ADVOCAT ANNOUNCES SECOND QUARTER RESULTS

FRANKLIN, Tenn. (August 14, 2002) - Advocat Inc. (Nasdaq OTC:AVCA) today announced its results for the second quarter ended June 30, 2002.  The Company reported a loss of $1.2 million, or $0.22 per diluted share, in the second quarter of 2002 compared with a loss of $2.4 million, or $0.43 per share, for the same period in 2001.  Net revenues for the second quarter ended June 30, 2002, were $49.5 million compared with net revenues of $50.2 million in 2001.

The loss for the second quarter includes approximately $1.1 million of non-recurring charges related primarily to the termination of leases on 16 U.S. assisted living facilities.  The non-recurring charges include $661,000 related to the remaining net book value of the 16 facilities and $404,000 write-down of assets held for sale to their net realizable value.  Thirteen of the leases were terminated effective April 30, 2002, two additional leases terminated effective May 31, 2002, and one lease was terminated effective June 30, 2002.  The Company is currently negotiating a similar termination of the remaining leased assisted living facilities in the U.S. and expects this to occur during the third quarter of 2002.

U.S. nursing homes net revenues increased 4.4% to $40.2 million in the second quarter of 2002 compared with $38.5 million in the second quarter of 2001 as a result of increased Medicare utilization, Medicare rate increases, higher Medicaid rates in certain states, partially offset by a 1.2% decline in occupancy and nursing home lease terminations in the fourth quarter of 2001. Net revenues for U.S. assisted living facilities declined 34.2% to $5.2 million compared with net revenues of $7.8 million in 2001 and was primarily due to lease terminations during the quarter. Canadian operation revenue increased 8.4% to $4.1 million compared with net revenues of $3.8 million in the second quarter of 2001 due to higher census compared with the second quarter of the prior year.

Operating expenses decreased 3.9% to $39.5 million in the second quarter compared with $41.1 million in 2001.  The decrease was primarily due to reduced bad debt expense and the lease terminations associated with the nursing homes and assisted living facilities.

At June 30, 2002, Advocat had negative working capital of $60.8 million primarily due to $55.8 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 $34.2 million of debt that must be repaid or refinanced in the next 12 months. 

As of June 30, 2002, the Company is engaged in 63 professional liability lawsuits, including 21 in Florida, 17 in Arkansas, and 11 in Texas.  The Company has recorded $26.2 million of total liabilities for incurred but unreported claims related to reported professional liability claims and estimates.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.  

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 100 facilities including 634 skilled nursing facilities containing 7,198 licensed beds and 37 assisted living facilities with 3,704 units as of June 30, 2002.  The Company operates facilities in ten states, primarily in the Southeast, and four provinces in Canada.