##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, 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
    September 30, 2007oro

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

75-2749762(State or other jurisdiction
    of
    incorporation or organization)

(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)
   þ o
  Rule 12b-2
 o o þ
  Rule 12b-2 o þ




---



##### 



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
  INDEX
  
  PART I. Financial InformationItem 1.


Financial Statements (unaudited)


3Consolidated Balance Sheets


3Consolidated Statements of Operations


4Consolidated Statements of Comprehensive Income
    (Loss)


6Consolidated Statements of Stockholders
    Equity


7Consolidated Statements of Cash Flows


8Notes to Consolidated Financial Statements


9Item 2.


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


30Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


49Item 4.


Controls and Procedures


50PART II. Other InformationItem 1.


Legal Proceedings


50Item 6.


Exhibits


51Signatures


52Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906     2




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##### Table of Contents



PART I.
    FINANCIAL INFORMATION
  ITEM 1.
    Financial
    Statements  UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
  Consolidated Balance Sheets
  Successor



PredecessorSeptember 30,



December 31,2007



2006(Unaudited)



(Unaudited)(In thousands, except share and per share amounts)ASSETSCash and cash equivalents

$
96,759



$
31,740Patient receivables, net of allowance for doubtful accounts of
    $12,728 and $9,955, respectively


57,736




58,525Other receivables


16,316




16,973Inventories of supplies


9,549




9,108Deferred tax asset, net







14,238Prepaids and other current assets


18,946




13,264Total current assets


199,306




143,848Property and equipment, net


376,360




299,829Investments in affiliates


169,235




158,499Goodwill and intangible assets, net


1,522,461




621,264Other assets


14,018




8,416Total assets

$
2,281,380



$
1,231,856LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable

$
24,678



$
24,436Accrued salaries and benefits


28,607




26,145Due to affiliates


82,095




76,398Accrued interest


25,466




1,742Current portion of long-term debt


27,225




26,373Other current liabilities


35,352




30,588Total current liabilities


223,423




185,682Long-term debt, less current portion


1,081,938




320,957Other long-term liabilities


14,694




10,857Deferred tax liability, net


73,836




42,256Total liabilities


1,393,891




559,752Minority interests


82,093




72,830Commitments and contingenciesStockholders equity:Common stock, $0.01 par value; 100 shares authorized,
    issued and outstanding at September 30, 2007 (Successor);
    200,000,000 shares authorized; 44,714,176 shares
    issued and 44,710,100 outstanding at December 31, 2006
    (Predecessor)







447Additional paid-in capital


798,407




382,327Treasury stock, at cost, 4,076 shares at December 31,
    2006







(109
)Accumulated other comprehensive income


3,017




16,349Retained earnings


3,972




200,260Total stockholders equity


805,396




599,274Total liabilities and stockholders equity

$
2,281,380



$
1,231,856    3




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
  Consolidated Statements of Operations
  Successor



PredecessorThree Months



Three MonthsEnded



EndedSeptember 30,



September 30,2007



2006(Unaudited  in thousands)Revenues:Net patient service revenue

$
140,403



$
128,145Management and contract service revenue


16,267




14,551Other revenue


1,256




2,066Total revenues


157,926




144,762Equity in earnings of unconsolidated affiliates


6,561




7,858Operating expenses:Salaries, benefits, and other employee costs


45,335




43,118Medical services and supplies


27,828




25,692Other operating expenses


26,592




23,423General and administrative expenses


9,339




9,164Provision for doubtful accounts


2,706




2,456Depreciation and amortization


11,233




9,223Total operating expenses


123,033




113,076Operating income


41,454




39,544Interest income


1,090




749Interest expense


(24,515
)



(8,454
)Loss on early retirement of debt







(14,856
)Other, net


(361
)



65Total other expense, net


(23,786
)



(22,496
)Income from continuing operations before minority interests


17,668




17,048Minority interests in income of consolidated subsidiaries


(13,874
)



(12,549
)Income from continuing operations before income taxes


3,794




4,499Income tax expense


(3,860
)



(2,177
)Income (loss) from continuing operations


(66
)



2,322Earnings (loss) from discontinued operations, net of tax


(110
)



527Net income (loss)

$
(176
)


$
2,849    4




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
  Consolidated Statements of Operations
  Successor



PredecessorPeriod from April 19



Period from January 1


Nine Monthsthrough



through


EndedSeptember 30,



April 18,


September 30,2007



2007


2006(Unaudited  in thousands)Revenues:Net patient service revenue

$
260,193



$
174,180


$
379,905Management and contract service revenue


29,332




19,142



36,790Other revenue


2,287




1,615



6,362Total revenues


291,812




194,937



423,057Equity in earnings of unconsolidated affiliates


13,805




9,906



21,892Operating expenses:Salaries, benefits, and other employee costs


81,772




55,334



119,319Medical services and supplies


50,923




35,032



76,154Other operating expenses


48,130




33,072



72,261General and administrative expenses


17,898




39,277



27,855Provision for doubtful accounts


5,693




3,385



7,020Depreciation and amortization


20,156




12,719



25,890Total operating expenses


224,572




178,819



328,499Operating income


81,045




26,024



116,450Interest income


1,841




933



3,308Interest expense


(43,879
)



(9,546
)


(24,599
)Loss on early retirement of debt







(2,435
)


(14,856
)Other, net


(233
)



798



1,710Total other expense, net


(42,271
)



(10,250
)


(34,437
)Income from continuing operations before minority interests


38,774




15,774



82,013Minority interests in income of consolidated subsidiaries


(28,135
)



(18,546
)


(39,289
)Income (loss) from continuing operations before income taxes


10,639




(2,772
)


42,724Income tax expense


(6,476
)



(4,139
)


(15,593
)Income (loss) from continuing operations


4,163




(6,911
)


27,131Loss from discontinued operations, net of tax


(191
)



(238
)


