##### 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
    June 30, 2008oro

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
  Large accelerated filer o

Accelerated filer o

Non-accelerated filer þ

Smaller reporting company o(Do not check if a smaller reporting
    company)    Rule 12b-2 o þ
   The number of shares of Common Stock of the Registrant
    outstanding at August 4, 2008 was 100.




---



##### 



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

Financial InformationItem 1.

Review Report of Independent Registered Public
    Accounting Firm


3Consolidated Balance Sheets (unaudited)


4Consolidated Statements of Operations
    (unaudited)


5Consolidated Statements of Comprehensive Income
    (Loss) (unaudited)


7Consolidated Statements of Cash Flows
    (unaudited)


8Notes to Consolidated Financial Statements
    (unaudited)


9Item 2.

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


29Item 3.

Quantitative and Qualitative Disclosures About
    Market Risk


47Item 4T

Controls and Procedures


47PART II.

Other InformationItem 1.

Legal Proceedings


48Item 6.

Exhibits


48Signatures


49Certification 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  Report of
    Independent Registered Public Accounting Firm
               3




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIESConsolidated Balance Sheets
    (except share data)
  June 30, 2008


December 31, 2007(In thousands)(Unaudited)ASSETSCash and cash equivalents

$
89,403


$
76,758Accounts receivable, net of allowance for doubtful accounts of
    $11,677 and $12,721, respectively


60,040



59,557Other receivables


10,793



8,974Inventories of supplies


9,277



9,495Prepaids and other current assets


20,518



20,056Total current assets


190,031



174,840Property and equipment, net


228,132



229,039Investments in affiliates


279,553



267,357Goodwill and intangible assets, net


1,597,920



1,590,820Other assets


16,599



15,337Total assets

$
2,312,235


$
2,277,393LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable

$
22,987


$
22,982Accrued salaries and benefits


20,866



24,671Due to affiliates


63,763



62,500Accrued interest


11,821



13,436Current portion of long-term debt


27,583



25,311Other current liabilities


40,042



38,509Total current liabilities


187,062



187,409Long-term debt, less current portion


1,081,059



1,072,751Other long-term liabilities


18,456



17,950Deferred tax liability, net


118,085



109,414Total liabilities


1,404,662



1,387,524Minority interests


83,411



83,063Commitments and contingenciesStockholders equity:Common stock, $0.01 par value; 100 shares authorized;
    issued and outstanding






Additional paid-in capital


801,012



799,562Accumulated other comprehensive income (loss)


237



(1,485
)Retained earnings


22,913



8,729Total stockholders equity


824,162



806,806Total liabilities and stockholders equity

$
2,312,235


$
2,277,393    4




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##### Table of Contents



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



PredecessorThree Months


Period from April 19



Period from April 1Ended June 30,


through June 30,



through April 18,2008


2007



2007(Unaudited  in thousands)Revenues:Net patient service revenues

$
142,922


$
117,050



$
27,884Management and contract service revenues


18,714



13,065




3,262Other revenues


1,266



1,030




258Total revenues


162,902



131,145




31,404Equity in earnings of unconsolidated affiliates


10,094



7,244




1,402Operating expenses:Salaries, benefits, and other employee costs


46,433



35,465




9,148Medical services and supplies


28,757



22,554




5,635Other operating expenses


28,550



20,574




5,265General and administrative expenses


9,739



8,558




24,301Provision for doubtful accounts


1,961



2,881




623Depreciation and amortization


9,512



8,750




2,291Total operating expenses


124,952



98,782




47,263Operating income (loss)


48,044



39,607




(14,457
)Interest income


787



751




191Interest expense


(21,608
)


(19,216
)



(1,600
)Loss on early retirement of debt











(2,435
)Other, net


(826
)


128




744Total other expense, net


(21,647
)


(18,337
)



(3,100
)Income (loss) before minority interests


26,397



21,270




(17,557
)Minority interests in income of consolidated subsidiaries


(13,935
)


(14,251
)



(3,094
)Income (loss) from continuing operations before income taxes


12,462



7,019




(20,651
)Income tax (expense) benefit


(5,043
)


(2,676
)



4,886Income (loss) from continuing operations


7,419



4,343




(15,765
)Loss from discontinued operations, net of tax


(956
)


(195
)



(44
)Net income (loss)

$
6,463


$
4,148



$
(15,809
)    5




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##### Table of Contents



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



PredecessorSix Months


Period from April 19



Period from January 1Ended June 30,


through June 30,



through April 18,2008


2007



2007(Unaudited  in thousands)Revenues:Net patient service revenues

$
289,612


$
117,050



$
170,598Management and contract service revenues


36,158



13,065




19,142Other revenues


2,532



1,030




1,615Total revenues


328,302



131,145




191,355Equity in earnings of unconsolidated affiliates


21,142



7,244




9,906Operating expenses:Salaries, benefits, and other employee costs


93,648



35,465




53,871Medical services and supplies


57,845



22,554




34,308Other operating expenses


56,203



20,574




31,744General and administrative expenses


20,167



8,558




39,277Provision for doubtful accounts


3,810



2,881




3,297Depreciation and amortization


18,846



8,750




12,426Total operating expenses


250,519



98,782




174,923Operating income


98,925



39,607




26,338Interest income


1,825



751




933Interest expense


(43,953
)


