ADVOCAT ANNOUNCES FOURTH QUARTER RESULTS

FRANKLIN, Tenn. - (April 1, 2002) - Advocat Inc. (Nasdaq OTC:AVCA) today announced its results for the fourth quarter and year ended December 31, 2001. The Company reported a net loss after taxes of $8.6 million, or $1.57 per share, in the fourth quarter of 2001 compared with a loss of $4.2 million, or $0.76 per share, for the same period in 2000.  The loss for 2001 included $4.8 million for impairment of long-lived assets and other non-recurring charges.  Net revenues for the fourth quarter of 2001 increased 6.7% to $53.5 million compared with $50.1 million in the same period of 2000.

Fourth Quarter Results  

Net revenues for the fourth quarter of 2001 increased to $53.5 million compared with $50.1 million in the same quarter of the prior year.  Patient and resident revenues increased 7% to $52.6 million compared with $49.2 million in the fourth quarter of 2000.  The growth in patient and resident revenues was due to higher Medicare rates in Arkansas and other states, higher Medicare census, and increases in Medicaid rates compared with the prior year.  These increases were partially offset by the termination of a Florida nursing home lease on October 1, 2001.  In addition, Advocat terminated a lease on an additional Florida nursing home effective December 31, 2001, that will affect revenue in 2002.  Management fees rose 0.8% to $910,000 compared with $903,000 in the fourth quarter of 2000. 

Total expenses rose 13.9% to $61.9 million compared with $54.4 million in the fourth quarter of 2000.  Operating expenses represented 85% of revenues for the latest quarter compared with 83% of revenues in the fourth quarter of 2000.  The increased costs were due to increased professional liability costs, higher salaries and wages, and a $4.8 million impairment of long-lived assets and other non-recurring charges in the fourth quarter of 2001.

The Company reported a net loss of $8.6 million, or $1.57 per share, in the fourth quarter of 2001 compared with a loss of $4.2 million, or $0.76 per share, in the fourth quarter of 2000.

2001 Results

Net revenues for 2001 rose 5.2% to $206.2 million compared with $196.0 million in 2000.  Patient and resident revenues increased to $203.1 million in 2001 from $192.0 million in 2000 as a result of higher Medicare rates, higher Medicare census, and increases in Medicaid rates compared with the prior year. Management fees totaled $3.0 million in 2001 compared with $3.9 million in 2000.  The decline in management fees related to a “priority of distribution” calculation at four nursing homes that resulted from higher operating costs, including professional liability costs and provisions for cost report settlements, that reduced the amount of fee income due Advocat as determined by the priority of distribution calculation.

Total expenses increased 14.1% to $228.0 million in 2001 compared with $198.8 million in 2000.  Operating expenses represented 86% of net patient revenues in 2001 compared with 78% in 2000.  The Company experienced a significant jump in professional liability costs in 2001 that accounted for over 50% of the increase in operating expenses compared with the prior year.  The largest component of operating expenses was wages, which increased to $88.8 million in 2001 from $82.9 million in 2000, a 7% increase.

The Company reported a net loss after taxes of $22.3 million, or $4.06 per share, in 2001 compared with a loss of $3.9 million, or $0.70 per share, for 2000. 

At December 31, 2001, Advocat had negative working capital of $64.4 million primarily due to $58.7 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 $34.3 million of debt that must be repaid or refinanced in 2002.  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, 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 5,298 units and 62 skilled nursing facilities containing 6,992 licensed beds as of December 31, 2001.  The Company operates facilities in 12 states, primarily in the Southeast, and four provinces in Canada.