reserved................................... -- -- --
Granted.................................... -- 145,500 $5.89-$22.75
Exercised.................................. -- (2,350) $ 5.89
Canceled................................... -- (9,400) $ 5.89
------- ------- ------------
Balance December 31, 1995.................... 470,000 385,200 $5.89-$22.75
======= ======= ============
</TABLE>

The 1995 Employee Stock Purchase Plan (the "1995 Purchase Plan") for
employees of the Company authorizes the issuance of a maximum of 235,000
shares of Common Stock pursuant to the exercise of nontransferable options
granted to participating employees.

The 1995 Purchase Plan is administered by the Compensation Committee of the
Board of Directors. All employees of the Company whose customary employment is
20 hours or more per week and have been employed by the Company for at least
six months are eligible to participate in the 1995 Purchase Plan. Employees
who own 5% or more of the Company's stock and directors who are not employees
of the Company may not participate in the 1995 Purchase Plan. To participate
in the 1995 Purchase Plan, an employee must authorize the Company in writing
to deduct an amount (not less than 1% nor more than 10% of a participant's
base compensation and in any event not more than $12,500) from his or her pay
during six month periods commencing on January 1 and July 1 of each year (each
a "Purchase Period"). On the first day of each Purchase Period, the Company
grants to each participating employee an option to purchase up to 500 shares
of Common Stock. The exercise price for shares purchased under the 1995
Purchase Plan for each Purchase Period is the lesser of 85% of the fair market
value of the Common Stock on the first or last business day of the Purchase
Period. The fair market value will be the closing selling price of the Common
Stock as quoted. If an employee is not a participant on the last day of the
Purchase Period, such employee is not entitled to purchase any shares during
such Purchase Period, and the amount of his or her accumulated payroll
deduction will be refunded to the employee. An employee's rights under the
1995 Purchase Plan terminate upon his or her voluntary withdrawal from the
plan at any time or upon termination of employment.

Common Stock for the 1995 Purchase Plan will be made available either from
authorized but unissued shares of Common Stock or from shares of Common Stock
reacquired by the Company, including shares repurchased in the open market.
The Company issued 18,299 shares of Common Stock at a price of $18.73 per
share for the first Purchase Period ended December 31, 1995.

The Financial Accounting Standards Board ("FASB") issued a new standard on
"Accounting for Stock-Based Compensation". The Company will adopt the
disclosure requirements of the new standard effective for the fiscal year
ended December 31, 1996. This standard establishes the financial accounting
and

F-17
<PAGE>

CRA MANAGED CARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
disclosure requirements for stock-based employee compensation plans. These
plans include all arrangements by which an employee receives shares of stock
or other equity instruments of the employer or the employer incurs liabilities
to employees in amounts based upon the price of the employer's stock such as
the stock option and stock purchase plans described above. At a minimum, the
new standard requires the Company to disclose the pro forma effect, if any,
that would have been recognized in the income statement if the fair value
based method of accounting for the stock-based employee compensation plans had
been used. The Company is completing its analysis of the impact of this new
accounting standard and has not yet fully quantified the impact of this
standard.

(11) RELATED PARTY TRANSACTIONS

The Company had the following related party transactions during the years
ended December 31, 1993, 1994 and 1995 (also see Note 4, "Revolving Credit
Facilities," Note 5, "Long-term Debt" and Note 8, "Commitments"):

(a) Colonial Realty Trust

The Company made rental payments to Colonial Realty Trust of $1,310,000,
$714,000 and $726,000 for the years ended December 31, 1993, 1994 and 1995,
respectively. Colonial Realty Trust is a real estate company owned by two
principal stockholders of the Company.

(b) Computer Equipment Systems

The Company made computer rental payments to Computer Equipment Systems of
$369,000 for the year ended December 31, 1993 while the Company made no
payments in 1994 and 1995. Computer Equipment Systems was a computer rental
company, which has since been liquidated, owned by two principal stockholders
of the Company.

Whitney was paid an equity placement fee of $500,000 in connection with the
issuance of the Series A Convertible Preferred Stock, a debt placement fee of
$630,000 in connection with the issuance of the Senior Subordinated Notes and
management fees of $100,000 for the year ended December 31, 1994. The Company
also reimburses Whitney for reasonable out-of-pocket expenses incurred in
connection with attending to the Company's business.

(d) First Union Bank

The Company paid First Union Bank a commitment fee of $405,000 which was
capitalized as Deferred Finance Costs and was being amortized over the life of
the debt and an up front agent fee of $50,000 at the closing of the loans on
March 7, 1994. The Company also paid First Union Bank a commitment fee of
$63,000 in connection with the establishment of the Credit Facility and an
amendment fee of $88,500 associated with the expansion of the Credit
Facility's borrowing capacity to $40,000,000.

(12) LEGAL MATTERS

The Company is party to certain claims and litigation initiated in the
ordinary course of business. The Company is not involved in any legal
proceeding that it believes will result, individually or in the aggregate, in
a material adverse effect upon its financial condition or results of
operations.

F-18
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Focus Healthcare Management, Inc.:

We have audited the accompanying balance sheets of Focus Healthcare
Management, Inc. ("Focus") as of December 31, 1994 and 1995, and the related
statements of operations, shareholder's equity (deficit) and cash flows for
each of the two years in the period ended December 31, 1995. We have also
audited the statements of operations, shareholder's equity (deficit) and cash
flows of Focus Healthcare Management, Inc. (the Predecessor) for the year
ended December 31, 1993. These financial statements are the responsibility of
the Focus' management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Focus as of December 31,
1994 and 1995, and the results of the operations of Focus and the Predecessor
and their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.

Arthur Andersen LLP

Boston, Massachusetts
March 27, 1996

F-19
<PAGE>

FOCUS HEALTHCARE MANAGEMENT, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1994 1995 1996
----------- ----------- ---------
(UNAUDITED)
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents.............. $ 58,000 $ 62,000 $ 16,000
Accounts receivable, net of allowance
for doubtful accounts of $493,000,
$388,000 and $388,000 in December 31
1994 and 1995, and March 31, 1996,
respectively.......................... 2,465,000 1,464,000 1,745,000
Prepaid expenses and other current as-
sets.................................. 134,000 66,000 34,000
----------- ----------- -----------
Total current assets................ 2,657,000 1,592,000 1,795,000
Property and Equipment, Net............. 2,139,000 1,067,000 929,000
Other Assets............................ 6,000 5,000 5,000
Goodwill, Net........................... 29,275,000 28,526,000 28,339,000
----------- ----------- -----------
Total assets........................ $34,077,000 $31,190,000 $31,068,000
=========== =========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current portion of capital lease obli-
gations............................... $ 84,000 $ 70,000 $ 69,000
Accounts payable....................... 375,000 240,000 310,000
Accrued expenses....................... 1,206,000 137,000 176,000
Accrued taxes.......................... 30,000 18,000 2,000
Other current liabilities.............. 267,000 139,000 154,000
Intercompany payable, net.............. 3,165,000 1,488,000 1,479,000
----------- ----------- -----------
Total current liabilities........... 5,127,000 2,092,000 2,190,000
----------- ----------- -----------
Capital Lease Obligations............... 126,000 55,000 39,000
Deferred Taxes.......................... -- 324,000 324,000
Commitments and Contingencies (Notes 3
and 5).................................
Shareholder's Equity:
Parent Company investment.............. 30,965,000 30,965,000 30,965,000
Accumulated deficit.................... (2,141,000) (2,246,000) (2,450,000)
----------- ----------- -----------
Total shareholder's equity.......... 28,824,000 28,719,000 28,515,000
----------- ----------- -----------
Total liabilities and shareholder's
equity............................. $34,077,000 $31,190,000 $31,068,000
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-20
<PAGE>

FOCUS HEALTHCARE MANAGEMENT, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
(PREDECESSOR) (FOCUS)
------------- ------------------------------------
FOR THE THREE
FOR THE YEARS ENDED DECEMBER 31, MONTHS ENDED
------------------------------------- MARCH 31,
1993 1994 1995 1996
------------- ----------- ---------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Case management........ $ 7,625,000 $ 4,740,000 $ -- $ --
Network access fees.... 10,207,000 9,367,000 9,295,000 2,227,000
Fee schedule audit..... 1,537,000 856,000 613,000 100,000
----------- ----------- ---------- ---------
Total revenues...... 19,369,000 14,963,000 9,908,000 2,327,000
----------- ----------- ---------- ---------
Costs and Expenses:
Cost of services....... 18,796,000 14,811,000 7,347,000 1,926,000
General and administra-
tive.................. 2,271,000 3,124,000 2,269,000 605,000
----------- ----------- ---------- ---------
Total costs and ex-
penses............. 21,067,000 17,935,000 9,616,000 2,531,000
----------- ----------- ---------- ---------
(Loss) Income from oper-
ations................. (1,698,000) (2,972,000) 292,000 (204,000)
Interest Expense (In-
come) net.............. 95,000 (112,000) 2,000 --
----------- ----------- ---------- ---------
(Loss) Income before
provision income taxes. (1,793,000) (2,860,000) 290,000 (204,000)
Provision for Income
Taxes.................. 100,000 19,000 395,000 --
----------- ----------- ---------- ---------
Net Loss................ $(1,893,000) $(2,879,000) $ (105,000) $(204,000)
=========== =========== ========== =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-21
<PAGE>

FOCUS HEALTHCARE MANAGEMENT, INC.

STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
REDEEMABLE COMMON STOCK ADDITIONAL
PREFERRED ------------------ PAID-IN ACCUMULATED TREASURY
STOCK SHARES AMOUNT CAPITAL DEFICIT STOCK TOTAL
------------ ---------- ------ ----------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1992................... $ 10,722,000 3,667,000 $2,000 $ 617,000 $(10,285,000) $(432,000) $ 624,000
Exercise of stock
options............... -- 68,000 -- 8,000 -- -- 8,000
Accretion of preferred
stock to redemption
value................. 1,264,000 -- -- -- (1,264,000) -- --
Net loss............... -- -- -- -- (1,893,000) -- (1,893,000)
------------ ---------- ------ ----------- ------------ --------- -----------
Balance December 31,
1993................... 11,986,000 3,735,000 2,000 625,000 (13,442,000) (432,000) (1,261,000)
Exercise of stock
options............... -- 198,000 -- 34,000 -- -- 34,000
Elimination of Prede-
cessor stockholder's
equity................ (11,986,000) (3,933,000) (2,000) (659,000) 14,180,000 432,000 1,965,000
Acquisition by United
and push- down of pur-
chase price........... -- -- -- 30,965,000 -- -- 30,965,000
Net loss............... -- -- -- -- (2,879,000) -- (2,879,000)
------------ ---------- ------ ----------- ------------ --------- -----------
Balance December 31,
1994................... -- -- -- 30,965,000 (2,141,000) -- 28,824,000
Net loss............... -- -- -- (105,000) -- (105,000)
------------ ---------- ------ ----------- ------------ --------- -----------
Balance, December 31,
1995................... -- -- -- 30,965,000 (2,246,000) -- 28,719,000
Net loss for the three
months ended March 31,
1996 (unaudited)...... -- -- -- -- (204,000) -- (204,000)
------------ ---------- ------ ----------- ------------ --------- -----------
Balance, March 31, 1996. $ -- -- $ -- $30,965,000 $ (2,450,000) $ -- $28,515,000
============ ========== ====== =========== ============ ========= ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-22
<PAGE>

FOCUS HEALTHCARE MANAGEMENT, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
(PREDECESSOR) (FOCUS)
------------- ---------------------------------------
FOR THE THREE
FOR THE YEARS ENDED DECEMBER 31, MONTHS ENDED
-------------------------------------- MARCH 31,
1993 1994 1995 1996
------------- ----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash Flows From Operating
Activities:
Net loss................ $(1,893,000) $(2,879,000) $ (105,000) $(204,000)
Adjustment to reconcile
net loss to net cash
provided by operating
activities--
Depreciation and
amortization.......... 1,038,000 2,211,000 1,778,000 397,000
Loss on sale of
property and
equipment............. (5,000) -- -- --
Transfers of property
and equipment (to)
from United, net...... -- (211,000) 203,000 --
Deferred taxes......... -- -- 324,000 --
Changes in assets and
liabilities--
Decrease (increase) in
accounts receivable.. 457,000 (250,000) 1,001,000 (281,000)
(Increase) decrease in
prepaid expenses and
other current assets. (176,000) 152,000 68,000 34,000
Decrease in other
assets............... 486,000 5,000 1,000 --
Increase (decrease) in
accounts payable..... 1,387,000 (1,563,000) (134,000) 70,000
Decrease in accrued
expenses............. (603,000) (617,000) (1,082,000) 21,000
Increase (decrease) in
other current
liabilities.......... 168,000 99,000 (128,000) 15,000
Increase (decrease) in
intercompany payable. -- 3,165,000 (1,677,000) (9,000)
----------- ----------- ----------- ---------
Net cash provided by
operating
activities......... 859,000 112,000 249,000 43,000
----------- ----------- ----------- ---------
Cash Flows From Investing
Activities:
Purchase of property and
equipment.............. (2,174,000) (487,000) (161,000) (72,000)
----------- ----------- ----------- ---------
Net cash used in
investing
activities......... (2,174,000) (487,000) (161,000) (72,000)
----------- ----------- ----------- ---------
Cash Flows From Financing
Activities:
Exercise of stock
options................ 8,000 34,000 -- --
Acquisition of Focus by
United................. -- 3,294,000 -- --
Proceeds (payment) of
long-term debt, net.... 1,315,000 (2,867,000) -- --
Payment of capital lease
obligations............ (248,000) (29,000) (84,000) (17,000)
----------- ----------- ----------- ---------
Net cash provided by
(used in) financing
activities.............. 1,075,000 432,000 (84,000) (17,000)
----------- ----------- ----------- ---------
(Decrease) Increase in
Cash and Cash
Equivalents............. (240,000) 57,000 4,000 (46,000)
----------- ----------- ----------- ---------
Cash and Cash
equivalents, Beginning
of Period............... 241,000 1,000 58,000 62,000
----------- ----------- ----------- ---------
Cash and Cash
Equivalents, End of
Period.................. $ 1,000 $ 58,000 $ 62,000 $ 16,000
=========== =========== =========== =========
Supplemental Disclosures
of Cash Flow
Information:
Cash paid during the
period for interest.... $ 195,000 $ 47,000 $ 16,000 $ --
=========== =========== =========== =========
Cash paid during the
period for taxes....... $ 205,000 $ 747,000 $ 74,000 $ 16,000
=========== =========== =========== =========
Schedule of Noncash
Investing and Financing
Activities:
Accretion of redeemable
preferred stock........ $ 1,264,000 $ -- $ -- $ --
=========== =========== =========== =========
Capital lease assets
acquired and
obligations incurred... $ 13,000 $ -- $ -- $ --
=========== =========== =========== =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-23
<PAGE>

FOCUS HEALTHCARE MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Focus Healthcare Management, Inc. ("Focus") was incorporated in the State of
Tennessee in February 1986 to develop and operate managed care programs
related to workers' compensation and to provide administrative services for
self-insuring employers, insurance carriers and others.

On December 20, 1993, Focus was acquired pursuant to an Agreement and Plan
of Acquisition (the Agreement) with UHC Management, Inc., an affiliate of
United HealthCare Corporation (collectively, "United"). Under the terms of the
Agreement, United purchased all of the stock of Focus for $28,000,000 in cash
and the assumption of $2,578,000 in debt. For accounting purposes, the
transaction was assumed to be effective January 1, 1994. In connection
therewith, United implemented a restructuring that consolidated Focus'
operations and resulted in the exit from the case management services
business. The charge for restructuring has been reflected as an increase in
goodwill associated with the transaction.

(a) Cash and Cash Equivalents

Cash and cash equivalents are comprised of highly liquid investments with
original maturities of three months or less.

(b) Revenues

Focus recognizes revenue primarily as services are rendered based on the
number of charges reviewed or the percentage of savings achieved for Focus'
customers. Accounts receivable at December 31, 1994 and 1995 include
$1,321,000 and $563,000, respectively, of unbilled accounts receivable
relating to services rendered prior to the period but not invoiced until after
year end.

Property and equipment are carried at cost. Depreciation is computed by the
straight-line method over the estimated useful lives of the assets.
Amortization of capital leases is included in depreciation and amortization
expense. The estimated useful lives of the depreciable assets are as follows:

<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
-------------------- -----------------
<S> <C>
Software............................................... 3 years
Office equipment....................................... 3-5 years
Furniture and fixtures................................. 5-7 years
Equipment under capital leases......................... The shorter of
the life of lease
or asset life
</TABLE>

(d) Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of income and expenses during
the reporting periods. Actual results could differ from these estimates.