(5,955
)Net income (loss)

$
3,972



$
(7,149
)

$
21,176    5




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
  Consolidated Statements of Comprehensive
    Income (Loss)
  Successor



PredecessorThree Months



Three MonthsEnded



EndedSeptember 30,



September 30,2007



2006(Unaudited  in thousands)Net income (loss)

$
(176
)


$
2,849Other comprehensive income:Foreign currency translation adjustments


2,400




1,235Comprehensive income

$
2,224



$
4,084   Successor



PredecessorPeriod from



Period fromApril 19



January 1


Nine Monthsthrough



through


EndedSeptember 30,



April 18,


September 30,2007



2007


2006Net income (loss)

$
3,972



$
(7,149
)

$
21,176Other comprehensive income:Foreign currency translation adjustments


3,017




2,169



8,187Comprehensive income (loss)

$
6,989



$
(4,980
)

$
29,363    6




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Consolidated Statements of Stockholders Equity
  AccumulatedCommon Stock


Additional





OtherOutstanding





Paid-in


Treasury


Comprehensive


RetainedShares


Par Value


Capital


Stock


Income


Earnings


Total(Unaudited  in thousands)PredecessorBalance, December 31, 2006


44,710


$
447


$
382,327


$
(109
)

$
16,349


$
200,260


$
599,274Issuance of common stock and exercise of stock options


474



5



6,211















6,216Repurchases of common stock


(71
)










(2,197
)










(2,197
)Equity-based compensation expense










17,100















17,100Tax benefit related to increase in value of equity awards










15,822















15,822Net loss






















(7,149
)


(7,149
)Foreign currency translation adjustments


















2,169







2,169Balance, April 18, 2007


45,113


$
452


$
421,460


$
(2,306
)

$
18,518


$
193,111


$
631,235SuccessorCapitalization of Successor company at April 19, 2007





$



$
791,856


$



$



$



$
791,856Expenses paid on behalf of USPI Group Holdings, Inc.










(7,862
)














(7,862
)Additional investment by USPI Group Holdings, Inc.










13,477















13,477Contribution related to equity award grants by USPI Group
    Holdings, Inc.










936















936Net income






















3,972



3,972Foreign currency translation adjustments


















3,017







3,017Balance, September 30, 2007





$



$
798,407


$



$
3,017


$
3,972


$
805,396    7




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##### Table of Contents



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



PredecessorPeriod from



Period fromApril 19



January 1


Nine Monthsthrough



through


EndedSeptember 30,



April 18,


September 30,2007



2007


2006(Unaudited  in thousands)Cash flows from operating activities:Net income (loss)

$
3,972



$
(7,149
)

$
21,176Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Loss on discontinued operations


191




238



5,955Provision for doubtful accounts


5,693




3,385



7,020Depreciation and amortization


20,156




12,719



25,890Loss on early retirement of debt







2,435



14,856Loss (gain) on sale of equity interests


565




(897
)


Amortization of debt issue costs and discount


1,214




202



729Deferred income tax expense


3,463




425



3,599Equity in earnings of unconsolidated affiliates, net of
    distributions received


1,015




4,335



109Minority interests in income of consolidated subsidiaries, net
    of distributions paid


983




148



(1,879
)Equity-based compensation


936




17,100



8,980Increases (decreases) in cash from changes in operating assets
    and liabilities, net of effects from purchases of new businesses:Patient receivables


(2,039
)



(1,040
)


(6,299
)Other receivables


(699
)



(100
)


(1,707
)Inventories of supplies, prepaids and other current assets


3,782




987



(2,928
)Accounts payable and other current liabilities


15,408




12,213



4,080Long-term liabilities


860




(528
)


3,676Tax benefit related to increase in value of equity awards







(15,822
)


(2,757
)Net cash provided by operating activities


55,500




28,651



80,500Cash flows from investing activities:Purchases of new businesses and equity interests, net of cash
    received


(78,534
)



(26,685
)


(273,080
)Proceeds from sale of businesses and equity interests


5,879




15,916



6,531Purchases of property and equipment


(8,318
)



(7,020
)


(21,494
)Returns of capital from unconsolidated affiliates


987




556



730(Increase) decrease in deposits and notes receivable


8,665




(9,084
)


329Net cash used in investing activities


(71,321
)



(26,317
)


(286,984
)Cash flows from financing activities:Proceeds from long-term debt, net of debt issuance costs


910,780




22,134



298,604Payments on long-term debt


(216,408
)



(7,480
)


(238,971
)Proceeds from issuances of common stock







6,135



5,410Net equity contribution from USPI Group Holdings, Inc.


779,279








Tax benefit related to increase in value of equity awards







15,822



2,757Payments to repurchase common stock


(1,430,879
)







(Decrease) increase in cash held on behalf of unconsolidated
    affiliates


(3,597
)



13,895



34,610Expenses paid on behalf of USPI Group Holdings, Inc.


(7,862
)







Returns of capital to minority interest holders


(1,890
)



(957
)


(1,008
)Net cash provided by financing activities


29,423




49,549



101,402Cash flows of discontinued operations:Operating cash flows


(196
)



(313
)


984Investing cash flows


129








(872
)Financing cash flows











(173
)Net cash used in discontinued operations


(67
)



(313
)


(61
)Effect of exchange rate changes on cash


27




(113
)


(11
)Net (decrease) increase in cash and cash equivalents


13,562




51,457



(105,154
)Cash and cash equivalents at beginning of period


83,197




31,740



130,440Cash and cash equivalents at end of period

$
96,759



$
83,197


$
25,286Supplemental information:Interest paid

$
19,612



$
9,861


$
23,875Income taxes paid


3,314




1,909



15,076Non-cash transactions:Assets acquired under capital lease obligations

$
3,418



$
1,677


$
3,677Issuance of common stock to employees











30,220Predecessor rollover equity


18,192








    8




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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.
 9




