Needham, MA, October 7, 1999 – CareMatrix Corporation (NASDAQ:CMDC) a fully integrated senior housing/assisted living company today announced that it expects income for the third quarter and full year to fall below analysts’ consensus estimates. As previously noted, this shortfall is primarily due to the difficulty in sustaining the development pipeline as a result of a lack of attractive financing. The Company derives a substantial portion of its revenue from this development pipeline. In addition, the Company has realized slower than expected fill-ups in certain of its non-stabilized facilities, and as a result, it has taken longer than expected to convert management agreements to leases. The Company intends to focus primarily on filling up its existing facilities and to proceed only with new developments in very select markets in the foreseeable future.

The Company stated that it expects to report third quarter income per share of approximately $0.04 to $0.06 and $0.75 to $0.80 for the full year. This does not take into consideration the potential write-off of any of the Company’s assets, which is currently being evaluated. Actual third-quarter 1999 results will not be available until the early part of November and could differ from the estimated range announced today.

Development income in the third quarter is expected to be approximately $500,000 to $1,000,000 as compared to $7,800,000 in the second quarter of this year. This is a $6,800,000 to $7,300,000 or $0.21 to $0.23 per share decrease from the previous quarter. The Company expects this slow down in development activity to continue, unless either a potential suitor desires to accelerate the development pipeline or the Company’s independent development resources can obtain attractive sources of financing.

Abraham D. Gosman, Chairman and Chief Executive Officer of CareMatrix Corporation said, "We have been affected by the financing issues that have impacted the entire senior housing industry and have not been able to complete several financings that, until recently, we had anticipated to close. Historic financing has become more costly and, therefore, the Company is looking to obtain alternative methods of financing, such as bonds, for those projects that the Company deems to be desirable. As a result, we have cut back our development plans from 3,000 new units a year to 1,000 to 1,500 units. Currently, we have 17 facilities representing 1,900 units either under construction or fully permitted. To the extent that attractive financing can be secured, construction on the permitted sites will begin. Otherwise, those sites may be sold."

"While we are disappointed at the slower than expected fill-up in some markets, operating fundamentals in the stabilized properties continue to be strong. Operating margins in the stabilized facilities remain consistent with prior quarters. We believe that this reflects our operating strategy of providing a continuum of care resulting in a longer-than-average length of stay. Average monthly room rates in our stabilized properties continue to increase as expected as our residents age in place and require more services. Resident satisfaction, as measured in our surveys, remains very high."

Mr. Gosman further stated, "The Company elected to build facilities larger than most of its competitors, and it is felt that this is still a sound strategy. When facilities are stabilized, CareMatrix will have a continuum of care that will enhance its operation. Most of the units have been developed to accommodate independent living, assisted living, and Alzheimer’s residents, which will enable the Company to capture a broad market."

As previously announced, the Company has engaged Paine Webber Incorporated and Deutsche Banc Alex. Brown to assist the Company in exploring strategic alternatives. Regarding that process, Mr. Gosman commented: "We are very pleased with the quality of the parties that the investment bankers have brought to us and we are continuing our discussions with several potential interested parties. The structure of any deal will be a function of our financial suitors’ own profiles and strategies and one that the Board of Directors feels is in the best interest of the shareholders."

Mr. Gosman concluded, "I strongly feel that the imbalance of supply and demand will begin to correct itself in the second half of next year and certainly in 2001/2002. The lack of new start-ups will enable existing facilities to absorb the current vacancies and achieve stabilized occupancy. Our industry is analogous to the congregate care industry in the late 80’s and early 90’s when overbuilding occurred yet became self-correcting when financing became more difficult to obtain."

CareMatrix Corporation is a leading provider of senior housing services including assisted living, supportive independent living and specialized programs for people with Alzheimer’s disease.

This release contains forward-looking statements regarding the Company’s future plans, operations and prospects. The company’s actual results could differ materially from the results anticipated in these forward-looking statement as a result of uncertainties, including risks relating to financing, demand, pricing, competition, construction, and other factors identified in the Company’s filings with the Securities and Exchange Commission.