##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-Q
   (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    June 30, 2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to    Commission file number
    333-144337
  United Surgical Partners
    International, Inc.
 (Exact name of registrant as
    specified in its charter)
   Delaware(State or other jurisdiction
    of
    incorporation or organization)

75-2749762(IRS Employer
    Identification Number)15305 Dallas Parkway, Suite 1600
    Addison, Texas(Address of principal
    executive offices)

75001(Zip
    Code)    (972) 713-3500
 (Registrants telephone
    number, including area code)
   o þ
  Regulation S-T o o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2 o þ
  The number of shares of Common Stock of the Registrant
    outstanding at July 31, 2009 was 100.




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##### 



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  INDEX
   
 PART I.


Financial Information


3Item 1.


Review Report of Independent Registered Public
    Accounting Firm


3Consolidated Balance Sheets (unaudited)


4Consolidated Statements of Income (unaudited)


5Consolidated Statements of Comprehensive Income
    (unaudited)


7Consolidated Statements of Changes in Equity
    (unaudited)


8Consolidated Statements of Cash Flows
    (unaudited)


10Notes to Consolidated Financial Statements
    (unaudited)


11Item 2.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


30Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


51Item 4T


Controls and Procedures


51PART II.


Other Information


52Item 1.


Legal Proceedings


52Item 6.


Exhibits


52Signatures


53EX-31.1EX-31.2EX-32.1EX-32.2     2




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##### Table of Contents



PART I.
    FINANCIAL INFORMATION  ITEM 1.
    Financial
    Statements  Report of
    Independent Registered Public Accounting Firm
           Noncontrolling Interests in Consolidated
    Financial Statements, An Amendment of ARB No. 51.
  KPMG
    LLP
    3




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Consolidated
    Balance Sheets
  June 30, 2009


December 31, 2008(Unaudited)(In thousands  except share data)ASSETSCash and cash equivalents

$
123,887


$
49,435Accounts receivable, net of allowance for doubtful accounts of
    $9,761 and $11,544, respectively


54,699



57,213Other receivables (Note 9)


25,016



17,070Inventories of supplies


8,337



9,079Prepaids and other current assets


13,763



11,735Total current assets


225,702



144,532Property and equipment, net


196,702



201,824Investments in unconsolidated affiliates


316,189



307,771Goodwill


1,284,830



1,270,287Intangible assets, net


320,570



318,852Other assets


26,610



24,897Total assets

$
2,370,603


$
2,268,163LIABILITIES AND EQUITYAccounts payable

$
19,933


$
22,194Accrued salaries and benefits


28,435



27,241Due to affiliates


126,630



57,237Accrued interest


9,075



9,336Current portion of long-term debt


23,284



24,488Other current liabilities


40,530



42,874Total current liabilities


247,887



183,370Long-term debt, less current portion


1,054,669



1,073,459Other long-term liabilities


29,046



27,517Deferred tax liability, net


136,115



125,639Total liabilities


1,467,717



1,409,985Noncontrolling interests  redeemable (Notes 1
    and 4)


56,096



52,214Commitments and contingencies (Note 10)Equity:United Surgical Partners International, Inc. (USPI)
    stockholders equity:Common stock, $0.01 par value; 100 shares authorized;
    issued and outstanding






Additional paid-in capital


798,041



801,902Accumulated other comprehensive loss


(56,943
)


(84,008
)Retained earnings


68,682



46,243Total USPI stockholders equity


809,780



764,137Noncontrolling interests  nonredeemable (Notes 1
    and 4)


37,010



41,827Total equity


846,790



805,964Total liabilities and equity

$
2,370,603


$
2,268,163    4




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Consolidated
    Statements of Income
  Three Months


Three MonthsEnded June 30,


Ended June 30,2009


2008(Unadited  in thousands)Revenues:Net patient service revenues

$
132,816


$
142,922Management and contract service revenues


19,268



18,714Other revenues


4,283



1,266Total revenues


156,367



162,902Equity in earnings of unconsolidated affiliates


14,639



10,094Operating expenses:Salaries, benefits, and other employee costs


42,991



46,433Medical services and supplies


24,815



28,757Other operating expenses


24,397



28,550General and administrative expenses


9,755



9,739Provision for doubtful accounts


2,826



1,961Depreciation and amortization


8,910



9,512Total operating expenses


113,694



124,952Operating income


57,312



48,044Interest income


1,275



787Interest expense


(17,576
)


(21,608
)Other, net


(157
)


(826
)Total other expense, net


(16,458
)


(21,647
)Income from continuing operations before income taxes


40,854



26,397Income tax expense


(7,997
)


(5,037
)Income from continuing operations


32,857



21,360Loss from discontinued operations, net of tax






(945
)Net income


32,857



20,415Less: Net income attributable to noncontrolling interests


(16,105
)


(13,952
)Net income attributable to USPIs common stockholder

$
16,752


$
6,463Amounts attributable to USPIs common stockholder:Income from continuing operations, net of tax

$
16,752


$
7,419Loss from discontinued operations, net of tax






(956
)Net income attributable to USPIs common stockholder

$
16,752


$
6,463    5




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Consolidated
    Statements of Income
  Six Months


Six MonthsEnded June 30,


Ended June 30,2009


2008(Unadited  in thousands)Revenues:Net patient service revenues

$
267,391


$
289,612Management and contract service revenues


38,052



36,158Other revenues


8,064



2,532Total revenues


313,507



328,302Equity in earnings of unconsolidated affiliates


28,197



21,142Operating expenses:Salaries, benefits, and other employee costs


85,865



93,648Medical services and supplies


50,568



57,845Other operating expenses


48,694



56,203General and administrative expenses


20,099



20,167Provision for doubtful accounts


4,879



3,810Depreciation and amortization


17,865



18,846Total operating expenses


227,970



250,519Operating income


113,734



98,925Interest income


1,741



1,825Interest expense


(35,795
)


(43,953
)Other, net (Notes 2 and 4)


(10,221
)


245Total other expense, net


(44,275
)


(41,883
)Income from continuing operations before income taxes


69,459



57,042Income tax expense


(14,620
)


(12,611
)Income from continuing operations


54,839



44,431Loss from discontinued operations, net of tax






(889
)Net income


54,839



43,542Less: Net income attributable to noncontrolling interests


(32,400
)


(29,358
)Net income attributable to USPIs common stockholder

$
22,439


$
14,184Amounts attributable to USPIs common stockholder:Income from continuing operations, net of tax

$
22,439


$
15,079Loss from discontinued operations, net of tax






(895
)Net income attributable to USPIs common stockholder

$
22,439


$
14,184    6




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Consolidated
    Statements of Comprehensive Income
  Three Months


Three MonthsEnded


EndedJune 30,


June 30,2009


2008(Unaudited  in thousands)Net income

$
32,857


$
20,415Other comprehensive income:Foreign currency translation adjustments


30,643



717Unrealized gain on interest rate swaps, net of tax


965



807Total other comprehensive income


31,608



1,524Comprehensive income


64,465



21,939Less: Comprehensive income attributable to noncontrolling
    interests


(16,105
)


(13,952
)Comprehensive income attributable to USPIs common
    stockholder

$
48,360


$
7,987   Six Months


Six MonthsEnded


EndedJune 30,


June 30,2009


2008(Unaudited  in thousands)Net income

$
54,839


$
43,542Other comprehensive income:Foreign currency translation adjustments


26,163



903Unrealized gain on interest rate swaps, net of tax


902



820Total other comprehensive income


27,065



1,723Comprehensive income


81,904



45,265Less: Comprehensive income attributable to noncontrolling
    interests


(32,400
)