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
      (b)
    Merger
    Transaction        
    an investment of cash and rollover equity of USPI in the equity
    of Parent by Welsh Carson, management and other equity investors
    of approximately $785.0 million;
    borrowings by the Company of $430.0 million in new senior
    secured credit facilities;
    the issuance by the Company of $240.0 million in aggregate
    principal amount of
    87/8% senior
    subordinated notes, due 2017, and $200.0 million in
    aggregate principal amount of
    91/4%/10% senior
    subordinated toggle notes, due 2017;
    additional borrowings of £10.0 million (approximately
    $19.7 million) by Global, which was repatriated to the
    U.S.; and
    approximately $21.8 million of cash on hand. 10




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
   Business Combinations
  A summary of the Merger is presented below (in thousands):Net cash and equity contribution from Holdings

$
791,856Proceeds from borrowings


889,700Cash on hand


21,835Expenses paid on behalf of Parent


(7,862
)Purchase price allocated

$
1,695,529Estimated fair value of net tangible assets acquired:Cash

$
63,497Patient receivables


58,435Other current assets


46,369Investments in affiliates


161,261Property and equipment


370,078Other assets


20,668Current liabilities


(108,147
)Due to affiliates


(90,260
)Long-term debt, excluding current portion


(131,158
)Deferred tax liability


(66,449
)Other long-term liabilities


(13,619
)Minority interests in consolidated subsidiaries


(84,635
)Net tangible assets acquired


226,040Capitalized debt issuance costs


29,009Intangible assets acquired


112,918Goodwill


1,327,562$
1,695,529     Three Months


Nine MonthsEnded


EndedSeptember 30,


September 30,2006


2007


2006Net revenues

$
144,762


$
486,749


$
423,057Income (loss) from continuing operations


(4,734
)


9,789



5,734    11




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (2)
    Discontinued
    Operations and Other Dispositions      Successor



PredecessorPeriod from






Period fromThree Months


April 19



Three Months


January 1


Nine MonthsEnded


Through



Ended


Through


EndedSeptember 30,


September 30,



September 30,


April 18,


September 30,2007


2007



2006


2007


2006Revenues

$
6


$
25



$
(14
)

$
111


$
1,143Loss from discontinued operations before income taxes

$
(169
)

$
(293
)


$
(242
)

$
(366
)

$
(328
)Income tax benefit


59



102




85



128



115Loss from discontinued operations

$
(110
)

$
(191
)


$
(157
)

$
(238
)

$
(213
)Gain (loss) on sale of discontinued operations before income
    taxes

$



$




$



$



$
(7,395
)Income tax benefit











684







1,653Gain (loss) on sale of discontinued operations

$



$




$
684


$



$
(5,742
)      12




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    (3)
    Acquisitions
    and Equity Method Investments  buy-up
    Successor



PredecessorPeriod from






Period fromThree Months


April 19



Three Months


January 1


Nine MonthsEnded


Through



Ended


Through


EndedSeptember 30,


September 30,



September 30,


April 18,


September 30,2007


2007



2006


2007


2006Net revenues

$
157,926


$
292,685



$
152,082


$
206,191


$
439,900Income (loss) from continuing operations


369



5,331




3,870



(3,947
)


31,230     
    Investment of $5.5 million in a company jointly operated
    with one of the Companys not-for-profit hospital partners,
    which the investee used to acquire ownership in a surgical
    hospital in the Houston, Texas area; and
    Net payment of approximately $0.7 million related to other
    purchases and sales of equity interests and contributions of
    cash to equity method investees.    
    Receipt of $9.8 million from a not-for-profit hospital
    partner that obtained additional ownership in certain of the
    Companys surgical facilities in the Chicago, Illinois area;
    Investment of $1.5 million in a joint venture with one of
    the Companys not-for-profit hospital partners, which the
    joint venture used to acquire ownership in a surgery center in
    the Utica, Michigan area; and
    Net payment of approximately $2.0 million related to other
    purchases and sales of equity interests and contributions of
    cash to equity method investees. 13




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##### Table of Contents



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


September 30,September 30,


Combined2007


2006


2007


2006Unconsolidated facilities operated at period-end


91



76



91



76Income statement information:Revenues

$
197,052


$
161,386


$
565,439


$
432,004Equity in earnings (loss) of unconsolidated affiliates


(10
)


177



102



223Operating expenses:Salaries, benefits, and other employee costs


55,258



40,679



150,416



108,314Medical services and supplies


42,492



33,690



118,567



88,348Other operating expenses


52,331



40,970



148,145



108,124Depreciation and amortization


10,535



7,980



28,804



21,199Total operating expenses


160,616



123,319



445,932



325,985Operating income


36,426



38,244



119,609



106,242Interest expense, net


(5,826
)


(3,780
)


(14,672
)


(9,988
)Other


1,542



(669
)


643



12Income before income taxes

$
32,142


$
33,795


$
105,580


$
96,266Balance sheet information:Current assets

$
181,389


$
156,612


$
181,389


$
156,612Noncurrent assets


381,113



264,079



381,113



264,079Current liabilities


109,004



82,131



109,004



82,131Noncurrent liabilities


280,640



165,098



280,640



165,098   (4)
    Long-Term
    Debt    New
    senior secured credit facility
   14




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  buy-up
    New
    senior subordinated notes
  7 8 1 4 payment-in-kind 1 4
   15




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  United
    Kingdom borrowings
        (5)
    Equity-Based
    Compensation  Share-Based
    Payment
       16




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##### Table of Contents



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



PredecessorPeriod from






Period fromThree Months


April 19



Three Months


January 1


Nine MonthsEnded


Through



Ended


Through


EndedSeptember 30,


September 30,



September 30,


April 18,


September 30,2007


2007



2006


2007


2006Equity in earnings of unconsolidated affiliates

$



$




$
17


$
20


$
49Salaries, benefits and other employee costs











823



959



2,307General and administrative expenses


120



594




2,164



16,144



6,691Other operating expenses


342



342












Minority interests in income of consolidated subsidiaries











(21
)


