Advocat Reports First Quarter Earnings.

FRANKLIN, Tenn.--(BUSINESS WIRE)--May 7, 1998--Advocat Inc. (NYSE:AVC), a leading provider of assisted living and skilled nursing services, today reported earnings for the first quarter ended March 31, 1998. Net income for the first quarter was $355,000, or $0.07 per share, compared with net income of $1.3 million, or $0.24 per share for the same period in 1997. Total revenues increased to $51.5 million for the first quarter of 1998, compared to $43.4 million in the comparable period in 1997.

Commenting on the company's results, Dr. Charles W. Birkett, chairman and chief executive officer, stated, "The negative trend Advocat experienced from issues with Alabama regulators in the last two quarters of 1997 has now been reversed. We are pleased that the State views all of our facilities as satisfactory and that the two facilities affected by the events previously described have begun to return to former occupancy levels. Occupancy of these two homes has increased to 72.4% and 87.4%, approximately 15% above their lows. We will however, as previously announced, continue to experience a negative impact on earnings through the second quarter until occupancies return to their previous levels at these two homes. Second quarter earnings will also be negatively affected by increased staffing levels at all of our Alabama facilities. Our reimbursement rates in Alabama will be adjusted in July 1998 to reflect these higher staffing costs, and we expect occupancy at the two homes to be back to their historical levels of over 90% by mid-summer. As a result, the company's financial performance should return to normal levels in the second half of 1998."

The Company has begun implementation of an integrated information management system that will provide enhanced monitoring and tracking of all its operations. Real time information will be available to managers at all levels with respect to clinical care planning, reimbursement, and financial controls management. This program is under the direction of the company's new vice president and chief information officer, Danny Montgomery, who has a wealth of industry-specific experience in systems development. The conversion of all Advocat's homes to this sophisticated new information platform should be completed by November 1998. Along with the implementation of the new information system, Advocat will be centralizing the accounting function for its nursing home operations. The company anticipates recording a one-time non-recurring pre-tax accounting charge in the second quarter of 1998 of approximately $1.0-$1.5 million, representing the costs associated with the closing of certain regional offices, the relocation and reduction of accounting personnel, the write-off of certain capitalized software development costs, and other costs of conversion to the new information system.

In closing, Dr. Birkett stated, "We are very excited about the installation of our new information management system. The need for real time cost, productivity, and outcome's information is increasingly essential to efficient and responsive management of our operations. Additionally, our recently announced joint venture with NCS HealthCare Inc. for pharmacy services represents just one of the many expansion opportunities we are pursuing pertaining to ancillary services. Similarly, in early March, we reached agreements with three separate groups for the development of assisted living facilities totaling 317 units in Canada. We will continue to target the acquisition of assisted living facilities, both in the US and Canada, as part of our ongoing strategy of providing a continuum of care to the elderly." -0- Forward-looking statements made in this release involve a number of risks and uncertainties, including, but not limited to, changes in governmental reimbursement, government regulation and health care reforms, the effectiveness of marketing on census levels, the impact of future state licensure surveys, the ability to execute on the company's acquisition program, both in finding suitable acquisitions and financing therefore, changing economic and market conditions and other risk factors detailed in the company's Securities and Exchange Commission filings.

Advocat is an owner and operator of 115 facilities with 12,101 beds of which 51 are assisted living with 4,880 beds and 64 are skilled nursing facilities containing 7,221 beds. The company has facilities in eleven Southern States and two Provinces of Canada. Assisted living is part of a spectrum of long term care services that provide a combination of housing, personal services and health care designed to respond to elderly individuals who require assistance with activities of daily living. Within this portfolio, seven facilities offer both levels of care. -0- For additional information about the company, visit Advocat's web site: http://www.irinfo.com/avc -0- The consolidated statement of operations follow: -0-

                             ADVOCAT INC.
                       Statements of Operations
                             (Unaudited)

                                        For the Three Months
                                          Ended March 31,

                                     1998                1997

REVENUES:
  Patient revenues                $50,544,000         $42,488,000
  Management fee revenues             906,000             918,000
  Interest income                      43,000              36,000
    Net revenues                   51,493,000          43,442,000

EXPENSES:
  Operating                        41,252,000          34,074,000
  Lease                             4,754,000           3,871,000
  General and administrative        2,726,000           2,312,000
  Depreciation and amortization       962,000             661,000
  Interest                          1,245,000             542,000
     Total expenses                50,939,000          41,460,000

INCOME BEFORE INCOME TAXES            554,000           1,982,000

PROVISION FOR INCOME TAXES            199,000             713,000

NET INCOME                         $  355,000         $ 1,269,000

BASIC & DILUTED EARNINGS PER SHARE      $0.07               $0.24

CONTACT: Advocat, Inc.

Charles W. Birkett, M.D.

Mary Margaret Hamlett

615/771-7575

or

Cameron Associates

Kevin McGrath 

212/245-8800