(19,216
)



(9,521
)Loss on early retirement of debt











(2,435
)Other, net


245



128




798Total other expense, net


(41,883
)


(18,337
)



(10,225
)Income before minority interests


57,042



21,270




16,113Minority interests in income of consolidated subsidiaries


(29,349
)


(14,251
)



(18,866
)Income (loss) from continuing operations before income taxes


27,693



7,019




(2,753
)Income tax expense


(12,614
)


(2,676
)



(4,145
)Income (loss) from continuing operations


15,079



4,343




(6,898
)Loss from discontinued operations, net of tax


(895
)


(195
)



(251
)Net income (loss)

$
14,184


$
4,148



$
(7,149
)    6




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##### Table of Contents



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



PredecessorPeriod from



Period fromThree Months


April 19



April 1Ended


through



throughJune 30,


June 30,



April 18,2008


2007



2007(Unaudited  in thousands)Net income (loss)

$
6,463


$
4,148



$
(15,809
)Other comprehensive income:Foreign currency translation adjustments


717



617




1,591Unrealized gain on interest rate swap, net of tax


807








Other comprehensive income


1,524



617




1,591Comprehensive income (loss)

$
7,987


$
4,765



$
(14,218
)   Successor



PredecessorPeriod from



Period fromSix Months


April 19



January 1Ended


through



throughJune 30,


June 30,



April 18,2008


2007



2007Net income (loss)

$
14,184


$
4,148



$
(7,149
)Other comprehensive income:Foreign currency translation adjustments


900



617




2,169Unrealized gain on interest rate swap, net of tax


822








Other comprehensive income


1,722



617




2,169Comprehensive income (loss)

$
15,906


$
4,765



$
(4,980
)    7




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##### Table of Contents



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



PredecessorPeriod from



Period fromSix Months


April 19



January 1Ended


through



throughJune 30,


June 30,



April 18,2008


2007



2007(Unaudited  in thousands)Cash flows from operating activities:Net income (loss)

$
14,184


$
4,148



$
(7,149
)Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Loss on discontinued operations


895



195




251Provision for doubtful accounts


3,810



2,881




3,297Depreciation and amortization


18,846



8,750




12,426Loss on early retirement of debt











2,435Loss (gain) on sale of equity interests


949








(897
)Amortization of debt issue costs and discount


1,436



533




202Deferred income tax expense


7,190



775




1,328Equity in earnings of unconsolidated affiliates, net of
    distributions received


(145
)


1,996




4,335Minority interests in income of consolidated subsidiaries, net
    of distributions paid


(687
)


3,238




468Equity-based compensation


1,448



474




17,100Increases (decreases) in cash from changes in operating assets
    and liabilities, net of effects from purchases of new businesses:Accounts receivable


(7,019
)


(5,796
)



(973
)Other receivables


(3,649
)


(1,169
)



509Inventories of supplies, prepaids and other current assets


(2,134
)


1,087




919Accounts payable and other current liabilities


(2,164
)


2,264




12,060Long-term liabilities


623



(3
)



(1,390
)Tax benefit related to increase in value of equity awards











(15,822
)Net cash provided by operating activities


33,583



19,373




29,099Cash flows from investing activities:Purchases of new businesses and equity interests, net of cash
    received


(23,950
)


(38,362
)



(26,705
)Proceeds from sale of businesses and equity interests


9,678








15,916Purchases of property and equipment


(20,515
)


(1,986
)



(6,172
)Returns of capital from unconsolidated affiliates


1,558



302




556(Increase) decrease in deposits and notes receivable


413



12,706




(9,084
)Net cash used in investing activities


(32,816
)


(27,340
)



(25,489
)Cash flows from financing activities:Proceeds from long-term debt, net of debt issuance costs


24,568



874,172




20,684Payments on long-term debt


(13,041
)


(206,338
)



(7,424
)Proceeds from issuances of common stock











6,135Net equity contribution from USPI Group Holdings, Inc.






765,802




Tax benefit related to increase in value of equity awards











15,822Payments to repurchase common stock






(1,430,879
)



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


1,200



(18,760
)



13,895Expenses paid on behalf of USPI Group Holdings, Inc.






(2,833
)



Returns of capital to minority interest holders


(896
)


(290
)



(943
)Net cash provided by (used in) financing activities


11,831



(19,126
)



48,169Cash flows of discontinued operations:Operating cash flows


166



124




(761
)Investing cash flows


(76
)


(211
)



(827
)Financing cash flows


(34
)


115




1,379Net cash provided by (used in) discontinued operations


56



28




(209
)Effect of exchange rate changes on cash


(9
)


6




(113
)Net increase (decrease) in cash and cash equivalents


12,645



(27,059
)



51,457Cash and cash equivalents at beginning of period


76,758



83,197




31,740Cash and cash equivalents at end of period

$
89,403


$
56,138



$
83,197Supplemental information:Interest paid

$
44,115


$
6,420



$
9,861Income taxes paid


3,996



1,666




1,909Non-cash transactions:Assets acquired under capital lease obligations

$
485


$
2,669



$
1,677Receipt of note receivable for sale of equity interests


601








Predecessor 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
  Form 10-K.
   9




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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        Accounting for the
    Impairment or Disposal of Long-Lived Assets,
  Successor



