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): April 9, 1997



                                         PHC. Inc.
                     (Exact name of registrant as specified in its charter)




           Massachusetts            0-23524                   4-2601571

          (State or oth            (Commission              (I.R.S.Employer
           jurisdiction of          File Number)            Identification No.)
           incorporation)





                       200 Lake Street Suite 102. Peabody, MA 01960
                   (Address of Principal Executive Offices) (Zip Code)


Registrant's telephone number, including area code:         (508) 536-2777





      
     On February 19, 1997,  the Company's  Franvale  Nursing and  Rehabilitation
Center  ("Franvale") was cited for deficiencies by the Massachusetts  Department
of Public  Health as the result of a routine  survey.  A civil penalty of $3,050
per day was imposed  which was reduced to $2,250 per day March 12,  1997,  which
fines  continue to accrue.  The Company has the right to appeal  these fines and
has requested an informal  review of the fines imposed.  If the company does not
appeal the  imposition  of the fines and the  deficiency  notice,  the penalties
could be reduced by 35%. At the time of the original  citation,  the Company was
notified by the  Department  of Public Health and by the federal  agency,  HCFA,
that Franvale would be terminated from the Medicare and Medicaid programs unless
Franvale was in substantial compliance with regulatory requirements by March 14,
1997. Franvale submitted a plan of correction to the Department of Public Health
and on March 12, 1997,  as the result of a resurvey by the  Department of Public
Health,  a  new  statement  of  deficiencies  was  issued,   which  contained  a
significant number of violations but recharacterized the level of seriousness of
the  deficiencies  to a  lower  degree  of  violation  and  which  extended  the
threatened date of termination to April 30, 1997.


     As a result of the new statement of deficiencies,  the Department of Public
Health has  precluded  the Company from  admitting  new patients to its Franvale
facility.  In addition,  patients may be readmitted to Franvale  facility from a
hospital only after a case by case review by the  Department  of Public  Health.
The Company is obligated to notify the  attending  physician of each resident of
Franvale  who was  found to have  received  substandard  care of the  deficiency
notice and is obligated  also to notify the  Massachusetts  board which licenses
the  administrator  of  Franvale.  HCFA has  informed  the Company  that it will
publish a notice of  impending  termination  in the Boston  Globe not later than
April 14, 1997,  unless Franvale has been found to be in substantial  compliance
by that date.  The Company has  requested  authority  to admit new patients on a
case by case basis and is awaiting approval.

     The Company has replaced the management  team at Franvale and is attempting
to bring the facility into substantial compliance at the earliest possible date,
including the  expenditure  of  significant  sums for staffing and  programmatic
improvements. However, if the Franvale facility is not in substantial compliance
before  April 30,  1997,  Franvale  may be unable to admit new  patients  or may
continue to be subject to a case by case review of readmissions, may continue to
incur significant civil penalties, may lose its certification under the Medicare
and Medicaid  programs which would materially  affect the number of residents at
the facility and would call into question its ability to operate, and could lose
its licensure altogether.

     As a result of the  decrease  in census  resulting  from the  inability  of
Franvale to admit new  patients and the  limitations  on its ability to re-admit
patients, the monetary penalties which continue to accrue, and the expenses that
have been incurred by the Company in an attempt to cure the cited  deficiencies,
the  Company  anticipates  an adverse  effect on its  financial  results for the
quarter ended March 31, 1997 with the possibility of continued adverse financial
impacts in future quarters if new patients cannot be admitted.

     The  Company is  confident  that the  deficiencies  at  Franvale  have been
corrected, as evidenced by the second plan of correction that has been submitted
to the  Department  of Public  Health.  On April 8, 1997,  Franvale  submitted a
statement of allegation of substantial  compliance with the Department of Public
Health and  anticipates  that  resurveyance  of Franvale by the Department  will
occur shortly.  If Franvale is not found to be in substantial  compliance by the
Department of Public Health as a result of such resurvey, the Company intends to
appeal  the  decision.  The  Company  has hired a new  experienced  Director  of
Admissions  whose  primary  responsibility  is to see new  admissions as soon as
regulating approval is received.




                                  SIGNATURE

           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 hereinto duly authorized.


                                            PHC, INC.

 
Date:  April 9, 1997                        BY:  /s/  Bruce A. Shear
                                                  Bruce A. Shear
                                                  President