(29,358
)Comprehensive income attributable to USPIs common
    stockholder

$
49,504


$
15,907    7




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Consolidated
    Statement of Changes in Equity
 For the
    Three Months and Six Months Ended June 30,
    2009
  USPI Common StockholderAccumulatedAdditional


Other





NoncontrollingComprehensive


Outstanding





Paid-in


Comprehensive


Retained


Interests Total


Income (Loss)


Shares


Par Value


Capital


Income (Loss)


Earnings


Nonredeemable(Unaudited  in thousands, except share
    amounts)Balance, December 31, 2008

$
805,964


$




100


$



$
801,902


$
(84,008
)

$
46,243


$
41,827Distributions to noncontrolling interests


(605
)


























(605
)Purchases of noncontrolling interests


(668
)














(453
)










(215
)Sales of noncontrolling interests


(2,146
)














(2,142
)










(4
)Deconsolidation of subsidiaries


(5,852
)


























(5,852
)Contribution related to equity award grants by USPI Group
    Holdings, Inc. and other


462















462











Comprehensive income:Net income


6,915



5,687



















5,687



1,228Other comprehensive loss:Unrealized loss on interest rate swaps, net of tax


(63
)


(63
)














(63
)






Foreign currency translation adjustments


(4,480
)


(4,480
)














(4,480
)






Other comprehensive loss


(4,543
)


(4,543
)






















Comprehensive income


2,372


$
1,144























1,228Balance, March 31, 2009


799,527







100







799,769



(88,551
)


51,930



36,379Distributions to noncontrolling interests


(962
)


























(962
)Purchases of noncontrolling interests


(288
)














(270
)










(18
)Sales of noncontrolling interests


(1,904
)














(1,953
)










49Contribution related to equity award grants by USPI Group
    Holdings, Inc. and other


495















495











Comprehensive income:Net income


18,314



16,752



















16,752



1,562Other comprehensive loss:Unrealized gain on interest rate swaps, net of tax


965



965















965







Foreign currency translation adjustments


30,643



30,643















30,643







Other comprehensive income


31,608



31,608























Comprehensive income


49,922


$
48,360























1,562Balance, June 30, 2009

$
846,790







100


$



$
798,041


$
(56,943
)

$
68,682


$
37,010    8




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Consolidated
    Statement of Changes in Equity
 For the
    Three Months and Six Months Ended June 30, 2008
  USPI Common StockholderAccumulatedAdditional


Other





NoncontrollingComprehensive


Outstanding





Paid-in


Comprehensive


Retained


Interests Total


Income (Loss)


Shares


Par Value


Capital


Income (Loss)


Earnings


Nonredeemable(Unaudited  in thousands, except share
    amounts)Balance, December 31, 2007

$
837,100


$




100


$



$
799,562


$
(1,485
)

$
8,729


$
30,294Distributions to noncontrolling interests


(210
)


























(210
)Purchases and sales of noncontrolling interests, net


2,001



























2,001Contribution related to equity award grants by USPI Group
    Holdings, Inc.


987















987











Comprehensive income:Net income


8,926



7,721



















7,721



1,205Other comprehensive income:Unrealized loss on interest rate swaps, net of tax


13



13















13







Foreign currency translation adjustments


186



186















186







Other comprehensive income


199



199























Comprehensive income


9,125


$
7,920























1,205Balance, March 31, 2008


849,003







100







800,549



(1,286
)


16,450



33,290Distributions to noncontrolling interests


(3,512
)


























(3,512
)Purchases and sales of noncontrolling interests, net


1,000



























1,000Contribution related to equity award grants by USPI Group
    Holdings, Inc. and other


462















462











Comprehensive income:Net income


7,466



6,463



















6,463



1,003Other comprehensive income:Unrealized gain on interest rate swap, net of tax


807



807















807







Foreign currency translation adjustments


717



717















717







Other comprehensive income


1,524



1,524























Comprehensive income


8,990


$
7,987























1,003Balance, June 30, 2008

$
855,943







100


$



$
801,011


$
238


$
22,913


$
31,781    9




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Consolidated
    Statements of Cash Flows
  Six Months


Six MonthsEnded


EndedJune 30,


June 30,2009


2008(Unaudited  in thousands)Cash flows from operating activities:Net income

$
54,839


$
43,542Adjustments to reconcile net income to net cash provided by
    operating activities:Loss on discontinued operations






889Provision for doubtful accounts


4,879



3,810Depreciation and amortization


17,865



18,846Loss on sale of equity interests and other


10,253



949Amortization of debt issue costs and discount


1,558



1,436Deferred income tax expense


9,889



7,190Equity in earnings of unconsolidated affiliates, net of
    distributions received


(8,057
)


(145
)Equity-based compensation


996



1,448Increases (decreases) in cash from changes in operating assets
    and liabilities, net of effects from purchases of new businesses:Accounts receivable


(4,076
)


(7,019
)Other receivables


(4,311
)


(3,649
)Inventories of supplies, prepaids and other current assets


(3,205
)


(2,134
)Accounts payable and other current liabilities


(4,930
)


(2,166
)Long-term liabilities


965



623Net cash provided by operating activities


76,665



63,620Cash flows from investing activities:Purchases of new businesses and equity interests, net of cash
    received


(7,942
)


(16,412
)Proceeds from sale of businesses and equity interests


1,347



9,678Purchases of property and equipment


(11,090
)


(20,515
)Returns of capital from unconsolidated affiliates


2,140



1,558(Increase) decrease in deposits and notes receivable


(3,545
)


413Net cash used in investing activities


(19,090
)


(25,278
)Cash flows from financing activities:Proceeds from long-term debt


110



24,568Payments on long-term debt


(14,216
)


(13,041
)Increase in cash held on behalf of unconsolidated affiliates


60,600



1,200Sales (purchases) of noncontrolling interests, net


126



(7,538
)Distributions to noncontrolling interests


(29,965
)


(30,933
)Net cash provided by (used in) financing activities


16,655



(25,744
)Cash flows of discontinued operations:Operating cash flows






166Investing cash flows






(76
)Financing cash flows






(34
)Net cash provided by discontinued operations






56Effect of exchange rate changes on cash


222



(9
)Net increase in cash and cash equivalents


74,452



12,645Cash and cash equivalents at beginning of period


49,435



76,758Cash and cash equivalents at end of period

$
123,887


$
89,403Supplemental information:Interest paid

$
36,056


$
44,115Income taxes paid


5,809



3,996Non-cash transactions:Assets acquired under capital lease obligations

$
1,569


$
485Receipt of note receivable for sale of equity interests






601    10




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes
    to Consolidated Financial Statements (unaudited)
  (1)
    Basis of
    Presentation  (a)
    Description
    of Business        Form 10-K
  Form 10-K.
    (b)
    Adoption
    of New Accounting Standards  Business Combinations Noncontrolling Interests in
    Consolidated Financial Statements an Amendment of ARB
    No. 51
 11




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
      BeforeSFAS 160

SFAS 160Changes in Cash Flow Classification:Distributions of earnings paid to noncontrolling interests

Operating

FinancingAcquisitions or sales of equity interests in consolidated
    subsidiaries, no change of control

Investing

FinancingNo Change in Cash Flow Classification:Distributions of earnings received from unconsolidated affiliates

Operating

OperatingReturns of capital paid to noncontrolling interests

Financing

FinancingReturns of capital received from unconsolidated affiliates

Investing

InvestingSales of equity interests in consolidated subsidiaries resulting
    in a change of control

Investing

InvestingAcquisitions or sales of equity interests in unconsolidated
    affiliates, no change of control

Investing

InvestingAcquisitions of equity interests in unconsolidated affiliates,
    resulting in change of control

