##### Table of Contents





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

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    June 30, 2010oro

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)
   o þ
   Regulation S-T o 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 5, 2010 was 100.




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##### 



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


Financial Information


3Item 1.


Financial Statements:Review Report of Independent Registered Public
    Accounting Firm


3Consolidated Balance Sheets (unaudited)


4Consolidated Statements of Income (unaudited)


5Consolidated Statements of Comprehensive Income
    (unaudited)


7Consolidated Statements of Changes in Equity
    (unaudited)


8Consolidated Statements of Cash Flows
    (unaudited)


10Notes to Consolidated Financial Statements
    (unaudited)


11Item 2.


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


27Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


45Item 4.


Controls and Procedures


46PART II.


Other Information


46Item 1.


Legal Proceedings


46Item 6.


Exhibits


47Signatures


48EX-31.1EX-31.2EX-32.1EX-32.2     2




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##### Table of Contents



PART I.
    FINANCIAL INFORMATION  ITEM 1.
    Financial
    Statements Report of
    Independent Registered Public Accounting Firm           KPMG LLP
    3




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIESConsolidated Balance Sheets
  June 30,


December 31,2010


2009(Unaudited)(In thousands  except share data)ASSETSCash and cash equivalents

$
40,701


$
34,890Accounts receivable, net of allowance for doubtful accounts of
    $8,530 and $8,160, respectively


50,221



54,237Other receivables


20,191



15,246Inventories of supplies


8,307



8,789Deferred tax asset, net


14,749



16,400Prepaids and other current assets


14,813



14,382Total current assets


148,982



143,944Property and equipment, net


200,475



198,506Investments in unconsolidated affiliates


343,126



355,499Goodwill


1,268,215



1,279,291Intangible assets, net


320,880



322,896Other assets


29,660



25,256Total assets

$
2,311,338


$
2,325,392LIABILITIES AND EQUITYAccounts payable

$
20,974


$
23,475Accrued salaries and benefits


21,536



33,015Due to affiliates


108,221



129,296Accrued interest


8,900



8,784Current portion of long-term debt


25,757



23,337Other current liabilities


45,362



39,053Total current liabilities


230,750



256,960Long-term debt, less current portion


1,040,433



1,048,191Other long-term liabilities


32,129



32,466Deferred tax liability, net


131,783



125,907Total liabilities


1,435,095



1,463,524Noncontrolling interests  redeemable (Note 3)


71,361



63,865Commitments and contingencies (Note 10)Equity:United Surgical Partners International, Inc. (USPI)
    stockholders equity:Common stock, $0.01 par value; 100 shares authorized;
    issued and outstanding






Additional paid-in capital


785,900



789,505Accumulated other comprehensive loss


(75,578
)


(58,845
)Retained earnings


54,340



27,292Total USPI stockholders equity


764,662



757,952Noncontrolling interests  nonredeemable (Note 3)


40,220



40,051Total equity


804,882



798,003Total liabilities and equity

$
2,311,338


$
2,325,392    4




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##### Table of Contents



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


Three MonthsEnded


EndedJune 30,


June 30,2010


2009(Unaudited  in thousands)Revenues:Net patient service revenues

$
128,609


$
132,816Management and contract service revenues


20,478



19,268Other revenues


1,123



4,283Total revenues


150,210



156,367Equity in earnings of unconsolidated affiliates


18,219



14,639Operating expenses:Salaries, benefits, and other employee costs


40,831



42,991Medical services and supplies


24,571



24,815Other operating expenses


24,465



24,397General and administrative expenses


9,119



9,755Provision for doubtful accounts


2,436



2,826Depreciation and amortization


8,488



8,910Total operating expenses


109,910



113,694Operating income


58,519



57,312Interest income


62



1,275Interest expense


(17,623
)


(17,576
)Other, net


(265
)


(157
)Total other expense, net


(17,826
)


(16,458
)Income before income taxes


40,693



40,854Income tax expense


(9,671
)


(7,997
)Net income


31,022



32,857Less: Net income attributable to noncontrolling interests


(15,135
)


(16,105
)Net income attributable to USPIs common stockholder

$
15,887


$
16,752    5




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##### Table of Contents



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


Six MonthsEnded


EndedJune 30,


June 30,2010


2009(Unaudited  in thousands)Revenues:Net patient service revenues

$
251,416


$
267,391Management and contract service revenues


40,221



38,052Other revenues


3,417



8,064Total revenues


295,054



313,507Equity in earnings of unconsolidated affiliates


32,507



28,197Operating expenses:Salaries, benefits, and other employee costs


81,463



85,865Medical services and supplies


49,856



50,568Other operating expenses


47,891



48,694General and administrative expenses


17,668



20,099Provision for doubtful accounts


4,319



4,879Depreciation and amortization


16,786



17,865Total operating expenses


217,983



227,970Operating income


109,578



113,734Interest income


426



1,741Interest expense


(35,736
)