(23
)


(67
)Expense before income tax benefit


462



936




2,983



17,100



8,980Income tax benefit


(61
)


(117
)



(927
)


(5,366
)


(2,726
)Total equity-based compensation expense, net of tax

$
401


$
819



$
2,056


$
11,734


$
6,254     Successor



PredecessorPeriod from






Period fromThree Months


April 19



Three Months


January 1


Nine MonthsEnded


Through



Ended


Through


EndedSeptember 30,


September 30,



September 30,


April 18,


September 30,2007


2007



2006


2007


2006Share awards

$
124


$
472



$
2,446


$
13,202


$
6,917Stock options


(4
)


122




465



3,797



1,833Warrants


342



342












ESPP











72



101



230Expense before income tax benefit


462



936




2,983



17,100



8,980Income tax benefit


(61
)


(117
)



(927
)


(5,366
)


(2,726
)Total equity-based compensation expense, net of tax

$
401


$
819



$
2,056


$
11,734


$
6,254  17




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (6)
    Segment
    Disclosures  Disclosures About Segments of an Enterprise and Related
    Information,
  Successor




UnitedThree Months Ended September 30, 2007

United States


Kingdom


TotalNet patient service revenue

$
110,470


$
29,933


$
140,403Other revenue


17,523







17,523Total revenues

$
127,993


$
29,933


$
157,926Depreciation and amortization

$
8,111


$
3,122


$
11,233Operating income


37,433



4,021



41,454Net interest expense


(21,782
)


(1,643
)


(23,425
)Income tax (expense) benefit


(4,235
)


375



(3,860
)Total assets


2,001,047



280,333



2,281,380Capital expenditures


4,462



2,436



6,898   Successor




UnitedPeriod from April 19 through September 30, 2007

United States


Kingdom


TotalNet patient service revenue

$
206,634


$
53,559


$
260,193Other revenue


31,619







31,619Total revenues

$
238,253


$
53,559


$
291,812Depreciation and amortization

$
14,601


$
5,555


$
20,156Operating income


73,365



7,680



81,045Net interest expense


(39,142
)


(2,896
)


(42,038
)Income tax (expense) benefit


(6,573
)


97



(6,476
)Total assets


2,001,047



280,333



2,281,380Capital expenditures


7,765



3,971



11,736   18




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##### Table of Contents



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




UnitedThree Months Ended September 30, 2006

United States


Kingdom


TotalNet patient service revenue

$
103,553


$
24,592


$
128,145Other revenue


16,617







16,617Total revenues

$
120,170


$
24,592


$
144,762Depreciation and amortization

$
7,083


$
2,140


$
9,223Operating income


36,204



3,340



39,544Net interest expense


(6,838
)


(867
)


(7,705
)Income tax expense


(1,714
)


(463
)


(2,177
)Total assets


1,001,598



216,653



1,218,251Capital expenditures


7,267



2,376



9,643   Predecessor




UnitedPeriod from January 1 through April 18, 2007

United States


Kingdom


TotalNet patient service revenue

$
140,447


$
33,733


$
174,180Other revenue


20,757







20,757Total revenues

$
161,204


$
33,733


$
194,937Depreciation and amortization

$
9,780


$
2,939


$
12,719Operating income


20,615



5,409



26,024Net interest expense


(7,175
)


(1,438
)


(8,613
)Income tax expense


(2,789
)


(1,350
)


(4,139
)Total assets


1,114,429



209,279



1,323,708Capital expenditures


6,072



2,625



8,697   Predecessor




UnitedNine Months Ended September 30, 2006

United States


Kingdom


TotalNet patient service revenue

$
308,892


$
71,013


$
379,905Other revenue


43,152







43,152Total revenues

$
352,044


$
71,013


$
423,057Depreciation and amortization

$
19,999


$
5,891


$
25,890Operating income


106,128



10,322



116,450Net interest expense


(18,843
)


(2,448
)


(21,291
)Income tax expense


(14,155
)


(1,438
)


(15,593
)Total assets


1,001,598



216,653



1,218,251Capital expenditures


16,216



8,955



25,171   (7)
    Related
    Party Transactions   19




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  co-owned
    (8)
    Commitments
    and Contingencies  (a)
    Financial
    Guarantees    Guarantors Accounting and
    Disclosure Requirements for Guarantees, Including Indirect
    Guarantees of Indebtedness of Others
  (b)
    Spanish
    Tax Indemnification  Form 10-K, Form 10-K, Form 10-K.
 20




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (c)
    Litigation
    and Professional Liability Claims          (9)
    New
    Accounting Pronouncements  Fair Value Measurement
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities, Including an amendment of FASB Statement
    No. 115
 21




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    (10)
    Subsequent
    Events      (11)
    Condensed
    Consolidating Financial Statements    7 8 1 4 Form S-4
 22




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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


ConsolidatedSuccessor as of September 30, 2007

Guarantors


Investees


Adjustments


TotalAssetsCurrent assets:Cash and cash equivalents

$
87,847


$
8,912


$



$
96,759Patient receivables, net


104



57,651



(19
)


57,736Other receivables


31,208



47,965



(62,857
)


16,316Inventories of supplies






9,549







9,549Prepaids and other current assets


14,130



3,528



1,288



18,946Total current assets


133,289



127,605



(61,588
)


199,306Property and equipment, net


17,086



358,384



890



376,360Investments in affiliates


408,784



(2,632
)


(236,917
)


169,235Goodwill and intangible assets, net


1,335,263



145,170



42,028



1,522,461Other assets


92,743



11,475



(90,200
)


14,018Total assets

$
1,987,165


$
640,002


$
(345,787
)

$
2,281,380Liabilities and Stockholders EquityCurrent liabilities:Accounts payable