Investing

InvestingBusiness combinations with no previous ownership by the Company

Investing

Investing     Consolidated Balance Sheet

December 31, 2008Total equity as previously reported

$
764,137Reclassification of non-redeemable noncontrolling interests to
    equity as required by SFAS 160


41,827Total equity as adjusted for SFAS 160

$
805,964  12




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Six MonthsEndedConsolidated Statement of Cash Flows

June 30, 2008Net cash provided by operating activities as previously reported

$
33,583Reclassification of distributions to noncontrolling interests to
    financing activities


30,037Net cash provided by operating activities as adjusted for
    SFAS 160

$
63,620Net cash used in investing activities as previously reported

$
(32,816
)Reclassification of purchases and sales of noncontrolling
    interests to financing activities


7,538Net cash used in investing activities as adjusted for
    SFAS 160

$
(25,278
)Net cash provided by financing activities as previously reported

$
11,831Reclassification of distributions to noncontrolling interests
    from operating activities


(30,037
)Reclassification of purchases and sales of noncontrolling
    interests from investing activities


(7,538
)Net cash used in financing activities as adjusted for
    SFAS 160

$
(25,744
)     (2)
    Discontinued
    Operations and Other Dispositions    Effective Date

Facility Location

Proceeds


LossFebruary 2009

Las Cruces, New Mexico(1)

$



$
February 2009

East Brunswick, New Jersey(1)


0.7 million



2.6 millionTotal



$
0.7 million


$
2.6 million     (1)
    
    Because these investments were accounted for under the equity
    method, the results of operations of these facilities are not
    reported as discontinued operations. The loss on the disposal of
    these facilities is recorded in other income (expense) in the
    accompanying consolidated statements of income. 13




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Accounting for the
    Impairment or Disposal of Long-Lived Assets
  Three Months


Six MonthsEnded


EndedJune 30,


June 30,2008


2008Revenues

$
1,274


$
3,108Income from discontinued operations before income taxes

$
63


$
108Income tax expense


(22
)


(38
)Income from discontinued operations

$
41


$
70Loss on sale of discontinued operations before income taxes

$
(997
)

$
(965
)Income tax benefit






Loss on sale of discontinued operations

$
(997
)

$
(965
)   (3)
    Investments
    in Unconsolidated Affiliates   14




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Three Months Ended


Six Months EndedJune 30,


June 30,2009


2008


2009


2008Unconsolidated facilities operated at period-end


107



98



107



98Income statement information:Revenues

$
286,729


$
239,786


$
555,454


$
469,123Operating expenses:Salaries, benefits, and other employee costs


68,079



59,296



132,343



116,670Medical services and supplies


65,883



52,169



126,391



98,371Other operating expenses


67,104



61,225



130,748



120,253Depreciation and amortization


12,421



12,678



24,891



24,651Total operating expenses


213,487



185,368



414,373



359,945Operating income


73,242



54,418



141,081



109,178Interest expense, net


(6,395
)


(5,968
)


(12,326
)


(12,207
)Other, net


986



(2,765
)


1,341



(1,688
)Income before income taxes

$
67,833


$
45,685


$
130,096


$
95,283Balance sheet information:Current assets

$
238,245


$
198,527


$
238,245


$
198,527Noncurrent assets


410,129



404,933



410,129



404,933Current liabilities


147,550



120,059



147,550



120,059Noncurrent liabilities


295,768



291,580



295,768



291,580     
    Payment of $2.5 million for an investment in and the rights
    to manage a surgical facility in Stockton, California, jointly
    owned with one of the Companys not-for-profit hospital
    partners;
    Payment of $2.0 million for the rights to manage a surgical
    facility in the Dallas/Fort Worth, Texas area and to fund a
    transaction whereby an unconsolidated investee of the Company
    acquired an equity interest in the facility; and
    Net payment of approximately $2.0 million related to
    various other purchases and sales of equity interests and
    contributions of cash to equity method investees.   15




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (4)
    Noncontrolling
    Interests      Three Months


Six MonthsEnded


EndedJune 30, 2009


June 30, 2009Net income attributable to USPIs common stockholder

$
16,752


$
22,439Transfers to the noncontrolling interests:Decrease in USPIs additional paid-in capital for sales of
    subsidiaries equity interests


(1,953
)


(4,095
)Decrease in USPIs additional paid-in capital for purchases
    of subsidiaries equity interests


(270
)


(723
)Net transfers to noncontrolling interests


(2,223
)


(4,818
)Change in equity from net income attributable to USPI and
    transfers to noncontrolling interests

$
14,529


$
17,621    16




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    NoncontrollingInterests Redeemable-2009Balance, December 31, 2008

$
52,214Net income attributable to noncontrolling interests


15,067Distributions to noncontrolling interests


(13,359
)Purchases of noncontrolling interests


(594
)Sales of noncontrolling interests


3,111Deconsolidation of noncontrolling interests and other


(2,188
)Balance, March 31, 2009


54,251Net income attributable to noncontrolling interests


14,543Distributions to noncontrolling interests


(15,039
)Purchases of noncontrolling interests


(345
)Sales of noncontrolling interests


2,925Deconsolidation of noncontrolling interests and other


(239
)Balance, June 30, 2009

$
56,096   NoncontrollingInterests Redeemable-2008Balance, December 31, 2007

$
52,769Net income attributable to noncontrolling interests


14,201Distributions to noncontrolling interests


(14,618
)Purchases of noncontrolling interests


(104
)Sales of noncontrolling interests


(325
)Deconsolidation of noncontrolling interests and other


366Balance, March 31, 2008


52,289Net income attributable to noncontrolling interests


12,949Distributions to noncontrolling interests


(12,593
)Purchases of noncontrolling interests


(605
)Sales of noncontrolling interests


251Deconsolidation of noncontrolling interests and other


(662
)Balance, June 30, 2008

$
51,629  17




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (5)
    Interest
    Rate Swaps    Accounting for
    Derivative Instruments and Hedging Activities
         18




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (6)
    Fair
    Value of Financial Instruments  Fair
    Value Measurements FAS 107-1, Interim Disclosures about Fair Value of Financial
    Instruments
      (7)
    Equity-Based
    Compensation  Share-Based Payment
   19




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Three Months


Six Months


Three Months


Three MonthsEnded


Ended


Ended


EndedJune 30,


June 30,


June 30,


June 30,2009


2009


2008


2008Salaries, benefits and other employee costs

$
183


$
384


$
199


$
608General and administrative expenses


240



481



263



504Other operating expenses


131



131







336Expense before income tax benefit


554



996



462



1,448Income tax benefit(1)


(97
)


(189
)


(105
)


(277
)Total equity-based compensation expense, net of tax

$
457


$
807


$
357


$
1,171     Three Months


Six Months


Three Months


Three MonthsEnded


Ended


Ended


EndedJune 30,


June 30,


June 30,


June 30,2009


2009


2008


2008Share awards

$
301


$
585


$
315


$
598Stock options


122



280



147



514Warrants


131



131







336Expense before income tax benefit


554



996



462



1,448Income tax benefit(1)


(97
)


(189
)


(105
)


(277
)Total equity-based compensation expense, net of tax

$
457


$
807


$
357


$
1,171     (1)
    
    There is a tax benefit related to portions of the Companys
    equity-based compensation. However, the realizability of this
    and other deductions is affected by the Companys
    generating net operating losses in its overall U.S. tax
    computations since the merger in April 2007. As the Company does
    not consider it more likely than not these losses will be used
    to offset future taxable income, the Companys overall tax
    computations include a full valuation allowance against its U.S.
    net operating loss carryforwards and other deferred tax assets.  1 2
   20