PredecessorPeriod from



Period from


Period fromThree Months


Six Months


April 19



April 1


January 1Ended


Ended


through



through


throughJune 30,


June 30,


June 30,



April 18,


April 18,2008


2008


2007



2007


2007Revenues

$
1,274


$
3,108


$
2,760



$
635


$
3,693Income (loss) from discontinued operations before income taxes

$
63


$
108


$
(300
)


$
(67
)

$
(386
)Income tax (expense) benefit


(22
)


(38
)


105




23



135Income (loss) from discontinued operations

$
41


$
70


$
(195
)


$
(44
)

$
(251
)Loss on sale of discontinued operations before income taxes

$
(997
)

$
(965
)

$




$



$
Income tax benefit



















Loss on sale of discontinued operations

$
(997
)

$
(965
)

$




$



$
    10




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
 AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
      Consolidation of Variable Interest Entities (as
    amended),
      (3)
    Acquisitions
    and Equity Method Investments     11




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##### Table of Contents



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



PredecessorPeriod from



Period from


Period fromThree Months


Six Months


April 19



April 1


January 1Ended


Ended


through



through


throughJune 30,


June 30,


June 30,



April 18,


April 18,2008


2008


2007



2007


2007Net revenues

$
162,902


$
328,302


$
131,145



$
31,404


$
191,355Income (loss) from continuing operations


7,663



15,921



5,032




(15,634
)


(6,051
)       
    Receipt of $3.6 million from a not-for-profit hospital
    partner that obtained additional ownership in a facility in the
    Kansas City, Missouri area;
    Investment of $1.1 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 facility in the Las
    Vegas, Nevada, area;
    Investment of $1.4 million in a surgical facility in
    Knoxville, Tennessee, jointly owned with one of the
    Companys not-for-profit hospital partners; and
    Net receipt of approximately $0.1 million related to
    various other purchases and sales of equity interests and
    contributions of cash to equity method investees. 12




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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 30,2008


2007


2008


2007Unconsolidated facilities operated at period-end


98



90



98



90Income statement information:Revenues

$
239,786


$
191,298


$
469,110


$
368,354Equity in earnings of unconsolidated affiliates






59



13



112Operating expenses:Salaries, benefits, and other employee costs


59,296



50,229



116,670



95,047Medical services and supplies


52,169



40,120



98,371



76,054Other operating expenses


61,225



49,648



120,253



95,688Depreciation and amortization


12,678



9,484



24,651



18,261Total operating expenses


185,368



149,481



359,945



285,050Operating income


54,418



41,876



109,178



83,416Interest expense, net


(5,968
)


(5,124
)


(12,207
)


(8,846
)Other, net


(2,765
)


819



(1,688
)


(898
)Income before income taxes

$
45,685


$
37,571


$
95,283


$
73,672Balance sheet information:Current assets

$
198,527


$
176,843


$
198,527


$
176,843Noncurrent assets


404,933



368,196



404,933



368,196Current liabilities


120,059



102,812



120,059



102,812Noncurrent liabilities


291,580



261,504



291,580



261,504   (4)
    Long-Term
    Debt  (a)
    Senior
    secured credit facility    (b)
    United
    Kingdom borrowings   13




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
 AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
    (5)
    Interest
    Rate Swap    Accounting for
    Derivative Instruments and Hedging Activities
        (6)
    Equity-Based
    Compensation  Share-Based Payment
 14




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
 AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
           15




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##### Table of Contents



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



PredecessorPeriod from



Period from


Period fromThree Months


Six Months


April 19



April 1


January 1Ended


Ended


through



through


throughJune 30,


June 30,


June 30,



April 18,


April 18,2008


2008


2007



2007


2007Equity in earnings of unconsolidated affiliates

$



$



$




$



$
20Salaries, benefits and other employee costs


199



608








150



959General and administrative expenses


263



504



474




14,132



16,144Other operating expenses






336












Minority interests in income of consolidated subsidiaries



















(23
)Expense before income tax benefit


462



1,448



474




14,282



17,100Income tax benefit


(105
)


(277
)


(56
)



(4,481
)


(5,366
)Total equity-based compensation expense, net of tax

$
357


$
1,171


$
418



$
9,801


$
11,734     Successor



PredecessorPeriod from



Period from


Period fromThree Months


Six Months


April 19



April 1


January 1Ended


Ended


through



through


throughJune 30,


June 30,


June 30,



April 18,


April 18,2008


2008


2007



2007


2007Share awards

$
315


$
598


$
348



$
10,875


$
13,202Stock options


147



514



126




3,407



3,797Warrants






336












ESPP



















101Expense before income tax benefit


462



1,448



474




14,282



17,100Income tax benefit


(105
)


(277
)


(56
)



(4,481
)


(5,366
)Total equity-based compensation expense, net of tax

$
357


$
1,171


$
418



$
9,801


$
11,734  16




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
 AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
  (7)
    Segment
    Disclosures  Disclosures About Segments of an
    Enterprise and Related Information,
  Successor

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


(3,469
)


(1,574
)


(5,043
)Total assets


1,927,453



384,782



2,312,235Capital expenditures


5,572



2,970



8,542   Successor

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


(9,399
)


(3,215
)


