ADVOCAT ANNOUNCES SECOND QUARTER RESULTS

FRANKLIN, Tenn. (August 14, 2000) - Advocat Inc. (Nasdaq OTC:AVCA) today announced its results for the second quarter ended June 30, 2000.  The Company reported earnings of $73,000, or $0.01 per diluted share, in the second quarter of 2000 compared with a loss of $2.6 million, or $0.48 per share, for the same period in 1999.  Results for the second quarter included $263,000 in non-recurring charges associated with the continuing negotiations with the Company’s lenders and primary lessor.

 Net revenues for the second quarter ended June 30, 2000 increased 8.2% to $48.3 million compared with net revenues of $44.6 million in 1999.  Net revenues increased 7.4% to $36.3 million in U.S. nursing homes compared with $33.8 million in the second quarter of 1999 and were primarily due to higher patient revenues related to increased Medicare utilization and PPS rate increases at several facilities that became effective April 2000.  Net revenues for U.S. assisted living facilities rose 14.2% to $8.1 million compared with net revenues of $7.1 million in 1999, and Canadian operations were up 5.1% to $3.9 million compared with net revenues of $3.7 million in the second quarter of 1999.

 Operating expenses decreased 2.3% to $37.2 million in the second quarter compared with $38.0 million in 1999.  The Company continues to implement cost reductions in response to Medicare reimbursement changes. 

 The Company also announced that it has negotiated extensions on two loans with outstanding balances of $25.5 million at June 30, 2000. The loans include a working capital line of credit and a bridge loan with a combined balance outstanding of $14.4 million and an acquisition line of credit with an outstanding balance of $11.1 million at June 30, 2000.  The Company received extensions to August 31, 2000, for the amounts under the working capital line of credit, bridge loan and the acquisition line of credit.  The Company is negotiating a restructuring of the working capital line of credit and bridge loan, and negotiating replacement long-term financing on the acquisition line of credit.

 At June 30, 2000, the Company had negative working capital of $55.4 million primarily as result of the classification of a majority of the Company’s debt as current liabilities. The classification of a majority of the Company’s debt as current maturities is due to the Company’s non-compliance with debt covenants in various debt agreements, including net worth, cash flow and debt-to-equity ratio requirements.  Cross-default or material adverse change provisions contained in the agreements allow the holders of substantially all of the Company’s debt to demand immediate repayment.  As of this date, the Company had not obtained waivers of the non-compliance.  The Company cannot assure that internally generated cash flows from earnings and existing cash balances will be sufficient to fund existing debt obligations on future capital and working capital requirements through fiscal year 2000.  The Company is currently discussing potential restructuring, modification and refinancing alternatives with its lenders and primary lessor.  Any demands for repayment by lenders or the inability to obtain waivers or refinance the related debt would have a material adverse impact on the financial position, results of operations and cash flows of the Company.  If the Company is unable to generate sufficient cash flow from its operations or successfully negotiate debt or lease amendments, it will explore a variety of other options, including, but not limited to, equity financing from outside investors, asset dispositions or relief under the United States bankruptcy code.

 Forward-looking statements made in this release involve a number of risks and uncertainties, including but not limited to, 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. operates 120 facilities including 56 assisted living facilities with 5,472 units and 64 skilled nursing facilities containing 7,230 licensed beds as of June 30, 2000.  The Company operates facilities in 12 states, primarily in the Southeast, and four provinces in Canada.

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