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (8)
    Segment
    Disclosures  Disclosures About Segments of an
    Enterprise and Related Information,
  United


UnitedThree Months Ended June 30, 2009

States


Kingdom


TotalNet patient service revenues

$
106,436


$
26,380


$
132,816Other revenues


23,551







23,551Total revenues

$
129,987


$
26,380


$
156,367Depreciation and amortization

$
7,170


$
1,740


$
8,910Operating income


51,662



5,650



57,312Net interest income (expense)


(16,674
)


373



(16,301
)Income tax expense


(6,305
)


(1,692
)


(7,997
)Total assets


2,045,195



325,408



2,370,603Capital expenditures


3,744



2,377



6,121   United


UnitedSix Months Ended June 30, 2009

States


Kingdom


TotalNet patient service revenues

$
216,639


$
50,752


$
267,391Other revenues


46,116







46,116Total revenues

$
262,755


$
50,752


$
313,507Depreciation and amortization

$
14,685


$
3,180


$
17,865Operating income


102,631



11,103



113,734Net interest expense


(33,694
)


(360
)


(34,054
)Income tax expense


(11,552
)


(3,068
)


(14,620
)Total assets


2,045,195



325,408



2,370,603Capital expenditures


8,540



4,119



12,659   21




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  United


UnitedThree Months Ended June 30, 2008

States


Kingdom


TotalNet patient service revenues

$
110,158


$
32,764


$
142,922Other revenues


19,980







19,980Total revenues

$
130,138


$
32,764


$
162,902Depreciation and amortization

$
7,737


$
1,775


$
9,512Operating income


41,289



6,755



48,044Net interest expense


(19,416
)


(1,405
)


(20,821
)Income tax expense


(3,463
)


(1,574
)


(5,037
)Total assets


1,927,453



384,782



2,312,235Capital expenditures


5,572



2,970



8,542   United


UnitedSix Months Ended June 30, 2008

States


Kingdom


TotalNet patient service revenues

$
224,369


$
65,243


$
289,612Other revenues


38,690







38,690Total revenues

$
263,059


$
65,243


$
328,302Depreciation and amortization

$
15,258


$
3,588


$
18,846Operating income


85,021



13,904



98,925Net interest expense


(39,235
)


(2,893
)


(42,128
)Income tax expense


(9,396
)


(3,215
)


(12,611
)Total assets


1,927,453



384,782



2,312,235Capital expenditures


8,514



12,486



21,000   (9)
    Related
    Party Transactions       22




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (10)
    Commitments
    and Contingencies    Guarantors Accounting and Disclosure Requirements for
    Guarantees, Including Indirect Guarantees of Indebtedness of
    Others,
  (11)
    New
    Accounting Pronouncements  Subsequent Events
  Amendments to FASB Interpretation No. 46(R) Consolidation of Variable
    Interest Entities
  The
    FASB Accounting Standards Codification and the
    Hierarchy of Generally Accepted Accounting Principles FASB
    Accounting Standards Codification
  Employers Disclosures about
    Postretirement Benefit Plan Assets Employers Disclosures about
    Pensions and Other Postretirement Benefits
 23




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (12)
    Subsequent
    Events    (13)
    Condensed
    Consolidating Financial Statements    7 8 1 4 Form S-4
 24




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Condensed
    Consolidating Balance Sheets:
  Non-Participating


Consolidation


ConsolidatedAs of June 30, 2009

Guarantors


Investees


Adjustments


TotalAssetsCurrent assets:Cash and cash equivalents

$
115,272


$
8,615


$



$
123,887Accounts receivable, net






54,664



35



54,699Other receivables


53,173



46,623



(74,780
)


25,016Inventories of supplies


265



8,072







8,337Prepaids and other current assets


10,294



3,469







13,763Total current assets


179,004



121,443



(74,745
)


225,702Property and equipment, net


16,784



179,295



623



196,702Investments in unconsolidated affiliates


1,038,962







(722,773
)


316,189Goodwill and intangible assets, net


816,125



332,360



456,915



1,605,400Other assets


97,106



1,455



(71,951
)


26,610Total assets

$
2,147,981


$
634,553


$
(411,931
)

$
2,370,603Liabilities and EquityCurrent liabilities:Accounts payable

$
868


$
19,065


$



$
19,933Accrued expenses and other


229,065



48,160



(72,555
)


204,670Current portion of long-term debt


5,547



19,477



(1,740
)


23,284Total current liabilities


235,480



86,702



(74,295
)


247,887Long-term debt, less current portion


949,868



124,779



(19,978
)


1,054,669Other long-term liabilities


152,853



13,238



(930
)


165,161Parents equity


809,780



398,879



(398,879
)


809,780Noncontrolling interests






10,955



82,151



93,106Total liabilities and equity

$
2,147,981


$
634,553


$
(411,931
)

$
2,370,603   25




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Non-Participating


Consolidation


ConsolidatedAs of December 31, 2008

Guarantors


Investees


Adjustments


TotalAssetsCurrent assets:Cash and cash equivalents

$
42,025


$
7,410


$



$
49,435Accounts receivable, net






57,172



41



57,213Other receivables


43,033



39,454



(65,417
)


17,070Inventories of supplies


109



8,970







9,079Prepaids and other current assets


9,625



2,110







11,735Total current assets


94,792



115,116



(65,376
)


144,532Property and equipment, net


16,036



184,959



829



201,824Investments in unconsolidated affiliates


1,022,144



63



(714,436
)


307,771Goodwill and intangible assets, net


790,491



322,866



475,782



1,589,139Other assets


97,400



152



(72,655
)


24,897Total assets

$
2,020,863


$
623,156


$
(375,856
)

$
2,268,163Liabilities and EquityCurrent liabilities:Accounts payable

$
910


$
21,284


$



$
22,194Accrued expenses and other


153,249



46,371



(62,932
)


136,688Current portion of long-term debt


5,556



20,368



(1,436
)


24,488Total current liabilities


159,715



88,023



(64,368
)


183,370Long-term debt, less current portion


954,968



139,445



(20,954
)


1,073,459Other long-term liabilities


142,043



12,169



(1,056
)


153,156Parents equity


764,137



371,335



(371,335
)


764,137Noncontrolling interests






12,184



81,857



94,041Total liabilities and equity

$
2,020,863


$
623,156


$
(375,856
)

$
2,268,163  26




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Condensed
    Consolidating Statements of Income:
  Non-Participating


Consolidation


ConsolidatedFor the Six Months Ended June 30, 2009

Guarantors


Investees


Adjustments


TotalRevenues

$
48,646


$
276,369


$
(11,508
)

$
313,507Equity in earnings of unconsolidated affiliates


66,693



1,707



(40,203
)


28,197Operating expenses, excluding depreciation and amortization


38,697



182,935



(11,527
)


210,105Depreciation and amortization


3,594



14,065



206



17,865Operating income


73,048



81,076



(40,390
)


113,734Interest expense, net


(30,322
)


(4,021
)


289



(34,054
)Other income (expense), net


(10,128
)


62



(155
)


(10,221
)Income from before income taxes


32,598



77,117



(40,256
)


69,459Income tax expense


(10,159
)


(4,461
)






(14,620
)Net income


22,439



72,656



(40,256
)


54,839Less: Net income attributable to noncontrolling interests






(4,806
)


(27,594
)


(32,400
)Net income attributable to Parent

$
22,439


$
67,850


$
(67,850
)

$
22,439   Non-Participating


Consolidation


ConsolidatedFor the Six Months Ended June 30, 2008

Guarantors


Investees


Adjustments


TotalRevenues

$
46,394


$
293,836


$
(11,928
)