(12,614
)Total assets


1,927,453



384,782



2,312,235Capital expenditures


8,514



12,486



21,000   17




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##### Table of Contents



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

United


UnitedPeriod From April 19 through June 30, 2007

States


Kingdom


TotalNet patient service revenues

$
93,424


$
23,626


$
117,050Other revenues


14,095







14,095Total revenues

$
107,519


$
23,626


$
131,145Depreciation and amortization

$
6,318


$
2,432


$
8,750Operating income


35,948



3,659



39,607Net interest expense


(17,212
)


(1,253
)


(18,465
)Income tax expense


(2,398
)


(278
)


(2,676
)Total assets


1,941,473



276,583



2,218,056Capital expenditures


3,119



1,536



4,655   Predecessor

United


UnitedPeriod from April 1 through April 18, 2007

States


Kingdom


TotalNet patient service revenues

$
22,398


$
5,486


$
27,884Other revenues


3,520







3,520Total revenues

$
25,918


$
5,486


$
31,404Depreciation and amortization

$
1,789


$
502


$
2,291Operating income (loss)


(15,181
)


724



(14,457
)Net interest expense


(1,166
)


(243
)


(1,409
)Income tax (expense) benefit


5,062



(176
)


4,886Total assets


1,114,429



209,279



1,323,708Capital expenditures


998



939



1,927   Predecessor

United


UnitedPeriod from January 1 through April 18, 2007

States


Kingdom


TotalNet patient service revenues

$
136,865


$
33,733


$
170,598Other revenues


20,757







20,757Total revenues

$
157,622


$
33,733


$
191,355Depreciation and amortization

$
9,487


$
2,939


$
12,426Operating income


20,929



5,409



26,338Net interest expense


(7,150
)


(1,438
)


(8,588
)Income tax expense


(2,795
)


(1,350
)


(4,145
)Total assets


1,114,429



209,279



1,323,708Capital expenditures


5,224



2,625



7,849   (8)
    Related
    Party Transactions   18




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
 AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
        (9)
    Commitments
    and Contingencies    Guarantors Accounting and
    Disclosure Requirements for Guarantees, Including Indirect
    Guarantees of Indebtedness of Others,
  (10)
    New
    Accounting Pronouncements  Business Combinations
 19




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
 AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
    Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  Disclosures about Derivative Instruments and Hedging
    Activities, an amendment of FASB Statement No. 133
  No. 142-3, Determination of the Useful Life of Intangible Assets FSP 142-3 Goodwill and Other Intangible
    Assets FSP 142-3 Business Combinations FSP 142-3 FSP 142-3
  The
    Hierarchy of Generally Accepted Accounting Principles The Meaning of Present
    Fairly in Conformity With Generally Accepted Accounting
    Principles, The
    Meaning of Present Fairly in Conformity with Generally Accepted
    Accounting Principles
  (11)
    Subsequent
    Events   20




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
 AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
        (12)
    Condensed
    Consolidating Financial Statements    7 8 1 4 Form S-4
 21




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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, 2008

Guarantors


Investees


Adjustments


TotalAssetsCurrent assets:Cash and cash equivalents

$
77,431


$
11,972


$



$
89,403Accounts receivable, net






59,999



41



60,040Other receivables


30,431



42,021



(61,659
)


10,793Inventories of supplies






9,277







9,277Prepaids and other current assets


18,269



2,286



(37
)


20,518Total current assets


126,131



125,555



(61,655
)


190,031Property and equipment, net


16,574



210,786



772



228,132Investments in affiliates


988,628



1,450



(710,525
)


279,553Goodwill and intangible assets, net


820,663



371,729



405,528



1,597,920Other assets


87,455



2,090



(72,946
)


16,599Total assets

$
2,039,451


$
711,610


$
(438,826
)

$
2,312,235Liabilities and Stockholders EquityCurrent liabilities:Accounts payable

$
235


$
22,740


$
12


$
22,987Accrued expenses and other


148,242



47,441



(59,191
)


136,492Current portion of long-term debt


4,261



24,723



(1,401
)


27,583Total current liabilities


152,738



94,904



(60,580
)


187,062Long-term debt, less current portion


938,646



154,598



(12,185
)


1,081,059Other long-term liabilities


123,905



13,764



(1,128
)


136,541Minority interests






12,098



71,313



83,411Stockholders equity


824,162



436,246



(436,246
)


824,162Total liabilities and stockholders equity

$
2,039,451


$
711,610


$
(438,826
)

$
2,312,235   22




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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, 2007

Guarantors


Investees


Adjustments


TotalAssetsCurrent assets:Cash and cash equivalents

$
66,665



10,093


$



$
76,758Accounts receivable, net






59,796



(239
)


59,557Other receivables


26,616



43,019



(60,661
)


8,974Inventories of supplies






9,597



(102
)


9,495Prepaids and other current assets


17,696



2,473



(113
)


20,056Total current assets


110,977



124,978



(61,115
)


174,840Property and equipment, net


15,452



212,149



1,438



229,039Investments in affiliates


951,129



1,565



(685,337
)


267,357Goodwill and intangible assets, net


834,711



378,619



377,490



1,590,820Other assets


93,703



1,102



(79,468
)


15,337Total assets

$
2,005,972


$
718,413


$
(446,992
)

$
2,277,393Liabilities and Stockholders EquityCurrent liabilities:Accounts payable

