ADVOCAT ANNOUNCES FIRST QUARTER RESULTS

FRANKLIN, Tenn. - (May 15, 2002) - Advocat Inc. (Nasdaq OTC:AVCA) today announced its results for the first quarter ended March 31, 2002.  The Company reported a net loss after taxes of $3.1 million, or $0.56 per share, in the first quarter of 2002 compared with a loss of $1.5 million, or $0.27 per share, for the same period in 2001.  Net revenues for the first quarter of 2002 increased 3.8% to $51.6 million compared with $49.7 million in the same period of 2001.

First Quarter Results  

Patient revenues increased 6.2% to $40.7 million in the first quarter of 2002 compared with $38.3 million in 2001.  The increase in patient revenues was due to increased Medicare utilization, Medicare rate increases at several facilities that became effective in October 2001, and increased Medicaid rates in certain states, partially offset by a 0.6% decline in occupancy in 2002 compared with 2001.  In addition, the Company terminated leases on two nursing homes during the fourth quarter of 2001. Resident revenues decreased 2.3% to $10.2 million in 2002 compared with $10.4 million in the first quarter of 2001. The Company experienced increased resident revenue rates, offset by a 6.5% decline in resident days.  Management fees declined to $679,000 compared with $911,000 in the first quarter of 2001. 

Total expenses rose 6.8% to $54.5 million compared with $51.1 million in the first quarter of 2001.  Operating expenses represented 86.0% of patient and resident revenues for the latest quarter compared with 81.5% of patient and resident revenues in the first quarter of 2001.  The increased costs were due primarily to increased professional liability costs and higher salaries and wages.  Professional liability costs rose 136.3% to $4.8 million in the first quarter of 2002 compared with $2.0 million in the same quarter of 2001.

At March 31, 2002, Advocat had negative working capital of $61.5 million primarily due to $55.5 million of debt being classified as current liabilities resulting from the Company’s covenant non-compliance and other cross-default provisions.  Based on regularly scheduled debt service requirements, the Company has $33.7 million of debt that must be repaid or refinanced in the next 12 months.  The Company has been in discussions with its lenders regarding potential ways to restructure or refinance its debt, but there can be no assurance that these efforts will be successful.  

Effective April 30, 2002, the Company terminated 13 leases with the former principal owners or affiliates of Pierce Management Group and leases on two additional assisted living facilities were assumed by Pierce. As a result, the Company was relieved of its future obligations with respect to these 13 leases.  The Company will incur a write-down in the second quarter of 2002 of the remaining net book value of these facilities, estimated to be approximately $800,000. In addition, the leases on the two remaining additional assisted living facilities with affiliates of Pierce will be similarly terminated effective June 1, 2002.

Forward-looking statements made in this release involve a number of risks and uncertainties, including but not limited to, uncertainty regarding the Company’s ability to restructure or refinance its debt, the impact of under insured professional liability claims, factors affecting the long-term care industry in general, governmental reimbursement, government regulation, health care reforms, the impact of future licensing surveys, changing economic and market conditions and other risk factors detailed in the Company’s Securities and Exchange Commission filings.  Advocat Inc. is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this document by wire services or Internet services.

Advocat Inc. operates 116 facilities including 54 assisted living facilities with 5,345 units and 62 skilled nursing facilities containing 6,992 licensed beds as of March 31, 2002.  The Company operates facilities in 12 states, primarily in the Southeast, and four provinces in Canada.