$
328,302Equity in earnings of unconsolidated affiliates


55,053



1,184



(35,095
)


21,142Operating expenses, excluding depreciation and amortization


39,293



204,298



(11,918
)


231,673Depreciation and amortization


3,479



15,050



317



18,846Operating income


58,675



75,672



(35,422
)


98,925Interest expense, net


(35,604
)


(6,536
)


12



(42,128
)Other income (expense), net


218



182



(155
)


245Income from continuing operations before income taxes


23,289



69,318



(35,565
)


57,042Income tax expense


(8,210
)


(4,401
)






(12,611
)Income from continuing operations


15,079



64,917



(35,565
)


44,431Earnings (loss) from discontinued operations, net of tax


(895
)


6







(889
)Net income


14,184



64,923



(35,565
)


43,542Less: Net income attributable to noncontrolling interests






(4,437
)


(24,921
)


(29,358
)Net income attributable to Parent

$
14,184


$
60,486


$
(60,486
)

$
14,184  27




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Condensed
    Consolidating Statements of Cash Flows:
  Non-Participating


Consolidation


ConsolidatedSix Months Ended June 30, 2009

Guarantors


Investees


Adjustments


TotalCash flows from operating activities:Net income

$
22,439


$
72,656


$
(40,256
)

$
54,839Changes in operating and intercompany assets and liabilities and
    noncash items included in net income


(2,323
)


9,846



14,303



21,826Net cash provided by operating activities


20,116



82,502



(25,953
)


76,665Cash flows from investing activities:Purchases of property and equipment, net


(1,195
)


(9,895
)






(11,090
)Purchases and sales of businesses and equity interests, net


(6,693
)


98







(6,595
)Other items, net


(2,122
)


(7,532
)


8,249



(1,405
)Net cash used in investing activities


(10,010
)


(17,329
)


8,249



(19,090
)Cash flows from financing activities:Long-term borrowings, net


(5,117
)


(9,609
)


620



(14,106
)Purchases and sales of noncontrolling interests, net


126











126Distributions to noncontrolling interests






(55,918
)


25,953



(29,965
)Increase in cash held on behalf of noncontrolling interest
    holders and other


68,132



1,337



(8,869
)


60,600Net cash provided by (used in) financing activities


63,141



(64,190
)


17,704



16,655Effect of exchange rate changes on cash






222







222Net increase in cash


73,247



1,205







74,452Cash at the beginning of the period


42,025



7,410







49,435Cash at the end of the period

$
115,272


$
8,615


$



$
123,887   28




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Non-Participating


Consolidation


ConsolidatedSix Months Ended June 30, 2008

Guarantors


Investees


Adjustments


TotalCash flows from operating activities:Net income

$
14,184


$
64,923


$
(35,565
)

$
43,542Loss from discontinued operations


889











889Changes in operating and intercompany assets and liabilities and
    noncash items included in net income


3,842



10,344



5,003



19,189Net cash provided by operating activities


18,915



75,267



(30,562
)


63,620Cash flows from investing activities:Purchases of property and equipment, net


(2,503
)


(18,012
)






(20,515
)Purchases and sales of businesses and equity interests, net


(6,603
)


(131
)






(6,734
)Other items, net


121



2,214



(364
)


1,971Net cash used in investing activities


(8,985
)


(15,929
)


(364
)


(25,278
)Cash flows from financing activities:Long-term borrowings, net


10,775



328



424



11,527Purchases and sales of noncontrolling interests, net


(7,538
)










(7,538
)Distributions to noncontrolling interests






(61,071
)


30,138



(30,933
)Increase in cash held on behalf of noncontrolling interest
    holders and other


(2,457
)


3,293



364



1,200Net cash provided by (used in) financing activities


780



(57,450
)


30,926



(25,744
)Net cash provided by discontinued operations


56











56Effect of exchange rate changes on cash






(9
)






(9
)Net increase in cash


10,766



1,879







12,645Cash at the beginning of the period


66,665



10,093







76,758Cash at the end of the period

$
77,431


$
11,972


$



$
89,403  29




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##### Table of Contents



ITEM 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-Q.
  Forward-Looking
    Statements
  Form 10-Q, Form 10-Q.
  Overview
  not-for-profit
     30




---



##### Table of Contents



Critical
    Accounting Policies and Estimates
          Acquisitions,
    Equity Investments and Development Projects
     31




---



##### Table of Contents



Effective Date

Facility Location

AmountInvestmentsFebruary 2009

Granbury, Texas(1)

$
2.0 millionFebruary 2009

Stockton, California(1)


2.5 millionMay 2009

St. Louis, Missouri(2)


0.9 millionVarious

Various(3)


2.0 millionTotal



$
7.4 million     (1)
    
    Acquisition of a noncontrolling interest in and right to manage
    a surgical facility in which we previously had no involvement.
    This facility is jointly owned with one of our hospital partners
    and local physicians.(2)
    
    Acquisition of the right to manage a surgical facility in which
    we previously had no involvement. We have a purchase option to
    acquire a 20% equity interest in the facility within one year,
    and after approximately three years, an option to purchase an
    additional 20% equity interest.(3)
    
    Represents the purchase of additional ownership and equity
    contributions in various unconsolidated affiliates.    Noncontrolling Interests in
    Consolidated Financial Statements an Amendment of ARB
    No. 51,
    Discontinued
    Operations, Other Dispositions, and Deconsolidations
    Date

Facility Location

Proceeds


LossFebruary 2009

Las Cruces, New Mexico(1)

$



$
February 2009

East Brunswick, New Jersey(1)


0.7 million



2.6 millionTotal



$
0.7 million


$
2.6 million     (1)
    
    Because these investments were accounted for under the equity
    method, the results of operations of these facilities are not
    reported as discontinued operations. The loss on the disposal of
    these facilities is recorded in other income (expense) in the
    accompanying consolidated statement of income.   32




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##### Table of Contents



Sources
    of Revenue
    
    net patient service revenues of the facilities that we
    consolidate for financial reporting purposes, which are
    typically those facilities in which we have ownership interests
    of greater than 50% or otherwise maintain effective control.
    management and contract service revenues, consisting of the fees
    that we earn from managing the facilities that we do not
    consolidate for financial reporting purposes and the fees we
    earn from providing certain consulting and administrative
    services to physicians and hospitals. Our consolidated revenues
    and expenses do not include the management fees we earn from
    operating the facilities that we consolidate for financial
    reporting purposes as those fees are charged to subsidiaries and
    thus eliminate in consolidation.    Three MonthsEnded


Six MonthsJune 30,


Ended June 30,2009


2008


2009


2008Net patient service revenues


85
%


88
%


85
%


88
%Management and contract service revenues


12



11



12



11Other revenues


3



1



3



1Total revenues


100
%


100
%


100
%


100
%       Three Months


Six MonthsEnded June 30,


Ended June 30,2009


2008


2009


2008Management of surgical facilities

$
11,486


$
9,994


$
22,667


$
19,647Contract services provided to hospitals, physicians and related
    entities


7,782



8,720



15,385



16,511Total management and contract service revenues

$
19,268


$
18,714


$
38,052


$
36,158    33




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##### Table of Contents



Three MonthsEnded


Six MonthsJune 30,


Ended June 30,2009


2008


2009


2008United States


83
%


80
%


84
%


80
%United Kingdom


17



20



16



20Total


100
%


100
%


100
%


100
%     Equity in
    Earnings of Unconsolidated Affiliates
  not-for-profit
  Three Months