$
1,607


$
21,535


$
(160
)

$
22,982Accrued expenses and other


152,649



46,282



(59,815
)


139,116Current portion of long-term debt


3,787



22,831



(1,307
)


25,311Total current liabilities


158,043



90,648



(61,282
)


187,409Long-term debt, less current portion


926,519



156,725



(10,493
)


1,072,751Other long-term liabilities


114,604



14,054



(1,294
)


127,364Minority interests






14,061



69,002



83,063Stockholders equity


806,806



442,925



(442,925
)


806,806Total liabilities and stockholders equity

$
2,005,972


$
718,413


$
(446,992
)

$
2,277,393  23




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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:
  Six Months Ended June 30, 2008




Non-Participating


Consolidation


ConsolidatedSuccessor

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)


218



182



(155
)


245Income (loss) before minority interests


23,289



69,318



(35,565
)


57,042Minority interests in income of consolidated subsidiaries






(4,428
)


(24,921
)


(29,349
)Income (loss) from continuing operations before income taxes


23,289



64,890



(60,486
)


27,693Income tax expense


(8,210
)


(4,404
)






(12,614
)Income (loss) from continuing operations


15,079



60,486



(60,486
)


15,079Loss from discontinued operations, net of tax


(895
)










(895
)Net income (loss)

$
14,184


$
60,486


$
(60,486
)

$
14,184   Period from January 1 through April 18, 2007




Non-Participating


Consolidation


ConsolidatedPredecessor

Guarantors


Investees


Adjustments


TotalRevenues

$
26,714


$
173,575


$
(8,934
)

$
191,355Equity in earnings of unconsolidated affiliates


28,137



158



(18,389
)


9,906Operating expenses, excluding depreciation and amortization


51,244



120,371



(9,118
)


162,497Depreciation and amortization


2,219



9,408



799



12,426Operating income


1,388



43,954



(19,004
)


26,338Interest expense, net


(4,996
)


(3,592
)






(8,588
)Loss on early retirement of debt


(2,435
)










(2,435
)Other income (expense)


917



(718
)


599



798Income (loss) before minority interests


(5,126
)


39,644



(18,405
)


16,113Minority interests in income of consolidated subsidiaries






(4,855
)


(14,011
)


(18,866
)Income (loss) from continuing operations before income taxes


(5,126
)


34,789



(32,416
)


(2,753
)Income tax expense


(1,772
)


(2,375
)


2



(4,145
)Income (loss) from continuing operations


(6,898
)


32,414



(32,414
)


(6,898
)Loss from discontinued operations, net of tax


(251
)










(251
)Net income (loss)

$
(7,149
)

$
32,414


$
(32,414
)

$
(7,149
)  24




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
 AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
  Period from April 19 through June 30, 2007




Non-Participating


Consolidation


ConsolidatedSuccessor

Guarantors


Investees


Adjustments


TotalRevenues

$
17,850


$
119,272


$
(5,977
)

$
131,145Equity in earnings of unconsolidated affiliates


21,236



180



(14,172
)


7,244Operating expenses, excluding depreciation and amortization


15,551



80,518



(6,037
)


90,032Depreciation and amortization


1,797



6,807



146



8,750Operating income


21,738



32,127



(14,258
)


39,607Interest expense, net


(15,730
)


(2,735
)






(18,465
)Other income (expense)


151



39



(62
)


128Income before minority interests


6,159



29,431



(14,320
)


21,270Minority interests in income of consolidated subsidiaries






(2,626
)


(11,625
)


(14,251
)Income from continuing operations before income taxes


6,159



26,805



(25,945
)


7,019Income tax expense


(1,816
)


(919
)


59



(2,676
)Income from continuing operations


4,343



25,886



(25,886
)


4,343Loss from discontinued operations, net of tax


(195
)










(195
)Net income

$
4,148


$
25,886


$
(25,886
)

$
4,148  25




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
 AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
  Condensed Consolidating Statements of Cash Flows:
  Six Months Ended June 30, 2008




Non-Participating


Consolidation


ConsolidatedSuccessor

Guarantors


Investees


Adjustments


TotalCash flows from operating activities:Net income (loss)

$
14,184


$
60,486


$
(60,486
)

$
14,184Loss from discontinued operations


895











895Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


3,836



14,781



(113
)


18,504Net cash provided by operating activities


18,915



75,267



(60,599
)


33,583Cash flows from investing activities:Purchases of property and equipment, net


(2,503
)


(18,012
)






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


(14,141
)


(131
)






(14,272
)Other items


121



2,214



(364
)


1,971Net cash used in investing activities


(16,523
)


(15,929
)


(364
)


(32,816
)Cash flows from financing activities:Long-term borrowings, net


10,775



328



424



11,527Other items


(2,457
)


(57,778
)


60,539



304Net cash provided by (used in) financing activities


8,318



(57,450
)


60,963



11,831Net cash provided by discontinued operations


56











56Effect of exchange rate changes on cash






(9
)






(9
)Net increase (decrease) 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   26




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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
)

$
32,414


$
(32,414
)

$
(7,149
)Loss from discontinued operations


251











251Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


35,733



21,989



(21,725
)


35,997Net cash provided by operating activities


28,835



54,403



(54,139
)


29,099Cash flows from investing activities:Purchases of property and equipment, net