(e) Concentration of Credit Risk

Statement of Financial Accounting Standards (SFAS) No. 105, Disclosure of
Information about Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentration of Credit Risk, requires disclosure
of any significant off-balance-sheet and credit risk concentrations. Financial
instruments that subject Focus to credit risk consist primarily of trade
accounts receivable.

F-24
<PAGE>

FOCUS HEALTHCARE MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995

(f) Goodwill

Goodwill is being amortized using the straight-line method over a period of
40 years. Accumulated amortization was $687,000 and $749,100 at December 31,
1994 and 1995, respectively. Focus periodically evaluates whether changes have
occurred which would require revision of the remaining estimated useful life
of the assigned goodwill or render the goodwill not recoverable based on the
gross cash flow method.

(2) PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 1994 and
1995:

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Software.............................................. $ 456,000 $ 481,000
Office equipment...................................... 2,436,000 2,076,000
Furniture and fixtures................................ 1,198,000 866,000
Equipment under capital leases........................ 573,000 367,000
---------- ----------
4,663,000 3,790,000
Less--Accumulated depreciation and amortization....... 2,524,000 2,723,000
---------- ----------
$2,139,000 $1,067,000
========== ==========
</TABLE>
(3) LEASES

Focus leases office space under various operating leases. The corporate
office lease has an option to renew for an additional five years at prevailing
rates and is subject to increase based on increases in building maintenance
and operating expenses. Total rent expense for the years ended 1993, 1994 and
1995 was $573,000, $639,000 and $514,000, respectively.

Focus leases certain equipment under capital leases that extend to various
dates through 1997. Future minimum payments, by year and in the aggregate,
under the capital leases and noncancellable operating leases with terms of one
year or more consist of the following at December 31, 1995:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
Year Ending December 31,
1996.................................................. $ 85,000 $240,000
1997.................................................. 62,000 132,000
-------- --------
Total minimum lease payments........................ 147,000 $372,000
========
Less--Amounts representing interest and taxes......... 22,000
--------
$125,000
========
</TABLE>

(4) INCOME TAXES

Focus accounts for income taxes in accordance with SFAS No. 109, Accounting
for Income Taxes, which requires the asset and liability method of accounting
for income taxes. Prior to its acquisition by United, Focus elected to be
taxed as an S corporation under Section 1362 of the Internal Revenue Code. The
tax provision in 1993 resulted from certain states that do not recognize S
corporation status.

Beginning in 1994, Focus' results were included in the consolidated tax
return of United. No federal tax benefit was recognized in 1994 due to the
loss for the year. In accordance with the tax allocation agreement with
United, Focus' net operating loss was utilized by United in the IRS Tax
filing.

F-25
<PAGE>

FOCUS HEALTHCARE MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995

The tax provision for 1995 consisted of the following:

<TABLE>
<S> <C>
Current--
Federal......................................................... $ --
State........................................................... 18,000
--------
18,000
--------
Deferred--
Federal......................................................... 339,000
State........................................................... 38,000
--------
377,000
--------
$395,000
========
</TABLE>

The deferred tax liabilities consist of the difference between book and tax
depreciation methods and certain differences in the book and tax deduction of
certain accrued and prepaid items.

The difference between the federal statutory rate and the Focus' effective
tax rate for 1995 consists of nondeductible amortization of goodwill and state
income taxes, net of federal benefits.

(5) LITIGATION

Focus, Genesys, and the other shareholder of Genesys are defendants in a
class action seeking damages resulting from alleged breach of contract and
other claims. Focus is pursuing discovery of the allegations; until such
discovery is completed, it is not possible to evaluate the outcome or estimate
the amount or range of potential loss. Accordingly, no provision for any loss
that may result upon resolution of this matter has been made in the
accompanying financial statements. In connection with the acquisition, Focus
has been indemnified by United and, as a result, does not expect any outcome
to materially affect its financial position.

Focus is also involved in various other legal matters arising in the
ordinary course of business. Focus is not involved in any legal proceeding
that it believes will result, individually or in the aggregate, in a material
adverse effect on financial position or results of operations.

(6) CORPORATE SERVICES

Focus and United have a corporate services agreement under which United's
corporate staff provides certain administrative services, including legal
advice and services, risk management, certain employee benefit administration,
tax advice and preparation of tax returns, centralized cash management, and
certain financial and other services, for which Focus pays United annually.
For these services, Focus was charged $887,000 and $1,725,000 in fiscal 1994
and 1995, respectively. For items such as employee benefit plans, insurance
coverage and other identifiable costs, United charges Focus based on costs
directly attributable to Focus.

(7) SUBSEQUENT EVENT

On March 19, 1996, CRA Managed Care, Inc. signed a definitive agreement to
acquire Focus from United for $21,000,000 in cash. The transaction was
completed on April 2, 1996.

F-26
<PAGE>

CRA MANAGED CARE, INC.

CONSOLIDATED PRO FORMA BALANCE SHEET
(AMOUNTS IN THOUSANDS--UNAUDITED)

The following sets forth the Consolidated Pro Forma Balance Sheet of CRA
Managed Care, Inc. (the "Company") as of March 31, 1996 giving effect to the
acquisition of Focus. The Company's Consolidated Pro Forma Balance Sheet
presents the acquisition of Focus as if it had been consummated on March 31,
1996. The Pro Forma Financial Statements of the Company do not purport to
present the financial position or results of operations of the Company had the
transaction assumed therein occurred on the dates indicated, nor are they
necessarily indicative of the results of operations which may be expected to
occur in the future.

The acquisition of Focus has been accounted for by the Company as a purchase
whereby the basis for accounting for Focus' assets and liabilities is based
upon their fair values at the date of the acquisition. Pro forma adjustments
represent the Company's preliminary determination of these adjustments and are
based upon available information and certain assumptions the Company considers
reasonable under the circumstances. Final amounts could differ from those set
forth below.

<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------------
PRO FORMA PRO FORMA
CRA FOCUS ADJUSTMENTS COMBINED
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $ 2,893 $ 16 -- $ 2,909
Accounts receivable, net............. 28,964 1,745 -- 30,709
Prepaid expenses..................... 664 34 -- 698
------- ------- -------- -------
Total current assets............... 32,521 1,795 -- 34,316
Property and equipment, net............ 5,990 929 -- 6,919
Deferred taxes and other assets........ 400 5 -- 405
Excess of cost over fair value of
assets acquired ...................... -- 28,339 (8,439)(1) 19,900
------- ------- -------- -------
$38,911 $31,068 $ (8,439) $61,540
======= ======= ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit facilities.......... $ 9,100 $ -- $ 21,000 (2) $30,100
Current portion of long-term debt.... -- 69 -- 69
Accounts payable and accrued
expenses............................ 13,026 640 555 (3) 14,221
Intercompany payable................. -- 1,479 (1,479)(4) --
Accrued income taxes................. 1,009 2 -- 1,011
------- ------- -------- -------
Total current liabilities.......... 23,135 2,190 20,076 45,401
Long-term debt......................... -- 39 -- 39
Long-term deferred tax liabilities..... 2,056 324 -- 2,380
Stockholders' equity................... 13,720 28,515 (28,515)(5) 13,720
------- ------- -------- -------
$38,911 $31,068 $ (8,439) $61,540
======= ======= ======== =======
</TABLE>

See accompanying Notes to Consolidated Pro Forma Financial Statements.

F-27
<PAGE>

CRA MANAGED CARE, INC.

CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT EARNINGS PER SHARE--UNAUDITED)

The following sets forth the Company's Consolidated Pro Forma Statement of
Operations for the fiscal year ended December 31, 1995 and the three months
ended March 31, 1996 giving effect to the acquisition of Focus. The Company's
Consolidated Pro Forma Statement of Operations presents the acquisition of
Focus as if it had been consummated at January 1, 1995. The Consolidated Pro
Forma Financial Statements of the Company do not purport to present the
financial position or results of operations of the Company had the transaction
assumed therein occurred on the dates indicated, nor are they necessarily
indicative of the results of operations which may be expected to occur in the
future.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------
PRO FORMA PRO FORMA
CRA FOCUS ADJUSTMENTS COMBINED
-------- ------ ----------- ---------
<S> <C> <C> <C> <C>
Revenues............................... $146,055 $9,908 $ (407)(6) $155,556
Cost of services....................... 122,615 7,347 (493)(7) 129,469
-------- ------ ------ --------
Gross profit....................... 23,440 2,561 86 26,087
General and administrative expenses.... 11,021 2,269 (646)(8) 12,644
-------- ------ ------ --------
Operating income................... 12,419 292 732 13,443
Interest expense, net.................. 2,484 2 1,796 (9) 4,282
Provision for income taxes............. 3,974 395 (439)(10) 3,930
-------- ------ ------ --------
Net income (loss)...................... $ 5,961 $ (105) $ (625) $ 5,231
======== ====== ====== ========
Earnings per share..................... $ 0.91 $ 0.80
======== ========
Weighted average shares outstanding.... 6,540 6,540
======== ========
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
PRO FORMA PRO FORMA
CRA FOCUS ADJUSTMENTS COMBINED
-------- ------ ----------- ---------
<S> <C> <C> <C> <C>
Revenues............................... $ 40,225 $2,327 $ (269)(6) $ 42,283
Cost of services....................... 33,422 1,926 (290)(7) 35,058
-------- ------ ------ --------
Gross profit....................... 6,803 401 21 7,225
General and administrative expenses.... 3,109 605 (110)(8) 3,604
-------- ------ ------ --------
Operating income................... 3,694 (204) 131 3,621
Interest expense, net.................. 194 -- 374 (9) 568
Provision for income taxes............. 1,453 -- (117)(10) 1,336
-------- ------ ------ --------
Net income (loss)...................... $ 2,047 $ (204) $ (126) $ 1,717
======== ====== ====== ========
Earnings per share..................... $ 0.27 $ 0.23
======== ========
Weighted average shares outstanding.... 7,550 7,550
======== ========
</TABLE>

See accompanying Notes to Consolidated Pro Forma Financial Statements.

F-28
<PAGE>

CRA MANAGED CARE, INC.

NOTES TO CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS--UNAUDITED)

(1) Eliminate existing goodwill of Focus ($28,339) and record excess of cost
over fair value of net assets acquired resulting from the preliminary
purchase price allocation as follows:

<TABLE>
<S> <C>
Pro forma purchase price including fees and expenses: $21,555
Purchase price allocated to:
Current assets..................................................... 1,795
Property and equipment............................................. 929
Other long term assets............................................. 5
Current liabilities................................................ (711)
Long-term deferred tax liabilities................................. (324)
Long-term capital leases........................................... (39)
-------
Net assets acquired.............................................. 1,655
-------
Excess of cost over fair value of net assets acquired.............. $19,900
=======
</TABLE>

The foregoing purchase price allocation is based upon preliminary
information. The final purchase price allocation is contingent upon the
final determination of the fair value of the net assets acquired on
April 2, 1996, the date of acquisition. Based upon presently available
information, the Company does not believe that the final purchase price
allocation will materially differ from the preliminary allocation.

(2) Record borrowings of $21,000 under the Company's existing $40,000 Credit
Facility to finance the acquisition.

(3) Record fees and expenses associated with the purchase of Focus.

(4) To eliminate the intercompany payable between United HealthCare
Corporation and Focus which was forgiven as part of the transaction.

(5) To eliminate the historical stockholder's equity of Focus.

(6) To eliminate sales between CRA and Focus of $407 and $269 for the year
ended December 31, 1995 and the three months ended March 31, 1996,
respectively.

(7) The pro forma adjustment includes:

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
<S> <C> <C>
Elimination of sales between CRA and
Focus................................. $(407) $(269)
Elimination of historical goodwill am-
ortization............................ (749) (187)
Record new goodwill amortization under
a thirty year life.................... 663 166
----- -----
$(493) $(290)
===== =====
</TABLE>

(8) To eliminate general overhead expenses allocated to Focus by United
HealthCare Corporation of $646 and $110 for the year ended December 31,
1995 and three months ended March 31, 1996, respectively.

(9) To record interest expense of $1,796 and $374 associated with the
borrowing of $21,000 under the Company's Credit Facility for the year
ended December 31, 1995 and three months ended March 31, 1996,
respectively. Interest expense was calculated assuming an interest rate
of 8.55% and 7.12% (weighted average interest rate on borrowings during
the period for the year ended December 31, 1995 and three months ended
March 31, 1996, respectively).

F-29
<PAGE>

CRA MANAGED CARE, INC.

NOTES TO CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS IN THOUSANDS--UNAUDITED)
(10) To record the tax benefit of $439 and $117 associated with the pro forma
adjustments and to adjust Focus's results of operation to the Company's
effective tax rate of 40% and 41.5% for the year ended December 31, 1995
and three months ended March 31, 1996, respectively.

F-30
<PAGE>

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

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OF-
FER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN
ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UN-
DER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Recent Developments....................................................... 10
Use of Proceeds........................................................... 11
Price Range of Common Stock............................................... 11
Dividend Policy........................................................... 11
Capitalization............................................................ 12
Selected Historical Consolidated Financial Data........................... 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 14
Business.................................................................. 20
Management................................................................ 30
Certain Transactions...................................................... 38
Principal and Selling Stockholders........................................ 39
Description of Capital Stock.............................................. 41
Shares Eligible for Future Sale........................................... 43
Underwriting.............................................................. 45
Legal Matters............................................................. 46
Experts................................................................... 46
Additional Information.................................................... 46
Index to Financial Statements............................................. F-1
</TABLE>

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

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

2,500,000 Shares

(LOGO)

Common Stock

-----------

PROSPECTUS

-----------

Alex. Brown & Sons
INCORPORATED

Dean Witter Reynolds Inc.

Montgomery Securities

J.P. Morgan & Co.

, 1996

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses in connection with the issuance and distribution of the
securities being registered hereby, other than the underwriting discount, to
be paid by the Company, are estimated as follows:

<TABLE>
<S> <C>
Registration fee under Securities Act.............................. $ 42,506
NASD filing fee.................................................... 12,827
Nasdaq National Market fee......................................... 17,500
Legal fees and expenses............................................ 175,000
Accounting fees and expenses....................................... 125,000
Blue Sky fees and expenses (including legal fees).................. 15,000
Printing and engraving expenses.................................... 90,000
Transfer agent fees and expenses................................... 10,000
Miscellaneous...................................................... 112,167
--------
Total............................................................ $600,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 67 of Chapter 156B of the Massachusetts Business Corporation Law,
which is applicable to the Company, provides as follows:

Indemnification of directors, officers, employees and other agents of a
corporation, and persons who serve at its request in any capacity with respect
to any employee benefit plan, may be provided by it to whatever extent shall
be specified in or authorized by (i) the articles of organization or (ii) a
by-law adopted by the stockholders or (iii) a vote adopted by the holders of a
majority of the shares of stock entitled to vote on the election of directors.
Except as the articles of organization or by-laws otherwise require,
indemnification of any persons referred to in the preceding sentence who are
not directors of the corporation may be provided by it to the extent
authorized by the directors. Such indemnification may include payment by the
corporation of expenses incurred in defending a civil or criminal action or
proceeding in advance of the final disposition of such action or proceeding,
upon receipt of an undertaking by the person indemnified to repay such payment
if he shall be adjudicated to be not entitled to indemnification under this
section which undertaking may be accepted without reference to the financial
ability of such person to make repayment. Any such indemnification may be
provided although the person to be indemnified is no longer an officer,
director, employee or agent of the corporation or of such other organization
or no longer serves with respect to any such employee benefit plan.

No indemnification shall be provided for any person with respect to any
matter as to which he shall have been adjudicated in any proceeding not to
have acted in good faith in the reasonable belief that his action was in the
best interest of the corporation or to the extent that such matter relates to
service with respect to an employee benefit plan, in the best interests of the
participants or beneficiaries of such employee benefit plan.

The absence of any express provision for indemnification shall not limit any
right of indemnification existing independently of this section.

A corporation shall have power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or other agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or other agent of another organization or with
respect to any employee benefit plan, against any liability incurred by him in
any such capacity, or arising out of

II-1
<PAGE>

his status as such, whether or not the corporation would have the power to
indemnify him against such liability.

In addition, pursuant to its Articles and By-Laws, the Company shall
indemnify its directors and officers against expenses (including judgments or
amounts paid in settlement) incurred in any action, civil or criminal, to
which any such person is a party by reason of any alleged act or failure to
act in his capacity as such, except as to a matter as to which such director
or officer shall have been finally adjudged not to have acted in good faith in
the reasonable belief that his action was in the best interests of the
corporation.