Six MonthsEnded June 30,


Ended June 30,2009


2008


2009


2008Revenues

$
286,729


$
239,786


$
555,454


$
469,123Operating expenses:Salaries, benefits, and other employee costs


68,079



59,296



132,343



116,670Medical services and supplies


65,883



52,169



126,391



98,371Other operating expenses


67,104



61,225



130,748



120,253Depreciation and amortization


12,421



12,678



24,891



24,651Total operating expenses


213,487



185,368



414,373



359,945Operating income


73,242



54,418



141,081



109,178Interest expense, net


(6,395
)


(5,968
)


(12,326
)


(12,207
)Other


986



(2,765
)


1,341



(1,688
)Income before income taxes

$
67,833


$
45,685


$
130,096


$
95,283Long-term debt

$
286,366


$
278,628


$
286,366


$
278,628USPIs equity in earnings of unconsolidated affiliates


14,639



10,094



28,197



21,142USPIs imputed weighted average ownership percentage based
    on affiliates pre-tax income(1)


21.6
%


22.1
%


21.7
%


22.2
%USPIs imputed weighted average ownership percentage based
    on affiliates debt(2)


25.1
%


25.0
%


25.1
%


25.0
%Unconsolidated facilities operated at period end


107



98



107



98     (1)
    
    Our weighted average percentage ownership in our unconsolidated
    affiliates is calculated as USPIs equity in earnings of
    unconsolidated affiliates divided by the total net income of
    unconsolidated affiliates for each respective period. This is a
    non-GAAP measure but management believes it provides further
    useful information about its involvement in equity method
    investments. 34




---



##### Table of Contents



(2)
    
    Our weighted average percentage ownership in our unconsolidated
    affiliates is calculated as the total debt of each
    unconsolidated affiliate, multiplied by the percentage ownership
    USPI held in the affiliate as of the end of each respective
    period, divided by the total debt of all of the unconsolidated
    affiliates as of the end of each respective period. This is a
    non-GAAP measure but management believes it provides further
    useful information about its involvement in equity method
    investments.  Results
    of Operations
    Three Months


Six MonthsEnded June 30,


Ended June 30,2009


2008


2009


2008Total revenues


100
%


100
%


100
%


100
%Equity in earnings of unconsolidated affiliates


9.4



6.2



9.0



6.4Operating expenses, excluding depreciation and amortization


(67.0
)


(70.9
)


(67.0
)


(70.6
)Depreciation and amortization


(5.7
)


(5.8
)


(5.7
)


(5.7
)Operating income


36.7



29.5



36.3



30.1Interest and other expense, net


(10.6
)


(13.3
)


(14.1
)


(12.8
)Income from continuing operations before income taxes


26.1



16.2



22.2



17.3Income tax expense


(5.1
)


(3.1
)


(4.7
)


(3.8
)Income from continuing operations


21.0



13.1



17.5



13.5Loss from discontinued operations






(0.6
)






(0.3
)Net income


21.0



12.5



17.5



13.2Less: Net income attributable to noncontrolling interests


(10.3
)


(8.5
)


(10.3
)


(8.9
)Net income attributable to USPIs common stockholder


10.7
%


4.0
%


7.2
%


4.3
%   Executive
    Summary
     35




---



##### Table of Contents



not-for-profit
        Systemwide
    Operating Results
  not-for-profit
      
    equity in earnings of unconsolidated affiliates: our share of
    the net income of each facility, which is based on the
    facilities net income and the percentage of the
    facilitys outstanding equity interests owned by
    us; and 36




---



##### Table of Contents




    management and administrative services revenues: income we earn
    in exchange for managing the
    day-to-day
    operations of each facility, usually quantified as a percentage
    of each facilitys net revenues less bad debt expense.      Three Months Ended June 30,2009



2008USPI as












USPI asUSPI


Unconsolidated


Consolidation


Reported



USPI


Unconsolidated


Consolidation


ReportedSystem-Wide(1)


Affiliates(2)


Adjustments


Under GAAP



System-Wide(1)


Affiliates(2)


Adjustments


Under GAAPRevenues:Net patient service revenues

$
421,505


$
(288,689
)

$



$
132,816



$
384,080


$
(241,158
)

$



$
142,922Management and administrative services revenues


7,803







11,465
(3)


19,268




8,742







9,972
(3)


18,714Other income


5,987



(1,704
)






4,283




1,532



(266
)






1,266Total revenues


435,295



(290,393
)


11,465



156,367




394,354



(241,424
)


9,972



162,902Equity in earnings of unconsolidated affiliates










14,639
(4)


14,639












10,094
(4)


10,094Operating expenses:Salaries, benefits and other employee costs


111,969



(68,978
)






42,991




106,162



(59,729
)






46,433Medical services and supplies


91,605



(66,790
)






24,815




81,135



(52,378
)






28,757Other operating expenses


74,416



(61,484
)


11,465
(3)


24,397




72,065



(53,487
)


9,972
(3)


28,550General and administrative expenses


9,755











9,755




9,739











9,739Provision for doubtful accounts


9,640



(6,814
)






2,826




10,083



(8,122
)






1,961Depreciation and amortization


21,424



(12,514
)






8,910




22,190



(12,678
)






9,512Total operating expenses


318,809



(216,580
)


11,465



113,694




301,374



(186,394
)


9,972



124,952Operating income


116,486



(73,813
)


14,639



57,312




92,980



(55,030
)


10,094



48,044Interest income


1,366



(91
)






1,275




1,191



(404
)






787Interest expense


(24,030
)


6,454







(17,576
)



(27,979
)


6,371







(21,608
)Other, net


829



(986
)






(157
)



(468
)


(358
)






(826
)Total other expenses, net


(21,835
)


5,377







(16,458
)



(27,256
)


5,609







(21,647
)Income from continuing operations before income taxes


94,651



(68,436
)


14,639



40,854




65,724



(49,421
)


10,094



26,397Income tax expense


(9,392
)


1,395







(7,997
)



(6,555
)


1,518







(5,037
)Income from continuing operations


85,259



(67,041
)


14,639



32,857




59,169



(47,903
)


10,094



21,360Loss from discontinued operations, net of tax



















(945
)










(945
)Net income


85,259



(67,041
)


14,639



32,857




58,224



(47,903
)


10,094



20,415Less: Net income attributable to noncontrolling interests


(68,507
)






52,402
(5)


(16,105
)



(51,761
)






37,809
(5)


(13,952
)Net income attributable to USPI/Parent(6)

$
16,752


$
(67,041
)

$
67,041


$
16,752



$
6,463


$
(47,903
)

$
47,903


$
6,463   37




---



##### Table of Contents



Six Months Ended June 30,2009



2008USPI as












USPI asUSPI


Unconsolidated


Consolidation


Reported



USPI


Unconsolidated


Consolidation


ReportedSystem-Wide(1)


Affiliates(2)


Adjustments


Under GAAP



System-Wide(1)


Affiliates(2)


Adjustments


Under GAAPRevenues:Net patient service revenues

$
827,872


$
(560,481
)

$



$
267,391



$
761,670


$
(472,058
)

$



$
289,612Management and administrative services revenues


15,427







22,625
(3)


38,052




16,553







19,605
(3)


36,158Other income


10,487



(2,423
)






8,064




3,730



(1,198
)






2,532Total revenues


853,786



(562,904
)


22,625



313,507




781,953



(473,256
)


19,605



328,302Equity in earnings of unconsolidated affiliates










28,197
(4)


28,197




13



(13
)


21,142
(4)


21,142Operating expenses:Salaries, benefits and other employee costs


219,982



(134,117
)






85,865




211,434



(117,786
)






93,648Medical services and supplies


178,623



(128,055
)






50,568




156,814



(98,969
)






57,845Other operating expenses


146,942



(120,873
)