(576
)


(5,596
)






(6,172
)Purchases and sales of new businesses and equity interests, net


(10,789
)










(10,789
)Other items


(4,490
)


(8,411
)


4,373



(8,528
)Net cash used in investing activities


(15,855
)


(14,007
)


4,373



(25,489
)Cash flows from financing activities:Long-term borrowings, net


(511
)


9,688



4,083



13,260Proceeds 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



(55,081
)


54,139



14,879Net cash provided by (used in) financing activities


43,751



(45,348
)


49,766



48,169Net cash used in discontinued operations


(209
)










(209
)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   27




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
 AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
  Period from April 19 through June 30, 2007




Non-Participating


Consolidation


ConsolidatedSuccessor

Guarantors


Investees


Adjustments


TotalCash flows from operating activities:Net income (loss)

$
4,148


$
25,886


$
(25,886
)

$
4,148Loss from discontinued operations


195











195Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


3,847



6,139



5,044



15,030Net cash provided by operating activities


8,190



32,025



(20,842
)


19,373Cash flows from investing activities:Purchases of property and equipment, net


(1,159
)


(827
)






(1,986
)Purchases and sales of new businesses and equity interests, net


(38,362
)










(38,362
)Other items


13,355



3,383



(3,730
)


13,008Net cash used in investing activities


(26,166
)


2,556



(3,730
)


(27,340
)Cash flows from financing activities:Long-term borrowings, net


671,231



(3,686
)


289



667,834Net equity contribution from USPI Group Holdings, Inc.


765,802











765,802Payments to repurchase common stock


(1,430,879
)










(1,430,879
)Other items


(23,934
)


(22,232
)


24,283



(21,883
)Net cash provided by (used in) financing activities


(17,780
)


(25,918
)


24,572



(19,126
)Net cash provided by discontinued operations


28











28Effect of exchange rate changes on cash






6







6Net increase (decrease) in cash


(35,728
)


8,669







(27,059
)Cash at the beginning of the period


80,456



2,741







83,197Cash at the end of the period

$
44,728


$
11,410


$



$
56,138  28




---



##### 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
      government-sponsored
 29




---



##### Table of Contents



Critical
    Accounting Policies and Estimates
          equity-based
  Merger
    Transaction
  Form 10-K
  Acquisitions,
    Equity Investments and Development Projects
   30




---



##### Table of Contents




    Receipt of $3.6 million from a not-for-profit hospital
    partner that obtained additional ownership in a facility in the
    Kansas City, Missouri area;
    Investment of $1.1 million in a joint venture with one of
    our not-for-profit hospital partners which the joint venture
    used to acquire ownership in facility in the Las Vegas, Nevada,
    area;
    Investment of $1.4 million in a surgical facility in
    Knoxville, Tennessee, jointly owned with one of our
    not-for-profit
    hospital partners; and
    Net receipt of approximately $0.1 million related to
    various other purchases and sales of equity interests and
    contributions of cash to equity method investees.  Discontinued
    Operations and Other Dispositions
       31




---



##### Table of Contents



Combination
    of Operating Results
    Predecessor


SuccessorPeriod from


Period from


CombinedApril 1 through


April 19 through


Three Months EndedApril 18, 2007


June 30, 2007


June 30, 2007Revenues:Net patient service revenues

$
27,884


$
117,050


$
144,934Management and contract service revenues


3,262



13,065



16,327Other revenues


258



1,030



1,288Total revenues


31,404



131,145



162,549Equity in earnings of unconsolidated affiliates


1,402



7,244



8,646Operating expenses:Salaries, benefits, and other employee costs


9,148



35,465



44,613Medical services and supplies


5,635



22,554



28,189Other operating expenses


5,265



20,574



25,839General and administrative expenses


24,301



8,558



32,859Provision for doubtful accounts


623



2,881



3,504Depreciation and amortization


2,291



8,750



11,041Total operating expenses


47,263



98,782



146,045Operating income (loss)


(14,457
)


39,607



25,150Interest income


191



751



942Interest expense


(1,600
)


(19,216
)


(20,816
)Loss on early retirement of debt


(2,435
)






(2,435
)Other, net


744



128



872Total other expense, net


(3,100
)


(18,337
)


(21,437
)Income (loss) before minority interests


(17,557
)


21,270



3,713Minority interests in income of consolidated subsidiaries


(3,094
)


(14,251
)


(17,345
)Income (loss) from continuing operations before income taxes


(20,651
)


7,019



(13,632
)Income tax (expense) benefit


4,886



(2,676
)


2,210Income (loss) from continuing operations


(15,765
)


4,343



(11,422
)Loss from discontinued operations, net of tax


(44
)


(195
)


(239
)Net income (loss)

$
(15,809
)

$
4,148


$
(11,661
)  32




---



##### Table of Contents



Predecessor


SuccessorPeriod from


Period from


CombinedJanuary 1 through


April 19 through


Six Months EndedApril 18, 2007


June 30, 2007


June 30, 2007Revenues:Net patient service revenues

$
170,598


$
117,050


$
287,648Management and contract service revenues


19,142



13,065



32,207Other revenues


1,615



1,030



2,645Total revenues


191,355



131,145



322,500Equity in earnings of unconsolidated affiliates


9,906



7,244



17,150Operating expenses:Salaries, benefits, and other employee costs


53,871



35,465



89,336Medical services and supplies


34,308



22,554



56,862Other operating expenses


31,744



20,574



52,318General and administrative expenses


39,277



8,558



47,835Provision for doubtful accounts


3,297



2,881



6,178Depreciation and amortization


12,426



8,750



21,176Total operating expenses


174,923



98,782



273,705Operating income


26,338



39,607



65,945Interest income


933



751



1,684Interest expense


(9,521
)