The underwriters also will agree to indemnify the directors and officers of
the Company against certain liabilities as set forth in Section 8 of the
Underwriting Agreement (see Exhibit 1.1).

The Company has purchased insurance with respect to, among other things, the
liabilities that may arise under the statutory provisions referred to above.
The directors and officers of the Company also are insured against certain
liabilities, including certain liabilities arising under the Securities Act of
1933, as amended, which might be incurred by them in such capacities and
against which they are not indemnified by the Company.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

During the past three years the Company has issued the following securities,
none of which have been registered under the Securities Act of 1933, as
amended (the "Act"):

On March 8, 1994, the Company issued 1,222,470 shares of Class A Common
Stock to Lois E. Silverman as part of a recapitalization.

On March 8, 1994, the Company issued 1,174,530 shares of Class A Common
Stock to Donald J. Larson as part of a recapitalization.

On March 8, 1994, the Company issued 546,962 shares of Class A Common
Stock to Whitney Subordinated Debt Fund, L.P. for an aggregate
consideration of $2,268,238.

On March 8, 1994, the Company issued 57,575 shares of Class A Common
Stock to First Union Corporation for an aggregate consideration of
$238,762.

On March 8, 1994, the Company issued 1,222,893 shares of Series A
Convertible Preferred Stock to Whitney 1990 Equity Fund, L.P. for an
aggregate consideration $7,200,000.

On March 8, 1994, the Company issued 305,726 shares of Series A
Convertible Preferred Stock to J. H. Whitney & Co. for an aggregate
consideration of $1,800,000.

On March 8, 1994, the Company issued 169,844 shares of Series A
Convertible Preferred Stock to First Union Corporation for an aggregate
consideration of $1,000,000.

On March 8, 1994, the Company issued a 10.101% Senior Subordinated
Promissory Note in the original principal amount of $19,000,000 to Whitney
Subordinated Debt Fund, L.P. for an aggregate consideration of $18,678,805.

On March 8, 1994, the Company issued a 10.101% Senior Subordinated
Promissory Note in the original principal amount of $2,000,000 to First
Union Corporation for an aggregate consideration of $1,966,190.

On March 8, 1994, the Company issued a 10% Junior Subordinated Promissory
Note in the original principal amount of $2,500,000 to Lois E. Silverman as
part of a share redemption transaction.

On March 8, 1994, the Company issued a 10% Junior Subordinated Promissory
Note in the original principal amount of $2,500,000 to Donald J. Larson as
part of a share redemption transaction.

On June 6, 1994, the Company issued options to purchase an aggregate of
23,500 shares of Common Stock at an exercise price of $5.89 per share
pursuant to the Company's 1994 Non-Qualified Stock Option Plan for Non-
Employee Directors (the "Plan").

II-2
<PAGE>

On June 6, 1994, the Company issued options to purchase an aggregate of
152,750 shares of Common Stock at an exercise price of $5.89 per share
pursuant to the Company's 1994 Time Accelerated Restricted Stock Option
Plan (the "TARSOP").

On July 14, 1994, the Company issued options to purchase an aggregate of
23,500 shares of Common Stock at an exercise price of $5.89 per share
pursuant to the TARSOP.

On October 13, 1994, the Company issued options to purchase an aggregate
of 47,000 shares of Common Stock at an exercise price of $5.89 per share
pursuant to the TARSOP.

On November 15, 1994, the Company issued options to purchase an aggregate
of 4,700 shares of Common Stock at an exercise price of $5.89 per share
pursuant to the TARSOP.

On January 17, 1995, the Company issued options to purchase an aggregate
of 23,500 shares of Common Stock at an exercise price of $5.89 per share
pursuant to the Plan.

On January 31, 1995, the Company issued options to purchase an aggregate
of 28,200 shares of Common Stock at an exercise price of $5.89 per share
pursuant to the TARSOP.

On October 24, 1995, the Company issued an aggregate of 136,150 shares of
the Company's Common Stock to two individuals, Laurence G. Ernst and
Michael J. Spilde, in exchange for all outstanding capital stock of Alta
Pacific Corporation.

On October 24, 1995, the Company issued options to purchase an aggregate
of 93,800 shares of Common Stock at an exercise price of $22.75 per share
pursuant to the TARSOP.

On January 3, 1996, the Company issued options to purchase an aggregate
of 40,000 shares of Common Stock at an exercise price of $22.13 per share
pursuant to the TARSOP.

On April 10, 1996, the Company issued options to purchase an aggregate of
241,800 shares of Common Stock at an exercise price of $36.12 per share
pursuant to the TARSOP.

No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Act set forth in Section 4(2) thereof, relative to sales by an issuer
not involving any public offering or the rules and regulations thereunder, or,
in the case of options to purchase Common Stock, Rule 701 of the Act. All of
the foregoing securities are deemed restricted securities for the purposes of
the Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS: The following is a list of exhibits filed as part of this
Registration Statement:

<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
------- -----
<C> <S>
*1.1 Form of Underwriting Agreement.
*3.1 Restated Articles of Organization of the Company.
*3.2 Form of Articles of Amendment to the Articles of Organization of the
Company.
3.3 By-Laws of the Company, as amended and restated (incorporated by
reference to Exhibit 3.4 of the Company's Registration Statement No.
33-90426).
4.1 Specimen stock certificate representing the shares of Common Stock
(incorporated by reference to Exhibit 4.1 of the Company's
Registration Statement No. 33-90426).
4.2 Registration Rights Agreement, dated as of March 8, 1994, among the
Company, J. H. Whitney & Co., Whitney 1990 Equity Fund, L.P., Whitney
Subordinated Debt Fund, L.P., First Union Corporation, Lois E.
Silverman and Donald J. Larson (incorporated by reference to Exhibit
10.7 of the Company's Registration Statement No. 33-90426).
*4.3 Registration Rights Agreement dated October 24, 1995, by and among the
Company, Michael J. Spilde and Laurence G. Ernst.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
------- -----
<C> <S>
*4.4 Form of Registration Rights Agreement by and among the Company and the
shareholders of QMC3, Inc.
*5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation, as
to the legality of the securities being registered.
10.1 Employment Agreement, dated as of March 8, 1994, between the Company
and Lois E. Silverman (incorporated by reference to Exhibit 10.1 of
the Company's Registration Statement on Form S-1, File No. 33-90426).
10.2 Employment Agreement, dated as of March 8, 1994, between the Company
and Donald J. Larson (incorporated by reference to Exhibit 10.2 of the
Company's Registration Statement on Form S-1, File No. 33-90426).
10.3 1994 Non-Qualified Stock Option Plan for Non-Employee Directors
(incorporated by reference to Exhibit 10.3 of the Company's
Registration Statement on Form S-1, File No. 33-90426).
10.4 Form of Non-Qualified Stock Option Agreement pursuant to the 1994 Non-
Qualified Stock Option Plan for Non-Employee Directors (incorporated
by reference to Exhibit 10.4 of the Company's Registration Statement
on Form S-1, File No. 33-90426).
10.5 1994 Non-Qualified Time Accelerated Restricted Stock Option Plan
(incorporated by reference to Exhibit 10.5 of the Company's
Registration Statement on Form S-1, File No. 33-90426).
10.6 Form of Non-Qualified Stock Option Agreement pursuant to the 1994 Non-
Qualified Time Accelerated Restricted Stock Option Plan (incorporated
by reference to Exhibit 10.6 of the Company's Registration Statement
on Form S-1, File No. 33-90426).
10.7 Landlord Agreement, dated as of March 8, 1994, between Lois E.
Silverman and Donald J. Larson, Trustees of Colonial Realty Trust and
the Company in favor of First Union National Bank of North Carolina
(incorporated by reference to Exhibit 4.12 of the Company's
Registration Statement on Form S-1, File No. 33-90426).
+10.8 Software License Agreement between CompReview, Inc. and the Company,
dated February 10, 1995 (incorporated by reference to Exhibit 10.9 of
the Company's Registration Statement on Form S-1, File No. 33-90426).
10.9 Lease Agreement, dated January 1, 1994, by and between Colonial Realty
Trust and the Company for office space located at 168 U.S. Route 1,
Falmouth, ME 04105 (incorporated by reference to Exhibit 10.10 of the
Company's Registration Statement on Form S-1, File No. 33-90426).
10.10 Lease Agreement, dated January 1, 1994, by and between Colonial Realty
Trust and the Company for office space located at 46 Austin Street,
Newtonville, MA 02160 (incorporated by reference to Exhibit 10.11 of
the Company's Registration Statement on Form S-1, File No. 33-90426).
10.11 Lease Agreement, dated January 1, 1994, by and between Colonial Realty
Trust and the Company for office space located at 46 Austin Street,
Newtonville, MA 02160 (incorporated by reference to Exhibit 10.12 of
the Company's Registration Statement on Form S-1, File No. 33-90426).
10.12 Lease Agreement, dated January 1, 1994, by and between Colonial Realty
Trust and the Company for office space located at 46 Austin Street,
Newtonville, MA 02160 (incorporated by reference to Exhibit 10.13 of
the Company's Registration Statement on Form S-1, File No. 33-90426).
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
------- -----
<C> <S>
10.13 Lease Agreement, dated January 1, 1994, by and between Colonial Realty
Trust and the Company for office space located at 46 Austin Street,
Newtonville, MA 02160 (incorporated by reference to Exhibit 10.14 of
the Company's Registration Statement on Form S-1, File No. 33-90426).
10.14 Lease Agreement, dated January 1, 1994, by and between Colonial Realty
Trust and the Company for office space located at 46 Austin Street,
Newtonville, MA 02160 (incorporated by reference to Exhibit 10.15 of
the Company's Registration Statement on Form S-1, File No. 33-90426).
10.15 Lease Agreement, dated January 1, 1994, by and between Colonial Realty
Trust and the Company for office space located at 46 Austin Street,
Newtonville, MA 02160 (incorporated by reference to Exhibit 10.16 of
the Company's Registration Statement on Form S-1, File No. 33-90426).
10.16 Lease Agreement, dated January 1, 1994, by and between Colonial Realty
Trust and the Company for office space located at 312 Union Wharf,
Boston, MA 02109 (incorporated by reference to Exhibit 10.17 of the
Company's Registration Statement on Form S-1, File No. 33-90426).
10.17 Lease Agreement, dated January 1, 1994, by and between Colonial Realty
Trust and the Company for office space located at 565 Turnpike Street,
North Andover, MA 01845 (incorporated by reference to Exhibit 10.18 of
the Company's Registration Statement on Form S-1, File No. 33-90426).
10.18 Lease Agreement, dated January 1, 1994, by and between Colonial Realty
Trust and the Company for office space located at 15A Riverway Place,
Bedford, NH 03110 (incorporated by reference to Exhibit 10.19 of the
Company's Registration Statement on Form S-1, File No. 33-90426).
10.19 Lease Agreement, dated January 1, 1994, by and between Colonial Realty
Trust and the Company for office space located at 509 Stillwells
Corner Road, Freehold, NJ 07728 (incorporated by reference to Exhibit
10.20 of the Company's Registration Statement on Form S-1, File No.
33-90426).
10.20 Lease Agreement, dated January 1, 1994, by and between Colonial Realty
Trust and the Company for office space located at 732 Thimble Shoals
Blvd., Newport News, VA 23606 (incorporated by reference to Exhibit
10.21 of the Company's Registration Statement on Form S-1, File No.
33-90426).
10.21 Lease Agreement, dated January 1, 1994, by and between Colonial Realty
Trust and the Company for office space located at 10132 Colvin Run
Road, Suite A, Great Falls, VA 22066 (incorporated by reference to
Exhibit 10.22 of the Company's Registration Statement on Form S-1,
File No. 33-90426).
10.22 Waiver of the Registration Rights and Particpating Notice, dated as of
March 17, 1995, among the Company and the other parties to the
Registration Rights Agreement (incorporated by reference to Exhibit
10.23 of the Company's Registration Statement on Form S-1, File No.
33-90426).
10.23 Termination of Management Fee and Amendment to Executive Bonus Plan
among the Company, J. H. Whitney & Co., Whitney 1990 Equity Fund,
L.P., Ms. Silverman and Mr. Larson (incorporated by reference to
Exhibit 10.24 of the Company's Registration Statement on Form S-1,
File No. 33-90426).
10.24 1995 Employee Stock Purchase Plan (incorporated by reference to
Exhibit 10.25 of the Company's Registration Statement on Form S-1,
File No. 33-90426).
</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
------- -----
<C> <S>
10.25 Letter dated September 9, 1994 from the Company to Joseph F. Pesce
regarding terms of employment (incorporated by reference to Exhibit
10.26 of the Company's Registration Statement on Form S-1, File No.
33-90426).
10.26 Letter dated June 30, 1995 from the Company to Joseph F. Pesce
regarding continuation of compensation (incorporated by reference to
Exhibit 10.26 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, Commission File no. 02-25856).
10.27 Letter dated June 30, 1995 from the Company to John A. McCarthy Jr.
regarding continuation of compensation (incorporated by reference to
Exhibit 10.27 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, Commission File no. 02-25856).
10.28 Letter dated June 30, 1995 from the Company to Anne E. Kirby regarding
continuation of compensation (incorporated by reference to Exhibit
10.28 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, Commission File no. 02-25856).
10.29 Amendment to Employment Agreement dated as of January 24, 1996,
between the Company and Lois E. Silverman (incorporated by reference
to Exhibit 10.29 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, Commission File no. 02-25856).
10.30 Agreement to acquire Focus HealthCare Management, Inc., dated March
19, 1996, between the Company and United HealthCare Corporation
(incorporated by reference to Exhibit 10.30 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, Commission
File no. 02-25856).
10.31 Amendment, dated as of March 29, 1996, to Loan Agreement, by and among
the Company, First Union National Bank of North Carolina and certain
other Lenders, and the First Union National Bank of North Carolina, as
Agent (incorporated by reference to Exhibit 10.31 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1995,
Commission File no. 02-25856).
10.32 Loan Agreement, dated as of April 28, 1995, by and among the Company,
First Union National Bank of North Carolina and certain other Lenders,
and the First Union National Bank of North Carolina, as Agent
(incorporated by reference to Exhibit 4.23 of the Company's
Registration Statement on Form S-1, File No. 33-90426).
10.33 Form of Revolving Credit Note issued by the Company to First Union
National Bank of North Carolina (incorporated by reference to Exhibit
4.24 of the Company's Registration Statement on Form S-1, File No. 33-
90426).
10.34 Form of Security Agreement between the Company and First Union
National Bank of North Carolina (incorporated by reference to Exhibit
4.25 of the Company's Registration Statement on Form S-1, File No. 33-
90426).
10.35 Form of Collateral Assignment of Leases between the Company and First
Union National Bank of North Carolina (incorporated by reference to
Exhibit 4.26 of the Company's Registration Statement on Form S-1, File
No. 33-90426).
10.36 Form of Trademark Security Agreement between the Company and First
Union National Bank of North Carolina (incorporated by reference to
Exhibit 4.27 of the Company's Registration Statement on Form S-1, File
No. 33-90426).
10.37 Form of Landlord Agreement between Lois E. Silverman and Donald J.
Larson, Trustees of Colonial Realty Trust and the Company in favor of
First Union National Bank of North Carolina (incorporated by reference
to Exhibit 4.28 of the Company's Registration Statement on Form S-1,
File No. 33-90426).
</TABLE>

II-6
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
------- -----
<C> <S>
11.1 Statement regarding computation of pro forma and actual earnings per
share.
16.1 Letter from KPMG Peat Marwick LLP regarding change in principal
accountant (incorporated by reference to Exhibit 16.1 of the Company's
Registration Statement on Form S-1, File no. 33-90426).
21.1 List of Subsidiaries (incorporated by reference to Exhibit 21.1 of the
Company's Annual Report on Form 10-K for the year ended December 31,
1995, Commission File no. 02-25856).
23.1 Consent of Arthur Andersen LLP with respect to the Company.
23.2 Consent of Arthur Andersen LLP with respect to Focus HealthCare
Management, Inc.
*23.3 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation
(included in
Exhibit 5.1).
*24.1 Power of Attorney.
27.1 Financial Data Schedule
</TABLE>
- --------

*Previously filed with the Commission as part of this Registration Statement on
May 7, 1996.

+Confidential treatment previously granted with respect to portions of this
Exhibit.

(B) FINANCIAL STATEMENT SCHEDULES:

Report of Independent Public Accountants on Schedules.

Schedule II--Allowance for Doubtful Accounts.

Schedules not listed above have been omitted because they are not applicable
or the required information is included in the combined financial statements or
notes thereto.

