8-K

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                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                    FORM 8-K

                                 CURRENT REPORT

                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934



    Date of Report (Date of earliest event reported):  July 2, 1998



                      AMERICAN HEALTH PROPERTIES, INC.
           (Exact name of registrant as specified in its charter)

                                      

            DELAWARE                  1-9381               95-4084878
   (State or other jurisdiction     (Commission          (IRS Employer
         of incorporation)          File Number)       Identification No.)



     6400 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 1800      
                 ENGLEWOOD, COLORADO                              80111
         (Address of principal executive offices)               (Zip Code)



     Registrant's telephone number, including area code:  (303) 796-9793
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Item 5.  Other Events.


         On July 2, 1998, the Company announced a $35 million repayment of
Psychiatric Group mortgage loans, the declaration of a special stock dividend
and developments regarding the company's Psychiatric Group portfolio. Attached 
as Exhibit 99.1 is the Company's press release with respect to such matters.

Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits.


         (c) Exhibits

99.1             Press Release dated July 2, 1998.


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


Date:  July 2, 1998                               AMERICAN HEALTH PROPERTIES,
                                                  INC.
                                                  (Registrant)


                                                  By: /s/ Michael J. McGee
                                                      Michael J. McGee
                                                      Treasurer


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                                 Exhibit Index

Exhibit No.                       Description
- -----------                       -----------

   99.1          Press Release date of July 2, 1998

EX-99.1

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                                                                    EXHIBIT 99.1





                               PSYCHIATRIC GROUP

                   OF AMERICAN HEALTH PROPERTIES INC. REPORTS

                  $35 MILLION REPAYMENT OF PSYCHIATRIC GROUP 
                                 MORTGAGE LOANS

                     DECLARATION OF SPECIAL STOCK DIVIDEND 

                      PROPERTY OPERATIONS REMAIN VOLATILE


         Denver, Colorado --July 2, 1998 --The Board of Directors of American
Health Properties, Inc. Psychiatric Group (AHEPZ:NASDAQ) announced today that
the Company accepted $35 million as payment in full of approximately $37.7
million of net book value obligations owed to the Company by the operator of
the two New York Four Winds psychiatric facilities.  The Four Winds obligations
had undergone several restructurings and had been subject to write-downs in
1992 and 1994.  The payment of these obligations, secured by mortgages on
facilities located in Katonah and Saratoga, New York, will result in a $2.7
million charge to the Psychiatric Group's second quarter results.

         In accordance with policies previously announced, proceeds from the
payment of the Four Winds mortgage loans will initially be used to repay the
entire $11.2 million of fixed and revolving loans owed to the Company's Core
Group by the Psychiatric Group and to maintain a cash reserve of approximately
$2.3 million for the net current liabilities of the Psychiatric Group. It is
intended that substantially all of the remaining proceeds will be distributed
to holders of Psychiatric Group Depositary Shares in the form of a special
dividend payable in shares of the Company's Core Group Common Stock (AHE:NYSE).
Accordingly, on July 2, 1998, the Board of Directors declared a special
dividend of 0.4 shares of Core Group Common Stock per Psychiatric Group
Depositary Share payable July 24, 1998 to Psychiatric Group Depositary Share
holders of record July 17, 1998.  In order to effectuate the stock dividend,
the Psychiatric Group will purchase the Core Group Common Stock from the Core
Group at a price equal to the average trading price for the last ten trading
days prior to the record date for the dividend, as provided in the certificate
of designation for the Psychiatric Group Stock.



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         Joseph P. Sullivan, Chairman, President and Chief Executive Officer
stated, "The repayment of the Four Winds mortgage loans represents an important
step in the Company's announced policy to optimize the value of the Psychiatric
Group's assets for the benefit of the Psychiatric Group shareholders.  In this
instance, we will be able to return to our Psychiatric Group shareholders
approximately $10 per share in Core Group Common Stock, which currently yields
approximately 8.5%.  Psychiatric Group shareholders will also receive their
second quarter dividends based on the Psychiatric Group's funds from operations
(FFO) for the second quarter which will include a full quarter's contribution
from the Four Winds loans.  In addition, due to the timing of the special
dividend, Psychiatric Group shareholders will also receive the Core Group's
second quarter dividend on their new shares of Core Group Common Stock.  If the
second quarter dividends on Core Group Common Stock and Psychiatric Group
Depositary Shares were to remain at the same level as the first quarter
dividends, Psychiatric Group Depositary shareholders will have received a total
of approximately $10.86 from each Psychiatric Group Depositary Share held.