$
1,652


$
23,174


$
(148
)

$
24,678Accrued expenses and other


186,667



46,510



(61,657
)


171,520Current portion of long-term debt


3,889



24,623



(1,287
)


27,225Total current liabilities


192,208



94,307



(63,092
)


223,423Long-term debt, less current portion


928,156



176,525



(22,743
)


1,081,938Other long-term liabilities


61,385



28,924



(1,779
)


88,530Minority interests


20



14,269



67,804



82,093Stockholders equity


805,396



325,977



(325,977
)


805,396Total liabilities and stockholders equity

$
1,987,165


$
640,002


$
(345,787
)

$
2,281,380   23




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Predecessor as of December 31,




Non-Participating


Consolidation


Consolidated2006

Guarantors


Investees


Adjustments


TotalAssetsCurrent assets:Cash and cash equivalents

$
23,934


$
7,806


$



$
31,740Patient receivables, net


117



58,408







58,525Other receivables


33,434



19,212



(35,673
)


16,973Inventories of supplies






9,108







9,108Prepaids and other current assets


24,411



3,151



(60
)


27,502Total current assets


81,896



97,685



(35,733
)


143,848Property and equipment, net


19,357



280,367



105



299,829Investments in affiliates


279,485



14,592



(135,578
)


158,499Goodwill and intangible assets, net


515,589



126,253



(20,578
)


621,264Other assets


86,708



12,209



(90,501
)


8,416Total assets

$
983,035


$
531,106


$
(282,285
)

$
1,231,856Liabilities and Stockholders EquityCurrent liabilities:Accounts payable

$
2,886


$
21,686


$
(136
)

$
24,436Accrued expenses and other


139,856



21,376



(26,359
)


134,873Current portion of long-term debt


1,533



30,445



(5,605
)


26,373Total current liabilities


144,275



73,507



(32,100
)


185,682Long-term debt, less current portion


197,820



148,143



(25,006
)


320,957Other long-term liabilities


41,646



12,336



(869
)


53,113Minority interests


20



15,085



57,725



72,830Stockholders equity


599,274



282,035



(282,035
)


599,274Total liabilities and stockholders equity

$
983,035


$
531,106


$
(282,285
)

$
1,231,856  24




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Condensed
    Consolidating Statements of Operations:
  Period from April 19 through September 30, 2007




Non-Participating


Consolidation


ConsolidatedSuccessor

Guarantors


Investees


Adjustments


TotalRevenues

$
39,838


$
265,261


$
(13,287
)

$
291,812Equity in earnings of unconsolidated affiliates


42,464



108



(28,767
)


13,805Operating expenses, excluding depreciation and amortization


32,790



185,140



(13,514
)


204,416Depreciation and amortization


3,864



15,960



332



20,156Operating income


45,648



64,269



(28,872
)


81,045Interest expense, net


(35,776
)


(6,269
)


7



(42,038
)Other income (expense)


(300
)


208



(141
)


(233
)Income before minority interests


9,572



58,208



(29,006
)


38,774Minority interests in income of consolidated subsidiaries






(4,729
)


(23,406
)


(28,135
)Income from continuing operations before income taxes


9,572



53,479



(52,412
)


10,639Income tax expense


(5,409
)


(1,268
)


201



(6,476
)Income from continuing operations


4,163



52,211



(52,211
)


4,163Loss from discontinued operations, net of tax


(191
)










(191
)Net income

$
3,972


$
52,211


$
(52,211
)

$
3,972   Period from January 1 through April 18, 2007




Non-Participating


Consolidation


ConsolidatedPredecessor

Guarantors


Investees


Adjustments


TotalRevenues

$
26,714


$
177,157


$
(8,934
)

$
194,937Equity in earnings of unconsolidated affiliates


28,125



158



(18,377
)


9,906Operating expenses, excluding depreciation and amortization


51,243



123,975



(9,118
)


166,100Depreciation and amortization


2,219



9,701



799



12,719Operating income


1,377



43,639



(18,992
)


26,024Interest expense, net


(4,997
)


(3,616
)






(8,613
)Loss on early retirement of debt


(2,435
)










(2,435
)Other income (expense)


917



(718
)


599



798Income (loss) before minority interests


(5,138
)


39,305



(18,393
)


15,774Minority interests in income of consolidated subsidiaries






(4,535
)


(14,011
)


(18,546
)Income (loss) from continuing operations before income taxes


(5,138
)


34,770



(32,404
)


(2,772
)Income tax expense


(1,773
)


(2,368
)


2



(4,139
)Income (loss) from continuing operations


(6,911
)


32,402



(32,402
)


(6,911
)Loss from discontinued operations, net of tax


(238
)










(238
)Net income (loss)

$
(7,149
)

$
32,402


$
(32,402
)

$
(7,149
)  25




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Nine Months Ended September 30, 2006




Non-Participating


Consolidation


ConsolidatedPredecessor

Guarantors


Investees


Adjustments


TotalRevenues

$
63,083


$
379,418


$
(19,444
)

$
423,057Equity in earnings of unconsolidated affiliates


67,503



1,480



(47,091
)


21,892Operating expenses, excluding depreciation and amortization


57,937



264,354



(19,682
)


302,609Depreciation and amortization


6,265



19,611



14



25,890Operating income


66,384



96,933



(46,867
)


116,450Interest expense, net


(12,756
)


(8,535
)






(21,291
)Other income (expense)


(13,085
)


176



(237
)


(13,146
)Income before minority interests


40,543



88,574



(47,104
)


82,013Minority interests in income of consolidated subsidiaries






(11,045
)


(28,244
)


(39,289
)Income from continuing operations before income taxes


40,543



77,529



(75,348
)


42,724Income tax expense


(13,412
)


(2,216
)


35



(15,593
)Income from continuing operations


27,131



75,313



(75,313
)


27,131Loss from discontinued operations, net of tax


(5,955
)