II-7
<PAGE>

Schedules not listed above have been omitted because they are not applicable
or the required information is included in the combined financial statements
or notes thereto.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

1. For purposes of determining any liability under the Securities Act of
1933, as amended, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933, as amended,
shall be deemed to be part of this Registration Statement as of the time it
was declared effective.

2. For the purpose of determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide public offering thereof.

II-8
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, Commonwealth of
Massachusetts, on the 8th day of May, 1996.

CRA Managed Care, Inc.

/s/ Donald J. Larson
By: _________________________________
DONALD J. LARSON PRESIDENT, CHIEF
EXECUTIVE OFFICER AND DIRECTOR

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.

SIGNATURE TITLE DATE

/s/ Donald J. Larson President, Chief
- ------------------------------------- Executive Officer May 8, 1996
DONALD J. LARSON and Director
(principal
executive officer)

/s/ Joseph F. Pesce Vice President--
- ------------------------------------- Finance and May 8, 1996
JOSEPH F. PESCE Administration,
Chief Financial
Officer and
Treasurer
(principal
financial and
accounting officer)

Chairman of the
* Board of Directors May 8, 1996
- -------------------------------------
LOIS E. SILVERMAN

Director
* May 8, 1996
- -------------------------------------
JEFFREY R. JAY

II-9
<PAGE>

SIGNATURE TITLE DATE

Director
* May 8, 1996
- -------------------------------------
WILLIAM LAVERACK, JR.

Director
* May 8, 1996
- -------------------------------------
GEORGE H. CONRADES

Director
* May 8, 1996
- -------------------------------------
MITCHELL T. RABKIN

/s/ Donald J. Larson

*By: ___________________________

DONALD J. LARSON

ATTORNEY-IN-FACT

II-10
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE

To CRA Managed Care, Inc.:

We have audited in accordance with generally accepted auditing standards,
the financial statements of CRA Managed Care, Inc. included in this
registration statement and have issued our report thereon dated January 23,
1996. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 16(b) is
the responsibility of the Company's management and is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not
part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.

ARTHUR ANDERSEN LLP

Boston, Massachusetts

January 23, 1996

S-1
<PAGE>

SCHEDULE II

CRA MANAGED CARE, INC.
ALLOWANCE FOR DOUBTFUL ACCOUNTS

FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

<TABLE>
<CAPTION>
ADDITIONS
BALANCE CHARGED TO DEDUCTIONS BALANCE
AT BEGINNING COSTS AND FROM AT END
OF PERIOD EXPENSES RESERVES OF PERIOD
------------ ---------- ---------- ---------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
1993............................ $ 65,000 $ 15,000 $ -- $ 80,000
1994............................ 80,000 353,000 53,000 380,000
1995............................ 380,000 186,000 136,000 430,000
</TABLE>