         We consider this to be a good time to realize the value of these
assets. The mortgage loan on the Four Winds Saratoga facility is subject to an
interest rate reset in June 1999, which at current interest rates, would result
in a significant reduction in interest income to the Psychiatric Group.  As we
have previously reported, the State of New York is currently undergoing
significant changes in its behavioral health care delivery market.  Operators
in New York must now develop highly cost-effective systems designed to respond
to the increasing pressures of managed Medicare, Medicaid and HMO capitated
contracts.  Although we consider this operator to be very capable and
dedicated, we also believe the operator will encounter significant challenges
to remain competitive. The $35 million payment represents an average loan value
of approximately $135,000 per licensed bed. Finally, the Board obtained an
independent evaluation of the Four Winds credit which further supports the
acceptance of the $35 million payoff.  We welcome this opportunity to realize
significant value from this investment.  We wish the Four Winds organization
well in their future endeavors."

         The Four Winds loans represented the largest income-producing portion
of the Psychiatric Group's portfolio.  In the first quarter, the Four Winds
loans contributed revenue of $1,803,000 to the Psychiatric Group.  As a result
of these loan payoffs on July 1, second quarter results will be the last
quarter to include results from the Four Winds loans.  Accordingly, future
quarterly dividends will decrease very significantly and will be solely
dependent on the remaining three assets in the portfolio.

         The Company's objective is to optimize the value of the remaining
Psychiatric Group assets over time.  It expects to continue to monitor these
Psychiatric Group assets closely and to work actively with each of the
operators to try to realize long-term value wherever possible.  As previously
announced, the Company may sell, restructure or seek other means to reduce its
Psychiatric Group investments and continues to encourage each of the
psychiatric operators to pursue financing alternatives.



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         Operations of the remaining three Psychiatric Group facilities remain
volatile.  Continued operations at both the Retreat and Rock Creek Center
facilities are in flux, and it is unlikely that operations will re-commence at
the Northpointe facility.  Even if there is a change in the operator of any of
the facilities or if the Psychiatric Group provides additional financial
assistance, the Psychiatric Group cannot be assured that the facilities will
continue or re-commence operations or be able to meet their obligations to the
Psychiatric Group.  If the Psychiatric Group were able to sell any of its three
remaining facilities, the Psychiatric Group cannot be assured that it would
realize full book value.

o        As previously announced, a restructuring of The Retreat's obligations
         to the Psychiatric Group was completed early in the fourth quarter of
         1997.  The Retreat continues to be in default on certain obligations
         it owes to the Psychiatric Group.  While significant negotiations are
         in progress regarding the assumption of operations at the Retreat by a
         new operator, key financial terms between the existing operator and
         the Company have yet to be resolved and remain under negotiation.  The
         transfer of operations to the new operator will not occur unless those
         terms are satisfactorily resolved.  If not resolved, the Company may
         decide to exercise any or all of its remedies. Even if there is a
         change in the operator of the Retreat, continued operations at the
         Retreat will remain uncertain until the new operator has demonstrated
         its ability to successfully operate the facility.  In light of the
         volatile circumstances at the Retreat, the Psychiatric Group cannot be
         assured that further impairment losses on its investment in that
         facility will not be required.  For the first quarter of 1998 the
         Retreat contributed $105,000 of revenues to the Psychiatric Group.

o        At the end of June 1998, the operator of the Rock Creek Center (RCC)
         facility informed the Company that it had incurred a material,
         unanticipated liability to Medicare, which imperils the continuing
         operation of the facility.  In response, the operator contemplates a
         significant revision and downsizing of its operations to focus on
         geriatric psychiatric care.  In order to implement that change, the
         operator has given a WARN Act notice to its employees notifying them
         that the operations of the facility in its current mode will cease
         within 60 days of such notice and inviting them to reapply for
         positions in the proposed downsized operation.  The lease of the RCC
         property, initially set to expire December 31, 1997 and extended
         through September 30, 1998, has not been further extended.  There is a
         $2,500,000 balance outstanding under RCC's revolving credit agreement,
         which matured in June 1997.  Although interest continues to be paid on
         the loan, no arrangement has been established for the payment of the
         principal balance of the matured loan.