22,625
(3)


48,694




142,427



(105,829
)


19,605
(3)


56,203General and administrative expenses


20,099











20,099




20,167











20,167Provision for doubtful accounts


17,086



(12,207
)






4,879




19,302



(15,492
)






3,810Depreciation and amortization


42,956



(25,091
)






17,865




43,544



(24,698
)






18,846Total operating expenses


625,688



(420,343
)


22,625



227,970




593,688



(362,774
)


19,605



250,519Operating income


228,098



(142,561
)


28,197



113,734




188,278



(110,495
)


21,142



98,925Interest income


2,017



(276
)






1,741




2,743



(918
)






1,825Interest expense


(48,465
)


12,670







(35,795
)



(57,089
)


13,136







(43,953
)Other, net


(8,881
)


(1,340
)






(10,221
)



1,680



(1,435
)






245Total other expenses, net


(55,329
)


11,054







(44,275
)



(52,666
)


10,783







(41,883
)Income from continuing operations before income taxes


172,769



(131,507
)


28,197



69,459




135,612



(99,712
)


21,142



57,042Income tax expense


(17,710
)


3,090







(14,620
)



(15,262
)


2,651







(12,611
)Income from continuing operations


155,059



(128,417
)


28,197



54,839




120,350



(97,061
)


21,142



44,431Loss from discontinued operations, net of tax



















(889
)










(889
)Net income


155,059



(128,417
)


28,197



54,839




119,461



(97,061
)


21,142



43,542Less: Net income attributable to noncontrolling interests


(132,620
)






100,220
(5)


(32,400
)



(105,277
)






75,919
(5)


(29,358
)Net income attributable to USPI/Parent(6)

$
22,439


$
(128,417
)

$
128,417


$
22,439



$
14,184


$
(97,061
)

$
97,061


$
14,184     (1)
    
    Our systemwide statements of income treat all of our facilities
    as though they were consolidated subsidiaries. Our consolidated
    systemwide statement of income is not a measure defined under
    GAAP because it includes the revenues and expenses of entities
    we do not control and thus do not consolidate for financial
    reporting purposes under GAAP. We believe that systemwide
    revenues, expenses, and operating margins are important to
    understanding our business, since these measures include the
    health of the unconsolidated operating entities that comprise
    over 60% of our facilities. For example, these facilities
    growth in revenues directly affects our earnings in the form of
    management fees we earn for operating the facilities, as well as
    indicating the degree to which we are growing revenues and
    leveraging costs at these facilities, which are the key drivers
    of our net income. Our definition of systemwide statement of
    income may differ materially from similarly titled measures of
    other companies. Our systemwide net income is the same as our
    net income reported under GAAP.(2)
    
    Subtracts the aggregated revenues and expenses of our
    unconsolidated affiliates and two facilities in which we hold no
    ownership but operate under management contracts.(3)
    
    Our systemwide statements of income include consolidation
    entries that eliminate management fee revenues (on USPIs
    financial records) and expenses (on the facilities
    financial records). Under GAAP, these 38




---



##### Table of Contents



consolidation entries need to be removed with respect to amounts
    charged to unconsolidated affiliates, as under GAAP these are
    not intercompany transactions with consolidated subsidiaries.(4)
    
    Records our share of the net income of our unconsolidated
    affiliates.(5)
    
    Our systemwide statements of income includes noncontrolling
    interest expense for the portion of investees earnings not
    owned by us. Under GAAP, there is no noncontrolling interest
    expense recorded with respect to unconsolidated affiliates.(6)
    
    As the net impact of items (2) through (5) is zero,
    systemwide net income attributable to USPI/Parent equals the net
    income that we report under GAAP.  Our
    Ownership Share of Systemwide Results
      Six Months Ended


Year Ended


Six Months EndedJune 30, 2009


December 31, 2008


June 30, 2008Equity method facilities(1)


21.7
%


21.4
%


22.2
%Consolidated facilities(2)


49.2
%


48.8
%


47.7
%Total(3)


30.7
%


30.5
%


31.6
%     (1)
    
    Computed for equity method facilities by dividing (a) our
    total equity in earnings of unconsolidated affiliates by
    (b) the aggregate net income of U.S. surgical facilities we
    account for under the equity method.(2)
    
    Computed for consolidated facilities by dividing (a) the
    aggregate net income of U.S. surgical facilities we operate less
    net income attributable to the noncontrolling interests of
    consolidated subsidiaries by (b) the aggregate net income
    of our consolidated U.S. surgical facilities.(3)
    
    Computed in total by dividing our share of the facilities
    net income, defined as the sum of (a) in footnotes
    (1) and (2), by the aggregate net income of our U.S.
    surgical facilities, defined as the sum of (b) in footnotes
    (1) and (2).  Form 10-K,
 39




---



##### Table of Contents



Revenues
    Three Months Ended June 30, 2009USPI as ReportedUnder GAAP


USPI System-WideTotal revenues, period ended June 30, 2008

$
162,902


$
394,354Add: Revenue from acquired facilities


6,870



23,587Less: Revenue of disposed facilities






(5,039
)Less: Revenue of deconsolidated facilities


(14,384
)


Other payer adjustments


1,165



1,015Impact of exchange rate


(6,922
)


(6,922
)Adjusted base period


149,631



406,995Operating growth


6,435



28,251Non-facility based revenue


301



49Total revenues, period ended June 30, 2009

$
156,367


$
435,295   Six Months Ended June 30, 2009USPI as ReportedUnder GAAP


USPI System-WideTotal revenues, period ended June 30, 2008

$
328,302


$
781,953Add: Revenue from acquired facilities


14,064



50,879Less: Revenue of disposed facilities






(14,974
)Less: Revenue of deconsolidated facilities


(27,546
)


Other payer adjustments


78



(7,985
)Impact of exchange rate


(15,865
)


(15,865
)Adjusted base period


299,033



794,008Operating growth


9,831



58,804Non-facility based revenue


4,643



974Total revenues, period ended June 30, 2009

$
313,507


$
853,786   year-over-year
   40




---



##### Table of Contents



year-over-year
    Three Months Ended


Six Months EndedJune 30, 2009


June 30, 2009United States facilities:Net revenue


7.5
%


8.0
%Surgical cases


2.2
%


2.4
%Net revenue per case(1)


5.2
%


5.5
%United Kingdom facilities:Adjusted admissions


(3.6
)%


(2.1
)%Net revenue using actual exchange rates


(19.9
)%


(22.5
)%Net revenue using constant exchange rates(2)


1.8
%


2.5
%All same store facilities:Net revenue using actual exchange rates


5.3
%


5.5
%     (1)
    
    Our overall domestic same store growth in net revenue per case
    for the second quarter of 2009 was favorably impacted by the
    6.8% growth at our thirteen same store surgical hospitals, which
    on average perform more complex cases and thus earn a higher
    average net revenue per case than ambulatory surgery centers.
    The net revenue per case growth at our ambulatory surgery
    centers was 4.1% during the second quarter of 2009. The
    favorable impact, in the first quarter of 2008, of our
    collecting amounts related to past patient services in
    conjunction with our finalizing a new contract with a major
    payer has been excluded from these growth rates as it relates to
    dates of service prior to January 1, 2008. The revenue
    reductions related to two similar, but adverse, adjustments in
    the second quarter of 2008 were excluded for similar reasons, as
    was the unfavorable impact of such an amount which arose during
    the second quarter of 2009.(2)
    
    Calculated using 2009 exchange rates for both periods. Although
    this computation represents a non-GAAP measure, we believe that
    using a constant currency translation rate more accurately
    reflects the trend of the business. 41