S-2
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE PAGE
------- ----- ----
<C> <S> <C>
*1.1 Form of Underwriting Agreement.
*3.1 Restated Articles of Organization of the Company.
*3.2 Form of Articles of Amendment to the Articles of Organization
of the Company.
3.3 By-Laws of the Company, as amended and restated (incorporated
by reference to Exhibit 3.4 of the Company's Registration
Statement No. 33-90426).
4.1 Specimen stock certificate representing the shares of Common
Stock (incorporated by reference to Exhibit 4.1 of the
Company's Registration Statement No. 33-90426).
4.2 Registration Rights Agreement, dated as of March 8, 1994, among
the Company, J. H. Whitney & Co., Whitney 1990 Equity Fund,
L.P., Whitney Subordinated Debt Fund, L.P., First Union
Corporation, Lois E. Silverman and Donald J. Larson
(incorporated by reference to Exhibit 10.7 of the Company's
Registration Statement No. 33-90426).
*4.3 Registration Rights Agreement dated October 24, 1995, by and
among the Company, Michael J. Spilde and Laurence G. Ernst.
*4.4 Form of Registration Rights Agreement by and among the Company
and the shareholders of QMC3, Inc.
*5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional
Corporation, as to the legality of the securities being
registered.
10.1 Employment Agreement, dated as of March 8, 1994, between the
Company and Lois E. Silverman (incorporated by reference to
Exhibit 10.1 of the Company's Registration Statement on Form S-
1, File No. 33-90426).
10.2 Employment Agreement, dated as of March 8, 1994, between the
Company and Donald J. Larson (incorporated by reference to
Exhibit 10.2 of the Company's Registration Statement on Form S-
1, File No. 33-90426).
10.3 1994 Non-Qualified Stock Option Plan for Non-Employee Directors
(incorporated by reference to Exhibit 10.3 of the Company's
Registration Statement on Form S-1, File No. 33-90426).
10.4 Form of Non-Qualified Stock Option Agreement pursuant to the
1994 Non-Qualified Stock Option Plan for Non-Employee Directors
(incorporated by reference to Exhibit 10.4 of the Company's
Registration Statement on Form S-1, File No. 33-90426).
10.5 1994 Non-Qualified Time Accelerated Restricted Stock Option
Plan (incorporated by reference to Exhibit 10.5 of the
Company's Registration Statement on Form S-1, File No. 33-
90426).
10.6 Form of Non-Qualified Stock Option Agreement pursuant to the
1994 Non-Qualified Time Accelerated Restricted Stock Option
Plan (incorporated by reference to Exhibit 10.6 of the
Company's Registration Statement on Form S-1, File No. 33-
90426).
10.7 Landlord Agreement, dated as of March 8, 1994, between Lois E.
Silverman and Donald J. Larson, Trustees of Colonial Realty
Trust and the Company in favor of First Union National Bank of
North Carolina (incorporated by reference to Exhibit 4.12 of
the Company's Registration Statement on Form S-1, File No. 33-
90426).
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE PAGE
------- ----- ----
<C> <S> <C>
+10.8 Software License Agreement between CompReview, Inc. and the
Company, dated February 10, 1995 (incorporated by reference to
Exhibit 10.9 of the Company's Registration Statement on Form S-
1, File No. 33-90426).
10.9 Lease Agreement, dated January 1, 1994, by and between Colonial
Realty Trust and the Company for office space located at 168
U.S. Route 1, Falmouth, ME 04105 (incorporated by reference to
Exhibit 10.10 of the Company's Registration Statement on Form
S-1, File No. 33-90426).
10.10 Lease Agreement, dated January 1, 1994, by and between Colonial
Realty Trust and the Company for office space located at 46
Austin Street, Newtonville, MA 02160 (incorporated by reference
to Exhibit 10.11 of the Company's Registration Statement on
Form S-1, File No. 33-90426).
10.11 Lease Agreement, dated January 1, 1994, by and between Colonial
Realty Trust and the Company for office space located at 46
Austin Street, Newtonville, MA 02160 (incorporated by reference
to Exhibit 10.12 of the Company's Registration Statement on
Form S-1, File No. 33-90426).
10.12 Lease Agreement, dated January 1, 1994, by and between Colonial
Realty Trust and the Company for office space located at 46
Austin Street, Newtonville, MA 02160 (incorporated by reference
to Exhibit 10.13 of the Company's Registration Statement on
Form S-1, File No. 33-90426).
10.13 Lease Agreement, dated January 1, 1994, by and between Colonial
Realty Trust and the Company for office space located at 46
Austin Street, Newtonville, MA 02160 (incorporated by reference
to Exhibit 10.14 of the Company's Registration Statement on
Form S-1, File No. 33-90426).
10.14 Lease Agreement, dated January 1, 1994, by and between Colonial
Realty Trust and the Company for office space located at 46
Austin Street, Newtonville, MA 02160 (incorporated by reference
to Exhibit 10.15 of the Company's Registration Statement on
Form S-1, File No. 33-90426).
10.15 Lease Agreement, dated January 1, 1994, by and between Colonial
Realty Trust and the Company for office space located at 46
Austin Street, Newtonville, MA 02160 (incorporated by reference
to Exhibit 10.16 of the Company's Registration Statement on
Form S-1, File No. 33-90426).
10.16 Lease Agreement, dated January 1, 1994, by and between Colonial
Realty Trust and the Company for office space located at 312
Union Wharf, Boston, MA 02109 (incorporated by reference to
Exhibit 10.17 of the Company's Registration Statement on Form
S-1, File No. 33-90426).
10.17 Lease Agreement, dated January 1, 1994, by and between Colonial
Realty Trust and the Company for office space located at 565
Turnpike Street, North Andover, MA 01845 (incorporated by
reference to Exhibit 10.18 of the Company's Registration
Statement on Form S-1, File No. 33-90426).
10.18 Lease Agreement, dated January 1, 1994, by and between Colonial
Realty Trust and the Company for office space located at 15A
Riverway Place, Bedford, NH 03110 (incorporated by reference to
Exhibit 10.19 of the Company's Registration Statement on Form
S-1, File No. 33-90426).
10.19 Lease Agreement, dated January 1, 1994, by and between Colonial
Realty Trust and the Company for office space located at 509
Stillwells Corner Road, Freehold, NJ 07728 (incorporated by
reference to Exhibit 10.20 of the Company's Registration
Statement on Form S-1, File No. 33-90426).
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE PAGE
------- ----- ----
<C> <S> <C>
10.20 Lease Agreement, dated January 1, 1994, by and between Colonial
Realty Trust and the Company for office space located at 732
Thimble Shoals Blvd., Newport News, VA 23606 (incorporated by
reference to Exhibit 10.21 of the Company's Registration
Statement on Form S-1, File No. 33-90426).
10.21 Lease Agreement, dated January 1, 1994, by and between Colonial
Realty Trust and the Company for office space located at 10132
Colvin Run Road, Suite A, Great Falls, VA 22066 (incorporated
by reference to Exhibit 10.22 of the Company's Registration
Statement on Form S-1, File No. 33-90426).
10.22 Waiver of the Registration Rights and Particpating Notice,
dated as of March 17, 1995, among the Company and the other
parties to the Registration Rights Agreement (incorporated by
reference to Exhibit 10.23 of the Company's Registration
Statement on Form S-1, File No. 33-90426).
10.23 Termination of Management Fee and Amendment to Executive Bonus
Plan among the Company, J. H. Whitney & Co., Whitney 1990
Equity Fund, L.P., Ms. Silverman and Mr. Larson (incorporated
by reference to Exhibit 10.24 of the Company's Registration
Statement on Form S-1, File No. 33-90426).
10.24 1995 Employee Stock Purchase Plan (incorporated by reference to
Exhibit 10.25 of the Company's Registration Statement on Form
S-1, File No. 33-90426).
10.25 Letter dated September 9, 1994 from the Company to Joseph F.
Pesce regarding terms of employment (incorporated by reference
to Exhibit 10.26 of the Company's Registration Statement on
Form S-1, File No. 33-90426).
10.26 Letter dated June 30, 1995 from the Company to Joseph F. Pesce
regarding continuation of compensation (incorporated by
reference to Exhibit 10.26 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, Commission File
no. 02-25856).
10.27 Letter dated June 30, 1995 from the Company to John A. McCarthy
Jr. regarding continuation of compensation (incorporated by
reference to Exhibit 10.27 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, Commission File
no. 02-25856).
10.28 Letter dated June 30, 1995 from the Company to Anne E. Kirby
regarding continuation of compensation (incorporated by
reference to Exhibit 10.28 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, Commission File
no. 02-25856).
10.29 Amendment to Employment Agreement dated as of January 24, 1996,
between the Company and Lois E. Silverman (incorporated by
reference to Exhibit 10.29 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, Commission File
no. 02-25856).
10.30 Agreement to acquire Focus HealthCare Management, Inc., dated
March 19, 1996, between the Company and United HealthCare
Corporation (incorporated by reference to Exhibit 10.30 of the
Company's Annual Report on Form 10-K for the year ended
December 31, 1995, Commission File no. 02-25856).
10.31 Amendment, dated as of March 29, 1996, to Loan Agreement, by
and among the Company, First Union National Bank of North
Carolina and certain other Lenders, and the First Union
National Bank of North Carolina, as Agent (incorporated by
reference to Exhibit 10.31 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, Commission File
no. 02-25856).
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE PAGE
------- ----- ----
<C> <S> <C>
10.32 Loan Agreement, dated as of April 28, 1995, by and among the
Company, First Union National Bank of North Carolina and
certain other Lenders, and the First Union National Bank of
North Carolina, as Agent (incorporated by reference to Exhibit
4.23 of the Company's Registration Statement on Form S-1, File
No. 33-90426).
10.33 Form of Revolving Credit Note issued by the Company to First
Union National Bank of North Carolina (incorporated by
reference to Exhibit 4.24 of the Company's Registration
Statement on Form S-1, File No. 33-90426).
10.34 Form of Security Agreement between the Company and First Union
National Bank of North Carolina (incorporated by reference to
Exhibit 4.25 of the Company's Registration Statement on Form S-
1, File No. 33-90426).
10.35 Form of Collateral Assignment of Leases between the Company and
First Union National Bank of North Carolina (incorporated by
reference to Exhibit 4.26 of the Company's Registration
Statement on Form S-1, File No. 33-90426).
10.36 Form of Trademark Security Agreement between the Company and
First Union National Bank of North Carolina (incorporated by
reference to Exhibit 4.27 of the Company's Registration
Statement on Form S-1, File No. 33-90426).
10.37 Form of Landlord Agreement between Lois E. Silverman and Donald
J. Larson, Trustees of Colonial Realty Trust and the Company in
favor of First Union National Bank of North Carolina
(incorporated by reference to Exhibit 4.28 of the Company's
Registration Statement on Form S-1, File No. 33-90426).
11.1 Statement regarding computation of pro forma and actual
earnings per share.
16.1 Letter from KPMG Peat Marwick LLP regarding change in principal
accountant (incorporated by reference to Exhibit 16.1 of the
Company's Registration Statement on Form S-1, File no. 33-
90426).
21.1 List of Subsidiaries (incorporated by reference to Exhibit 21.1
of the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, Commission File no. 02-25856).
23.1 Consent of Arthur Andersen LLP with respect to the Company.
23.2 Consent of Arthur Andersen LLP with respect to Focus HealthCare
Management, Inc.
*23.3 Consent of Hutchins, Wheeler & Dittmar, A Professional
Corporation (included in
Exhibit 5.1).
*24.1 Power of Attorney.
27.1 Financial Data Schedule
</TABLE>
- --------

*Previously filed with the Commission as part of this Registration Statement on
May 7, 1996.

+Confidential treatment previously granted with respect to portions of this
Exhibit.

<PAGE>

EXHIBIT 11.1

CRA MANAGED CARE, INC.

CALCULATION OF SHARES USED IN DETERMINING

EARNINGS PER SHARE AND PRO FORMA EARNINGS PER SHARE

FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND

THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996

<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------- -------------------
1994 1995 1995 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Weighted average number of shares of
common stock outstanding during the
period................................ 4,700,000 6,413,000 4,700,000 7,373,000
Common stock equivalents, under the
treasury stock method................. 115,000 127,000 115,000 177,000
--------- --------- --------- ---------
4,815,000 6,540,000 4,815,000 7,550,000
========= ========= ========= =========
</TABLE>

<PAGE>

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
(and to all references to our firm) included in or made part of this Amendment
No. 1 of the Form S-1.

Arthur Andersen LLP

Boston, Massachusetts

May 8, 1996

<PAGE>

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
(and to all references to our firm) included in or made part of this Amendment
No. 1 of the Form S-1.

Arthur Andersen LLP

Boston, Massachusetts

May 8, 1996

<PAGE>
<ARTICLE> 5

<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 MAR-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 3,005,000 2,893,000
<SECURITIES> 0 0
<RECEIVABLES> 26,810,000 29,464,000
<ALLOWANCES> 430,000 500,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 30,333,000 32,521,000
<PP&E> 11,732,000 12,307,000
<DEPRECIATION> 5,864,000 6,317,000
<TOTAL-ASSETS> 36,556,000 38,911,000
<CURRENT-LIABILITIES> 22,840,000 23,135,000
<BONDS> 0 0
0 0
0 0
<COMMON> 74,000 74,000
<OTHER-SE> 11,586,000 13,646,000
<TOTAL-LIABILITY-AND-EQUITY> 36,556,000 38,911,000
<SALES> 0 0
<TOTAL-REVENUES> 146,055,000 40,225,000
<CGS> 0 0
<TOTAL-COSTS> 122,615,000 33,422,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 186,000 70,000
<INTEREST-EXPENSE> 2,484,000 194,000
<INCOME-PRETAX> 9,935,000 3,500,000
<INCOME-TAX> 3,974,000 1,453,000
<INCOME-CONTINUING> 5,961,000 2,047,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 2,460,000 0
<CHANGES> 0 0
<NET-INCOME> 3,501,000 2,047,000
<EPS-PRIMARY> .54 .27
<EPS-DILUTED> 0 0

</TABLE>