(5,955
)Net income

$
21,176


$
75,313


$
(75,313
)

$
21,176  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 Cash Flows:
  Period from April 19 through September 30, 2007




Non-Participating


Consolidation


ConsolidatedSuccessor

Guarantors


Investees


Adjustments


TotalCash flows from operating activities:Net income (loss)

$
3,972


$
52,211


$
(52,211
)

$
3,972Loss from discontinued operations


191











191Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


24,009



30,743



(3,415
)


51,337Net cash provided by (used in) operating activities


28,172



82,954



(55,626
)


55,500Cash flows from investing activities:Purchases of property and equipment, net


(1,640
)


(6,678
)






(8,318
)Purchases and sales of new businesses and equity interests, net


(72,655
)










(72,655
)Other items


13,430



447



(4,225
)


9,652Net cash used in investing activities


(60,865
)


(6,231
)


(4,225
)


(71,321
)Cash flows from financing activities:Long-term borrowings, net


703,833



(10,111
)


650



694,372Net equity contributions from USPI Group Holdings, Inc.


779,279











779,279Payments to repurchase common stock


(1,430,879
)










(1,430,879
)Other items


(12,082
)


(60,468
)


59,201



(13,349
)Net cash provided by (used in) financing activities


40,151



(70,579
)


59,851



29,423Net cash used in discontinued operations


(67
)










(67
)Effect of exchange rate changes on cash






27







27Net increase in cash


7,391



6,171







13,562Cash at the beginning of the period


80,456



2,741







83,197Cash at the end of the period

$
87,847


$
8,912


$



$
96,759   27




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Period from January 1 through April 18, 2007




Non-Participating


Consolidation


ConsolidatedPredecessor

Guarantors


Investees


Adjustments


TotalCash flows from operating activities:Net income (loss)

$
(7,149
)

$
32,402


$
(32,402
)

$
(7,149
)Loss from discontinued operations


238











238Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


35,830



21,469



(21,737
)


35,562Net cash provided by (used in) operating activities


28,919



53,871



(54,139
)


28,651Cash flows from investing activities:Purchases of property and equipment, net


(576
)


(6,444
)






(7,020
)Purchases and sales of new businesses and equity interests, net


(10,769
)










(10,769
)Other items


(4,490
)


(8,411
)


4,373



(8,528
)Net cash provided by (used in) investing activities


(15,835
)


(14,855
)


4,373



(26,317
)Cash flows from financing activities:Long-term borrowings, net


(511
)


11,082



4,083



14,654Proceeds from issuance of common stock


6,135











6,135Change in cash held on behalf of unconsolidated affiliates


22,306



45



(8,456
)


13,895Other items


15,821



(55,095
)


54,139



14,865Net cash provided by (used in) financing activities


43,751



(43,968
)


49,766



49,549Net cash used in discontinued operations


(313
)










(313
)Effect of exchange rate changes on cash






(113
)






(113
)Net increase (decrease) in cash


56,522



(5,065
)






51,457Cash at the beginning of the period


23,934



7,806







31,740Cash at the end of the period

$
80,456


$
2,741


$



$
83,197   28




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Nine Months Ended September 30, 2006




Non-Participating


Consolidation


ConsolidatedPredecessor

Guarantors


Investees


Adjustments


TotalCash flows from operating activities:Net income (loss)

$
21,176


$
75,313


$
(75,313
)

$
21,176Loss from discontinued operations


5,955











5,955Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


23,088



37,618



(7,337
)


53,369Net cash provided by (used in) operating activities


50,219



112,931



(82,650
)


80,500Cash flows from investing activities:Purchases of property and equipment, net


(3,155
)


(18,339
)






(21,494
)Purchases of new businesses and equity interests, net


(255,840
)


(10,709
)






(266,549
)Other items


3,660



10,950



(13,551
)


1,059Net cash used in investing activities


(255,335
)


(18,098
)


(13,551
)


(286,984
)Cash flows from financing activities:Long-term borrowings, net


64,462



(7,613
)


2,784



59,633Proceeds from issuance of common stock


5,410











5,410Other items


25,610



(82,668
)


93,417



36,359Net cash provided by (used in) financing activities


95,482



(90,281
)


96,201



101,402Net cash used in discontinued operations


(61
)










(61
)Effect of exchange rate changes on cash






(11
)






(11
)Net increase (decrease) in cash


(109,695
)


4,541







(105,154
)Cash at the beginning of the period


122,624



7,816







130,440Cash at the end of the period

$
12,929


$
12,357


$



$
25,286  29




---



##### 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
       30




---



##### Table of Contents



Critical
    Accounting Policies and Estimates
           31




---



##### Table of Contents



Merger
    Transaction
      
    an investment of cash and rollover equity in the equity of
    Parent by Welsh Carson, management and other equity investors of
    approximately $785.0 million;
    borrowings by the Company of $430.0 million in new senior
    secured credit facilities;
    the issuance by the Company of $240.0 million in aggregate
    principal amount of
    87/8% senior
    subordinated notes, due 2017, and $200.0 million in
    aggregate principal amount of
    91/4%/10% senior
    subordinated toggle notes, due 2017;
    additional borrowings of £10.0 million (approximately
    $19.7 million) by Global Healthcare Partners Limited, which
    was repatriated to the U.S.; and
    approximately $21.8 million of cash on hand.  Acquisitions,
    Equity Investments and Development Projects
  buy-up
     32




---



##### Table of Contents




    Receipt of $9.8 million from a not-for-profit hospital
    partner that obtained additional ownership in certain of the
    Companys surgical facilities in the Chicago, Illinois area;
    Investment of $1.5 million in a joint venture with one of
    the Companys not-for-profit hospital partners, which the
    joint venture used to acquire ownership in a surgery center in
    the Utica, Michigan area;
    Investment of $5.5 million in a company jointly operated
    with one of our not-for-profit hospital partners, which the
    joint venture used to acquire ownership in a surgical hospital
    in the Houston, Texas area; and
    Net payment of approximately $2.7 million related to other
    purchases and sales of equity interests and contributions of
    cash to equity method investees.  Discontinued
    Operations and Other Dispositions
          Combination
    of Operating Results
   33