         Under the existing lease extension, the Company has the right,
         effective July 1, 1998, to negotiate with other potential health care
         operators regarding operating the facility. Discussions also continue
         with the existing operator regarding a new lease, but such discussions
         have not been successful to date.  Although local and national
         operators have expressed interest in the facility, the Psychiatric
         Group cannot be assured that a new lease will be accomplished.  If the
         current operator is unsuccessful in formulating a program which
         permits it to pay suitable lease



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         payments and a facility lease with a new operator is not accomplished,
         a significant negative impact to the Psychiatric Group likely will
         result.  Furthermore, if a new operator assumes operation of the RCC
         facility, the Company cannot be assured that the current operator will
         be able to pay the balance owed under the revolving credit agreement
         or that a new operator will be able to successfully operate the
         facility.  The total revenue contribution to the Psychiatric Group
         from the RCC investment for the first quarter was $361,000.

o        The Northpointe property, at which the operator ceased hospital
         operations in mid-1997, continues to remain idle. There have been
         numerous discussions with health care operators and others regarding a
         potential sale or lease of the property.  However, no agreement for
         sale or lease has been reached.  If efforts to identify a health care
         operator for the property prove unsuccessful, the property will most
         likely have to be sold for its real estate value.  As previously
         announced, the Psychiatric Group incurred costs of approximately
         $225,000 during the first quarter of 1998 ($.11 per depositary share)
         to protect and maintain this property, including approximately
         $150,000 for unexpected capital expenditures.

         The Board of Directors of the Company will continue to review and set
the Psychiatric Group dividend on a quarterly basis. Historically, the level of
dividends of the Psychiatric Group has varied quarter-to-quarter.  With the
repayment of the Four Winds loans, small events with respect to the Psychiatric
Group's three remaining facilities will likely have a more significant effect
on the Psychiatric Group's cash flows and dividends, and therefore the price of
the Psychiatric Group Depositary Shares. The liquidity of the Psychiatric Group
Depositary Shares will also likely be adversely affected.  Furthermore, since
the Psychiatric Group does not maintain a separate management structure, it has
an ongoing obligation to pay for an allocated portion of the Company's general
and administrative expenses, subject to a minimum of $250,000 annually, as well
as for specific expenses directly related to the operations of the Psychiatric
Group.  Offsetting these expenses in future quarters will be a reduction of
interest expense as a result of the repayment of the inter-Group loans to the
Core Group.  Interest expense on inter-Group loans to the Core Group was
$365,000 for the first quarter of 1998.

         Had the Fours Winds loan payoff and special dividend occurred on
January 1, 1998, Psychiatric Group FFO for the first quarter of 1998 would have
been approximately $.11 per depositary share, excluding $150,000 incurred for
unexpected capital expenditures, compared with actual FFO for the first quarter
of 1998 as previously reported of $.68 per depositary share.

         Any advance of additional funds to operators of the Psychiatric
Group's properties, modification of terms covering the rental or interest
obligations of its properties or nonpayment or deferral of such obligations as
they become due likely will have an adverse impact on the Psychiatric Group
results of operations and cash flows, as well as on the quarterly dividend
payment on Psychiatric Group Depositary Shares.  In addition, future operating
results, cash flows and dividends of the Psychiatric Group will be affected by
changes in the level of additional rent, the amount of additional financial
advisory fees and, to the extent necessary, various costs which might be
incurred in an effort to maintain, protect and pursue alternatives for its
investments.