(19,216
)


(28,737
)Loss on early retirement of debt


(2,435
)






(2,435
)Other, net


798



128



926Total other expense, net


(10,225
)


(18,337
)


(28,562
)Income before minority interests


16,113



21,270



37,383Minority interests in income of consolidated subsidiaries


(18,866
)


(14,251
)


(33,117
)Income (loss) from continuing operations before income taxes


(2,753
)


7,019



4,266Income tax expense


(4,145
)


(2,676
)


(6,821
)Income (loss) from continuing operations


(6,898
)


4,343



(2,555
)Loss from discontinued operations, net of tax


(251
)


(195
)


(446
)Net income (loss)

$
(7,149
)

$
4,148


$
(3,001
)   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. 33




---



##### Table of Contents



Three Months


Six MonthsEnded June 30,


Ended June 30,Combined





Combined2008


2007


2008


2007Net patient service revenues


88
%


89
%


88
%


89
%Management and contract service revenues


11



10



11



10Other revenues


1



1



1



1Total revenues


100
%


100
%


100
%


100
%       Three Months


Six MonthsEnded June 30,


Ended June 30,Combined





Combined2008


2007


2008


2007Management of surgical facilities

$
9,994


$
8,313


$
19,647


$
16,555Contract services provided to physicians, hospitals and related
    entities


8,720



8,014



16,511



15,652Total management and contract service revenues

$
18,714


$
16,327


$
36,158


$
32,207     Six MonthsThree Months Ended June 30,


Ended June 30,Combined





Combined2008


2007


2008


2007United States


80
%


82
%


80
%


82
%United Kingdom


20



18



20



18Total


100
%


100
%


100
%


100
%    34




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##### Table of Contents



Equity in
    Earnings of Unconsolidated Affiliates
    Three Months


Six MonthsEnded June 30,


Ended June 30,2008


2007


2008


2007Revenues

$
239,786


$
191,298


$
469,110


$
368,354Equity in earnings of unconsolidated affiliates






59



13



112Operating expenses:Salaries, benefits, and other employee costs


59,296



50,229



116,670



95,047Medical services and supplies


52,169



40,120



98,371



76,054Other operating expenses


61,225



49,648



120,253



95,688Depreciation and amortization


12,678



9,484



24,651



18,261Total operating expenses


185,368



149,481



359,945



285,050Operating income


54,418



41,876



109,178



83,416Interest expense, net


(5,968
)


(5,124
)


(12,207
)


(8,846
)Other


(2,765
)


819



(1,688
)


(898
)Income before income taxes

$
45,685


$
37,571


$
95,283


$
73,672Long-term debt

$
278,628


$
246,217


$
278,628


$
246,217USPIs equity in earnings of unconsolidated affiliates


10,094



8,646



21,142



17,150USPIs imputed weighted average ownership percentage based
    on affiliates pre-tax income(1)


22.1
%


23.0
%


22.2
%


23.3
%USPIs imputed weighted average ownership percentage based
    on affiliates debt(2)


25.0
%


27.4
%


25.0
%


27.4
%Unconsolidated facilities operated at period end


98



90



98



90     (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.(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 June 30, 2008, as compared to prior
    period ends primarily as a result of our largest U.S. facility,
    in which we own a 25% interest, borrowing to finance a major
    expansion during the second and third quarters of 2007. This is
    a non-GAAP measure but management believes it provides further
    useful information about its involvement in equity method
    investments. 35




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##### Table of Contents



Results
    of Operations
    Six MonthsThree Months Ended June 30,


Ended June 30,Combined





Combined2008


2007


2008


2007Total revenues


100
%


100
%


100
%


100
%Equity in earnings of unconsolidated affiliates


6.2



5.3



6.4



5.3Operating expenses, excluding depreciation and amortization


(70.9
)


(83.0
)


(70.6
)


(78.3
)Depreciation and amortization


(5.8
)


(6.8
)


(5.7
)


(6.6
)Operating income


29.5



15.5



30.1



20.4Minority interests in income of consolidated entities


(8.6
)


(10.7
)


(8.9
)


(10.3
)Interest and other expense, net


(13.3
)


(13.2
)


(12.8
)


(8.9
)Income (loss) from continuing operations before income taxes


7.6



(8.4
)


8.4



1.2Income tax (expense) benefit


(3.1
)


1.4



(3.8
)


(2.1
)Income (loss) from continuing operations


4.5



(7.0
)


4.6



(0.9
)Loss from discontinued operations


(0.5
)


(0.2
)


(0.3
)


Net income (loss)


4.0
%


(7.2
)%


4.3
%


(0.9
)%   Executive
    Summary
         36




---



##### Table of Contents



Revenues
      ramp-up
    Three Months Ended


Six Months EndedJune 30, 2008


June 30, 2008United States facilities:Net revenue


10.6
%


9.2
%Surgical cases


0.9
%


0.7
%Net revenue per case(1)


