ADVOCAT ANNOUNCES FOURTH QUARTER AND 1999 RESULTS

FRANKLIN, Tenn. (March 30, 2000) - Advocat Inc. (Nasdaq OTC:AVCA) today announced its results for the fourth quarter and year ended December 31, 1999. The Company reported a pre-tax loss of $2.0 million in the fourth quarter of 1999 compared with a loss of $6.1 million for the same period in 1998. The net loss for the quarter and year ended December 31, 1999, were $13.9 million and $21.6 million, respectively, compared with $3.9 million and $3.0 million for the quarter and year ended December 31, 1998. The net loss per share for the quarter and year ended December 31, 1999, were $2.55 and $3.98, respectively, compared with a net loss per share of $0.72 and $0.57 for the quarter and year ended December 31, 1998.

 The net loss for 1999 includes a $7.6 million tax provision compared with a $1.7 million tax benefit in 1998. The 1999 tax provision is the result of a $12.8 million increase in the Company’s valuation allowance against Advocat’s deferred tax assets due to the uncertainty surrounding the realization of the future benefits of those deferred tax assets. In 1998, the net loss included a non-recurring charge of $5.9 million due primarily to a charge for impairment of assets, legal and contractual settlements, the termination of proposed financing and acquisition transactions, and additional restructuring charges associated with the Company’s management information systems conversion.  

 Revenues for 1999 were $182.0 million compared with revenues of $205.2 million in 1998. Net revenues for the fourth quarter of 1999 totaled $46.2 million compared with revenues of $49.7 million for the fourth quarter of 1998. The lower revenues were primarily due to Medicare reimbursement changes brought about by the implementation of prospective payment system (PPS), various initiatives in the Balanced Budget Act of 1997 and reimbursement issues.

 Operating expenses decreased to $152.6 million in 1999 compared with $164.8 million in 1998. Operating expenses decreased to $37.1 million in the fourth quarter of 1999 compared with $41.2 million in the 1998 comparable period. Advocat initiated cost reduction programs in 1999 in response to Medicare reimbursement changes. The cost reduction initiatives were offset somewhat by a significant increase in the provision for doubtful accounts, rising to $7.0 million in 1999 from $2.4 million in 1998.

 The Company also reported that it is currently not in compliance with various financial covenants contained in its loan agreements with its primary bank and other lenders, including its primary lessor. Cross-default and other provisions contained in other loan agreements will under certain circumstances permit the holders of a majority of the Company’s debt to demand immediate repayment. The Company had total bank and other debt of $60.9 million as of December 31, 1999, of which the Company has classified $53.1 million as current liabilities. The Company is currently discussing potential restructuring, modification and refinancing alternatives with its lenders, primary lessor and potential investors. No assurance can be given that the Company will successfully negotiate a restructuring, including appropriate waivers, of its indebtedness. If any of the Company’s lenders forced immediate repayment, the Company would not be able to repay the amounts outstanding. Advocat had negative working capital of $56.7 million as of December 31, 1999, primarily as a result of the majority of debt being reclassified as short-term.

 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. operated 119 facilities including 54 assisted living facilities with 5,215 units and 65 skilled nursing facilities containing 7,307 licensed beds as of December 31, 1999. The Company operates facilities in 12 states, primarily in the Southeast, and three provinces in Canada.