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##### Table of Contents



Predecessor


Successor


CombinedPeriod from


Period from


Nine MonthsJanuary 1 Through


April 19 Through


EndedApril 18, 2007


September 30, 2007


September 30, 2007(Unaudited  in thousands)Revenues:Net patient service revenue

$
174,180


$
260,193


$
434,373Management and contract service revenue


19,142



29,332



48,474Other revenue


1,615



2,287



3,902Total revenues


194,937



291,812



486,749Equity in earnings of unconsolidated affiliates


9,906



13,805



23,711Operating expenses:Salaries, benefits, and other employee costs


55,334



81,772



137,106Medical services and supplies


35,032



50,923



85,955Other operating expenses


33,072



48,130



81,202General and administrative expenses


39,277



17,898



57,175Provision for doubtful accounts


3,385



5,693



9,078Depreciation and amortization


12,719



20,156



32,875Total operating expenses


178,819



224,572



403,391Operating income


26,024



81,045



107,069Interest income


933



1,841



2,774Interest expense


(9,546
)


(43,879
)


(53,425
)Loss on early retirement of debt


(2,435
)






(2,435
)Other, net


798



(233
)


565Total other expense, net


(10,250
)


(42,271
)


(52,521
)Income from continuing operations before minority interests


15,774



38,774



54,548Minority interests in income of consolidated subsidiaries


(18,546
)


(28,135
)


(46,681
)Income (loss) from continuing operations before income taxes


(2,772
)


10,639



7,867Income tax expense


(4,139
)


(6,476
)


(10,615
)Income (loss) from continuing operations


(6,911
)


4,163



(2,748
)Loss from discontinued operations, net of tax


(238
)


(191
)


(429
)Net income (loss)

$
(7,149
)

$
3,972


$
(3,177
)  34




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##### Table of Contents



Nine MonthsEndedThree Months Ended


September 30,September 30,


Combined2007


2006


2007


2006Total revenues


100
%


100
%


100
%


100
%Equity in earnings of unconsolidated affiliates


4.2



5.4



4.9



5.2Operating expenses, excluding depreciation and amortization


(70.8
)


(71.7
)


(76.1
)


(71.6
)Depreciation and amortization


(7.1
)


(6.4
)


(6.8
)


(6.1
)Operating income


26.3



27.3



22.0



27.5Minority interests in income of consolidated entities


(8.8
)


(8.7
)


(9.6
)


(9.3
)Interest and other expense, net


(15.1
)


(15.5
)


(10.8
)


(8.1
)Income from continuing operations before income taxes


2.4



3.1



1.6



10.1Income tax expense


(2.4
)


(1.5
)


(2.2
)


(3.7
)Income (loss) from continuing operations


0.0



1.6



(0.6
)


6.4Earnings (loss) from discontinued operations


(0.1
)


0.4



(0.1
)


(1.4
)Net income (loss)


(0.1
)%


2.0
%


(0.7
)%


5.0
%   Sources
    of Revenue
    
    net patient service revenue 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 revenue, 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 Months Ended


Nine Months Ended September 30,September 30,


Combined2007


2006


2007


2006Net patient service revenue


89
%


89
%


89
%


90
%Management and contract service revenue


10



10



10



9Other revenue


1



1



1



1Total revenues


100
%


100
%


100
%


100
%    35




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##### Table of Contents



Nine Months EndedThree Months Ended


September 30,September 30,


Combined2007


2006


2007


2006Management of surgical facilities

$
8,394


$
7,090


$
24,949


$
18,965Contract services provided to physicians, hospitals and related
    entities


7,873



7,461



23,525



17,825Total management and contract service revenues

$
16,267


$
14,551


$
48,474


$
36,790     Nine Months EndedThree Months Ended


September 30,September 30,


Combined2007


2006


2007


2006United States


81
%


83
%


82
%


83
%United Kingdom


19



17



18



17Total


100
%


100
%


100
%


100
%    36




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##### Table of Contents



Equity in
    Earnings of Unconsolidated Affiliates
    Nine Months EndedThree Months Ended


September 30,September 30,


Combined2007


2006


2007


2006Revenues

$
197,052


$
161,386


$
565,439


$
432,004Equity in earnings (loss) of unconsolidated affiliates


(10
)


177



102



223Operating expenses:Salaries, benefits, and other employee costs


55,258



40,679



150,416



108,314Medical services and supplies


42,492



33,690



118,567



88,348Other operating expenses


52,331



40,970



148,145



108,124Depreciation and amortization


10,535



7,980



28,804



21,199Total operating expenses


160,616



123,319



445,932



325,985Operating income


36,426



38,244



119,609



106,242Interest expense, net


(5,826
)


(3,780
)


(14,672
)


(9,988
)Other


1,542



(669
)


643



12Income before income taxes

$
32,142


$
33,795


$
105,580


$
96,266Long-term debt

$
269,668


$
167,128


$
269,668


$
167,128USPIs equity in earnings of unconsolidated affiliates


6,561



7,858



23,711



21,892USPIs imputed weighted average ownership percentage based
    on affiliates pre-tax income(1)


20.4
%


23.2
%


22.5
%


22.7
%USPIs imputed weighted average ownership percentage based
    on affiliates debt(2)