9.6
%


8.5
%United Kingdom facilities:Net revenue using actual exchange rates


12.6
%


13.8
%Net revenue using constant exchange rates(2)


13.5
%


13.5
%All same store facilities:Net revenue using actual exchange rates


10.7
%


9.6
%     (1)
    
    Our overall same store growth in net revenue per case was
    favorably impacted by the growth at our twelve 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 6.1% and 6.2%
    for the three and six months ended June 30, 2008,
    respectively as 37




---



##### Table of Contents



compared to the corresponding prior year combined periods, after
    having increased by 1.8% during the year ended December 31,
    2007. 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, settlements in
    the second quarter of 2008 were excluded for similar reasons.(2)
    
    Calculated using 2008 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.  Joint
    Ventures With Not-For-Profit Hospitals
        June 30,2008


2007United States facilities(1):With a hospital partner


91



90Without a hospital partner


63



62Total U.S. facilities


154



152United Kingdom facilities


3



3Total facilities operated


157



155Change from June 30, 2007:De novo (newly constructed)


6Acquisition


4Disposals(2)


(8
)Total increase in number of facilities


2     (1)
    
    At June 30, 2008, physicians own a portion of all of these
    facilities.(2)
    
    We sold our ownership interests in facilities in Los Angeles,
    California; Cleveland, Ohio; Sarasota, Florida; Atlanta,
    Georgia; Baltimore, Maryland; Houston, Texas; and Decatur,
    Alabama. Additionally, we ceased managing a facility effective
    October 1, 2007, although we still held an ownership
    interest until we sold it in July 2008.  Facility
    Operating Margins
   38




---



##### Table of Contents



Three Months Ended


Increase


Six Months Ended


IncreaseJune 30, 2008


(Decrease)


June 30, 2008


(Decrease)United States facilities:With a hospital partner


24.1
%


50  bps



23.3
%


(60) bpsWithout a hospital partner


30.7
%


(280) bps



31.3
%


(290) bpsTotal U.S. facilities


25.8
%


(70) bps



25.4
%


(150) bpsUnited Kingdom facilities(2)


25.5
%


90  bps



26.3
%


160  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 2008 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. The favorable impact, in the
    first quarter of 2008, of a settlement of a contract dispute
    with a major payer in the first quarter of 2008 has been
    excluded from these growth rates, as it related to dates of
    service prior to January 1, 2008. 39




---



##### Table of Contents



Three
    Months Ended June 30, 2008 Compared to Combined Three
    Months Ended June 30, 2007
              Form 10-K
 40




---



##### Table of Contents



Six
    Months Ended June 30, 2008 Compared to Combined Six Months
    Ended June 30, 2007
               41




---



##### Table of Contents



Form 10-K
      Liquidity
    and Capital Resources
  Cash
    Flows
    ,
    Debt
   42




---



##### Table of Contents



Senior
    secured credit facility
  buy-up buy-up buy-ups
    Senior
    subordinated notes
  7 8 1 4 payment-in-kind 1 4
 43




---



##### Table of Contents



United
    Kingdom borrowings
        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 (principal plus interest)(1):U.S. Term loan facility (Term B)

$
706,648


$
41,062


$
81,670


$
80,197


$
503,719Senior subordinated notes, due 2017


429,925



21,300



42,600



42,600



323,425Senior subordinated toggle notes, due 2017


364,958



18,500



37,000



37,000



272,458Amended and restated U.K. credit facility


106,930



12,507



26,861



67,562



Other debt at operating subsidiaries


43,246



12,005



16,837



7,872



6,532Capitalized lease obligations


76,548



8,412



15,603



11,856



40,677Operating lease obligations


69,598



13,686



22,187



13,426



20,299Total contractual cash obligations

$
1,797,853


$
127,472


$
242,758


$
260,513


$
1,167,110     (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 June 30, 2008
    rates applicable to each debt instrument and also gives effect
    to the interest rate swap designated in a cash flow hedging
    relationship against a portion of the U.K. credit facility. 44




---



##### Table of Contents



Debt
    at Operating Subsidiaries
      Related
    Party Transactions
         45




---



##### Table of Contents



New
    Accounting Pronouncements
  Business Combinations
  Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  Disclosures about Derivative Instruments and Hedging
    Activities, an amendment of FASB Statement No. 133
  No. 142-3, Determination of the Useful Life of Intangible Assets FSP 142-3 Goodwill and Other Intangible
    Assets FSP 142-3 Business Combinations FSP 142-3 FSP 142-3
  The
    Hierarchy of Generally Accepted Accounting Principles The Meaning of Present
    Fairly in Conformity With Generally Accepted Accounting
    Principles, The
    Meaning of Present Fairly in Conformity with Generally Accepted
    Accounting Principles
 46




---



##### Table of Contents



ITEM 3.
    Quantitative
    and Qualitative Disclosures About Market Risk            ITEM 4T.
    Controls
    and Procedures  Form 10-Q.
 47




---



##### 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 Note due 2017 and
    91/4%/10% Senior
    Subordinated Toggle Note 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 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. 48




---



##### 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)
 49




---



##### 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
    91/4%/10% Senior
    Subordinated 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
    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 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.