---



##### Table of Contents



Joint
    Ventures With
    Not-For-Profit
    Hospitals; Number of Facilities
  not-for-profit
    June 30,2009


2008United States facilities(1):With a hospital partner


105



91Without a hospital partner


61



63Total U.S. facilities


166



154United Kingdom facilities


4



3Total facilities operated


170



157Change from June 30, 2008:De novo (newly constructed) and other(2)


3Acquisition


13Disposals(3)


(3
)Total increase in number of facilities


13     (1)
    
    At June 30, 2009, physicians own a portion of all of these
    facilities.(2)
    
    We now consider our operations at the Parkside facility in
    London, consisting of a hospital and an oncology clinic, to be
    two separate entities in our facility count.(3)
    
    We sold our ownership interests in facilities in Manitowoc,
    Wisconsin; Las Cruces, New Mexico; and East Brunswick, New
    Jersey.  Facility
    Operating Margins
    ramp-up
 42




---



##### Table of Contents



not-for-profit
  ramp-up
    year-over-year
  Three Months Ended


Increase


Six Months Ended


IncreaseJune 30, 2009


(Decrease)


June 30, 2009


(Decrease)United States facilities(2):With a hospital partner


26.8
%


440
bps


26.4
%


460
bpsWithout a hospital partner


29.5
%


(20
) bps


30.2
%



bpsTotal U.S. facilities


27.5
%


320
bps


27.3
%


320
bpsUnited Kingdom facilities(3)


23.6
%


(190
) bps


25.6
%


(70
) bps     (1)
    
    Operating margin is calculated as operating income divided by
    total revenues. This table aggregates all of the same store
    facilities we operate using 100% of their results. This does not
    represent the overall margin for USPIs operations in
    either the U.S. or the U.K. because we have a variety of
    ownership levels in the facilities we operate, and facilities
    open for less than a year are excluded from same store
    calculations.(2)
    
    The favorable impact, in the first quarter of 2008, of our
    collecting amounts related to past patient services in
    conjunction with our finalizing a new contract with a major
    payer has been excluded from these growth rates as it relates to
    dates of service prior to January 1, 2008. The revenue
    reductions related to two similar, but adverse, adjustments in
    the second quarter of 2008 were excluded for similar reasons, as
    was the unfavorable impact of such an amount which arose during
    the second quarter of 2009.(3)
    
    Calculated using 2009 exchange rates for both periods. Although
    this computation represents a non-GAAP measure, we believe that
    using a constant currency translation rate more accurately
    reflects the trend of the business. In addition, the
    $1.0 million favorable impact of a one-time recovery of
    value-added tax has been excluded from U.K. same facility
    operating margins. 43




---



##### Table of Contents



Three
    Months Ended June 30, 2009 Compared to Three Months Ended
    June 30, 2008
              Form 10-K
   44




---



##### Table of Contents



Six
    Months Ended June 30, 2009 Compared to Six Months Ended
    June 30, 2008
               45




---



##### Table of Contents



Form 10-K
        Liquidity
    and Capital Resources
  Cash
    Flows
    ,
   46




---



##### Table of Contents



Debt
      Senior
    secured credit facility
  sub-facility, sub-facility; buy-up buy-up
     47




---



##### Table of Contents



Senior
    subordinated notes
  7 8 1 4 payment-in-kind 1 4
  United
    Kingdom borrowings
       48




---



##### Table of Contents



Contractual
    Cash Obligations
    Payments Due by PeriodWithin


Years


Years


BeyondContractual Cash Obligations

Total


1 Year


2 and 3


4 and 5


5 Years(In thousands)Long-term debt obligations:Senior secured credit facility(1)

$
516,342


$
5,265


$
10,530


$
10,530


$
490,017Senior subordinated notes, due 2017(1)


240,000















240,000Senior subordinated toggle notes, due 2017(1)


197,515















197,515U.K. credit facility(1)


63,914



7,100



16,257



40,557



Other debt at operating subsidiaries(1)


27,618



6,290



11,785



4,383



5,160Interest on long-term debt obligations(2)


414,132



62,192



121,930



113,842



116,168Capitalized lease obligations(3)


55,484



7,850



12,831



8,193



26,610Operating lease obligations


78,010



15,048



24,236



15,470



23,256Total contractual cash obligations

$
1,593,015


$
103,745


$
197,569


$
192,975


$
1,098,726     (1)
    
    Scheduled principal payments(2)
    
    Represents interest due on long-term debt obligations. For
    variable rate debt, the interest is calculated using the
    June 30, 2009 rates applicable to each debt instrument and
    also gives effect to the interest rate swaps designated in a
    cash flow hedging relationship against portions of the U.K.
    credit facility and senior secured credit facility in the U.S.(3)
    
    Includes related principal and interest.  Debt
    at Operating Subsidiaries
     49




---



##### Table of Contents



Related
    Party Transactions
      New
    Accounting Pronouncements
  Subsequent Events
  Amendments to FASB Interpretation No. 46(R) Consolidation of Variable
    Interest Entities
  The
    FASB Accounting Standards Codification and the
    Hierarchy of Generally Accepted Accounting Principles FASB
    Accounting Standards Codification
  Employers Disclosures about
    Postretirement Benefit Plan Assets Employers Disclosures about
    Pensions and Other Postretirement Benefits
 50




---



##### Table of Contents



ITEM 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  variable-to-fixed
            ITEM 4T.
    Controls
    and Procedures  Form 10-Q.
 51




---



##### Table of Contents



PART II 
    OTHER INFORMATION  ITEM 1.
    Legal
    Proceedings    ITEM 6.
    Exhibits  3
.1

Amended and Restated Certificate of Incorporation (previously
    filed as an exhibit to the Companys Registration Statement
    on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).3
.2

Amended and Restated Bylaws (previously filed as an exhibit to
    the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).4
.1

Indenture governing
    87/8% Senior
    Subordinated Notes due 2017 and
    91/4%/10% Senior
    Subordinated Toggle Notes due 2017, among the Company, the
    Guarantors named therein and U.S. Bank National Association, as
    trustee (previously filed as an exhibit to the Companys
    Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).4
.2

Form of
    87/8% Senior
    Subordinated Note due 2017 and
    91/4%/10% Senior
    Subordinate Toggle Note due 2017 (previously filed as an exhibit
    to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).31
.1*

Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.31
.2*

Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32
.1*

Certification of Chief Executive Officer pursuant
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.2*

Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     *
    
    Filed herewith 52




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##### Table of Contents



SIGNATURES      By:
    /s/  Mark
    A. Kopser   Executive Vice President
 and Chief Financial Officer
 (Principal Financial Officer)
    By:
    /s/  J.
    Anthony Martin   Vice President, Corporate Controller,
 and Chief Accounting Officer
 (Principal Accounting Officer)
 53




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##### Table of Contents



Exhibit Index
  3
.1

Amended and Restated Certificate of Incorporation (previously
    filed as an exhibit to the Companys Registration Statement
    on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).3
.2

Amended and Restated Bylaws (previously filed as an exhibit to
    the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).4
.1

Indenture governing
    87/8% Senior
    Subordinated Notes due 2017 and
    91/4%/10% Senior
    Subordinated Toggle Notes due 2017, among the Company, the
    Guarantors named therein and U.S. Bank National Association, as
    trustee (previously filed as an exhibit to the Companys
    Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).4
.2

Form of
    87/8% Senior
    Subordinated Note due 2017 and
    91/4%/10% Senior
    Subordinate Toggle Note due 2017 (previously filed as an exhibit
    to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).31
.1*

Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.31
.2*

Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32
.1*

Certification of Chief Executive Officer pursuant
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.2*

Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     *
    
    Filed herewith. 54