25.8
%


28.6
%


25.8
%


28.6
%Unconsolidated facilities operated at period end


91



76



91



76     (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. For the
    three months ended September 30, 2007 as compared to the
    corresponding prior period, this percentage decreased primarily
    due to lower overall ownership in unconsolidated affiliates as
    compared to the prior period and the $0.4 million
    incremental expense related to the merger. This is a non-GAAP
    measure but management believes it provides further useful
    information about its involvement in equity method investments.(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
    percentage is lower at September 30, 2007 as compared to
    the corresponding prior period due primarily to a number of
    facilities in which we own a lower ownership percentage
    borrowing additional funds as compared to prior periods. One
    facility, a surgical hospital in which we own 25%, has borrowed
    a significant amount during 2007 to fund a large capital
    expansion project. This is a non-GAAP measure but management
    believes it provides further useful information about its
    involvement in equity method investments. 37




---



##### Table of Contents



Results
    of Operations
  Executive
    Summary
            Revenues
   38




---



##### Table of Contents



39




---



##### Table of Contents



Three Months


CombinedEnded


Nine Months EndedSeptember 30,


September 30,2007


2007United States facilities:Net revenue


8
%


11
%Surgical cases


5
%


7
%Net revenue per case(1)


3
%


3
%United Kingdom facilities:Net revenue using actual exchange rates


22
%


23
%Net revenue using constant exchange rates(2)


13
%


12
%All same store facilities:Net revenue using actual exchange rates


9.4
%


11.6
%     (1)
    
    Our overall same store growth in net revenue per case was
    favorably impacted by the growth at our ten 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. Net revenue per case of our same store
    ambulatory surgery centers also increased approximately 1.4% for
    the three and combined nine months ended September 30, 2007.(2)
    
    Calculated using 2007 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. 40




---



##### Table of Contents



Joint
    Ventures With Not-For-Profit Hospitals
    September 30,2007


2006United States facilities(1):With a hospital partner


89



75Without a hospital partner


63



59Total U.S. facilities


152



134United Kingdom facilities


3



3Total facilities operated


155



137Change from September 30, 2006:De novo (newly constructed)


11Acquisition


10Disposals(2)


(3
)Total increase in number of facilities


18     (1)
    
    At September 30, 2007, physicians own a portion of all of
    these facilities.(2)
    
    We entered into agreements to sell our interests in two
    facilities in September 2007. Additionally, we classified a
    surgery center as held for sale in March 2007.  Facility
    Operating Margins
     41




---



##### Table of Contents



Three Months





CombinedEnded





Nine Months EndedSeptember 30,


Increase


September 30,


Increase2007


(Decrease)


2007


(Decrease)United States facilities:With a hospital partner


20.3
%


(390
)bps


23.5
%


(180
)bpsWithout a hospital partner


29.5
%


(70
)bps


31.0
%


80
bpsTotal U.S. facilities


23.1
%


(300
)bps


25.9
%


(100
)bpsUnited Kingdom facilities(2)


23.3
%


225
bps


24.2
%


200
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)
    
    Calculated using 2007 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.  Three
    Months Ended September 30, 2007 Compared to Three Months
    Ended September 30, 2006
     42




---



##### Table of Contents



Combined
    Nine Months Ended September 30, 2007 Compared to Nine
    Months Ended September 30, 2006
   43




---



##### Table of Contents



44




---



##### Table of Contents



Liquidity
    and Capital Resources
  Cash
    Flows
    , buy-up buy-up
 45




---



##### Table of Contents



Debt
      New
    senior secured credit facility
  buy-up
   46




---



##### Table of Contents



New
    senior subordinated notes
  7 8 1 4 payment-in-kind 1 4
  United
    Kingdom borrowings
       47




---



##### Table of Contents



Contractual
    Cash Obligations
    Payments Due by PeriodWithin 1


Years


Years


Beyond 5Contractual Cash Obligations

Total


Year


2 and 3


4 and 5


Years(In thousands)Long-term debt obligations (principal plus interest)(1):U.S. Term loan facility (Term B)

$
721,442


$
40,370


$
79,791


$
78,525


$
522,756Senior subordinated notes, due 2017


453,000



21,300



42,600



42,600



346,500Senior subordinated toggle notes, due 2017


385,000



18,500



37,000



37,000



292,500Amended and restated U.K. credit facility


117,023



11,661



26,145



27,623



51,594Other debt at operating subsidiaries


48,497



14,275



23,262



8,695



2,265Capitalized lease obligations


86,217



9,070



16,107



13,441



47,599Operating lease obligations


73,866



15,209



23,375



15,964



19,318Total contractual cash obligations

$
1,885,045


$
130,385


$
248,280


$
223,848


$
1,282,532     (1)
    
    Amounts shown for long-term debt obligations and capital lease
    obligations include the associated interest. For variable rate
    debt, the interest is calculated using the September 30,
    2007 rates applicable to each debt instrument.  Debt
    at Operating Subsidiaries
       48




---



##### Table of Contents



Related
    Party Transactions
      New
    Accounting Pronouncements
  Fair Value Measurement
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities, Including an amendment of FASB Statement
    No. 115
  ITEM 3.
    Quantitative
    and Qualitative Disclosures About Market Risk     49




---



##### Table of Contents



ITEM 4.
    Controls
    and Procedures  Form 10-Q.
  PART II 
    OTHER INFORMATION
  ITEM 1.
    Legal
    Proceedings       50




---



##### Table of Contents



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 Note due 2017 and 9
    1/4%/10% Senior
    Subordinate Toggle Note due 2017, among United Surgical Partners
    International, Inc., 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 9
    1/4%/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 to
    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. 51




---



##### Table of Contents



SIGNATURES
      By:
    /s/  Mark
    A. Kopser    Executive Vice President and
    Chief Financial Officer
    (Principal Financial Officer)
  By:
    /s/  John
    J. Wellik    Senior Vice President, Accounting and
 Administration, and Secretary
 (Principal Accounting Officer)
   52




---



##### 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 Note due 2017 and 9
    1/4%/10% Senior
    Subordinate Toggle Note due 2017, among United Surgical Partners
    International, Inc., 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 9
    1/4%/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 to
    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. 53