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         The Company does not currently intend to make new Psychiatric Group
investments, and, will pursue all alternatives with respect to the remaining
Psychiatric Group investments.  The Company will continue to encourage
operators to pursue financing alternatives, which might enable them to acquire
the properties and/or repay their borrowings from the Psychiatric Group.  The
net proceeds received by the Psychiatric Group from any such psychiatric
property sales and/or psychiatric operator borrowing repayments are expected to
be used first to repay any then outstanding loans owed to the Core Group or
other liabilities owed by the Psychiatric Group, with all remaining net
proceeds, if any, distributed in cash or Core Group Common Stock to holders of
Psychiatric Group Depositary Shares. The Company cannot be assured that the
efforts of psychiatric operators to obtain alternative financing will be
successful or, if successful, that the amounts of such financing would be
sufficient to enable the Psychiatric Group to realize the carrying amounts of
its investments.

         The Company will continue to review quarterly the FFO and the
performance of each of the remaining assets of the Psychiatric Group.  Should
the Board of Directors of the Company decide that the remaining Psychiatric
Group portfolio and operations are not consistent with a separate public
security, the Board may elect to then redeem the outstanding Psychiatric Group
Depositary Shares.

CAUTIONARY STATEMENT REGARDING FUTURE RESULTS AND FORWARD-LOOKING STATEMENTS

         This press release includes statements that are not purely historical
and are "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, including statements regarding the Company's
expectations, beliefs, intentions or strategies regarding the future.  All
statements other than historical fact contained in this press release,
including without limitation statements regarding rent or interest to be
received from the Company's operators, plans with respect to individual
facilities, expectations with respect to the specific terms and renewals of
leases of the Company's facilities, the Company's anticipated dividend payout
ratios, the Company's liquidity position, projected expenses associated with
maintaining individual properties, the Company's ability to realize the
recorded amounts of its investments and the potential effect of new or existing
regulations on the operations conducted at the Company's facilities, are
forward-looking statements.   All forward-looking statements included in this
press release are based on information available to the Company on the date
hereof, and the Company assumes no obligation to update such forward-looking
statements.  Although the Company believes that the assumptions and
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct or
that the Company will take any actions that may presently be planned.

         Certain factors that could cause actual results to differ materially
from those expected include, among others: the financial success of the
operations conducted at the Company's facilities and the financial strength of
the operators of such facilities, the continuing ability of operators to meet
their obligations to the Company under existing or restructured agreements,
changes in operators or ownership of operators, the viability of alternative
uses for the



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Company's properties when necessary, changes in government policy relating to
the health care industry including reductions in reimbursement levels under the
Medicare and Medicaid programs, operators' continued eligibility to participate
in the Medicare or Medicaid programs, reductions in reimbursement by other
third-party payors, the impact of managed care pricing pressures, the
requirement to provide care on a fixed-price basis, lower occupancy levels at
the Company's facilities, demand for the services provided at the Company's
facilities, the strength and financial resources of the Company's competitors,
the availability and cost of capital and changes in tax laws and regulations
affecting real estate investment trusts.  Readers are encouraged to review the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 for a
fuller discussion of such factors.

SUMMARY BACKGROUND INFORMATION

         The Psychiatric Group Depositary Shares represent the Company's
approximately $14 million of gross investments in three psychiatric hospitals
(the "Psychiatric Group").  The Core Group Common Stock represents the
Company's approximately $820 million of gross investments in acute care
hospitals, rehabilitation hospitals, long-term acute care hospitals, assisted
living facilities, skilled nursing facilities, Alzheimer's care facilities and
medical office/clinic facilities (the "Core Group"). The Company has directly
assigned or, if not directly assigned, allocated its assets, liabilities and
stockholders' equity, and its revenues, expenses and cash flow items, between
the Psychiatric Group and Core Group.  General and administrative expenses of
the Company that cannot be directly attributed to either Group are allocated to
the Psychiatric Group and the Core Group primarily on the basis of their
respective contributions to the Company's consolidated revenues.

         American Health Properties, Inc. is a real estate investment trust
(REIT) specializing in quality health care facilities.  The Company currently
has in excess of $830 million of gross investments in health care facilities
located in 22 states.



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