(35,795
)Other, net (Note 3)


(173
)


(10,221
)Total other expense, net


(35,483
)


(44,275
)Income before income taxes


74,095



69,459Income tax expense


(17,427
)


(14,620
)Net income


56,668



54,839Less: Net income attributable to noncontrolling interests


(28,770
)


(32,400
)Net income attributable to USPIs common stockholder

$
27,898


$
22,439    6




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##### Table of Contents



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


Three MonthsEnded


EndedJune 30,


June 30,2010


2009(Unaudited  in thousands)Net income

$
31,022


$
32,857Other comprehensive income (loss):Foreign currency translation adjustments


(3,563
)


30,643Unrealized gain on interest rate swaps, net of tax


1,118



965Total other comprehensive income (loss)


(2,445
)


31,608Comprehensive income


28,577



64,465Less: Comprehensive income attributable to noncontrolling
    interests


(15,135
)


(16,105
)Comprehensive income attributable to USPIs common
    stockholder

$
13,442


$
48,360   Six Months


Six MonthsEnded


EndedJune 30,


June 30,2010


2009(Unaudited  in thousands)Net income

$
56,668


$
54,839Other comprehensive income (loss):Foreign currency translation adjustments


(18,151
)


26,163Unrealized gain on interest rate swaps, net of tax


1,418



902Total other comprehensive income (loss)


(16,733
)


27,065Comprehensive income


39,935



81,904Less: Comprehensive income attributable to noncontrolling
    interests


(28,770
)


(32,400
)Comprehensive income attributable to USPIs common
    stockholder

$
11,165


$
49,504    7




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
 AND SUBSIDIARIES
  Consolidated Statement of Changes in Equity
 For the Three Months and Six Months Ended June 30,
    2010
  USPIs Common StockholderAccumulatedAdditional


Other





NoncontrollingComprehensive


Outstanding





Paid-in


Comprehensive


Retained


InterestsTotal


Income (Loss)


Shares


Par Value


Capital


Income (Loss)


Earnings


Nonredeemable(Unaudited  in thousands, except share amounts)Balance, December 31, 2009

$
798,003


$




100


$



$
789,505


$
(58,845
)

$
27,292


$
40,051Distributions to noncontrolling interests


(1,702
)


























(1,702
)Purchases of noncontrolling interests


(88
)














(28
)










(60
)Sales of noncontrolling interests


(2,797
)














(2,950
)










153Contribution related to equity award grants by USPI Group
    Holdings, Inc. and other


532















532











Comprehensive income (loss):Net income


13,518



12,011



















12,011



1,507Other comprehensive loss:Unrealized gain on interest rate swaps, net of tax


300



300















300







Foreign currency translation adjustments


(14,588
)


(14,588
)














(14,588
)






Other comprehensive loss


(14,288
)


(14,288
)






















Comprehensive income (loss)


(770
)

$
(2,277
)






















1,507Balance, March 31, 2010


793,178







100







787,059



(73,133
)


39,303



39,949Distributions to noncontrolling interests


(1,450
)


























(1,450
)Purchases of noncontrolling interests


(142
)














(115
)










(27
)Sales of noncontrolling interests


(919
)














(1,496
)










577Contribution related to equity award grants by USPI Group
    Holdings, Inc. and other


452















452











Dividend to USPI Holdings/USPI Group Holdings


(850
)






















(850
)


Comprehensive income:Net income


17,058



15,887



















15,887



1,171Other comprehensive loss:Unrealized gain on interest rate swaps, net of tax


1,118



1,118















1,118







Foreign currency translation adjustments


(3,563
)


(3,563
)














(3,563
)






Other comprehensive income


(2,445
)


(2,445
)






















Comprehensive income


14,613


$
13,442























1,171Balance, June 30, 2010

$
804,882







100


$



$
785,900


$
(75,578
)

$
54,340


$
40,220    8




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##### Table of Contents



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


Other





NoncontrollingComprehensive


Outstanding





Paid-in


Comprehensive


Retained


InterestsTotal


Income (Loss)


Shares


Par Value


Capital


Income (Loss)


Earnings


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

$
805,964


$




100


$



$
801,902


$
(84,008
)

$
46,243


$
41,827Distributions to noncontrolling interests


(605
)


























(605
)Purchases of noncontrolling interests


(668
)














(453
)










(215
)Sales of noncontrolling interests


(2,146
)














(2,142
)










(4
)Deconsolidation of subsidiaries


(5,852
)


























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


462















462











Comprehensive income:Net income


6,915



5,687



















5,687



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


(63
)


(63
)














(63
)






Foreign currency translation adjustments


(4,480
)


(4,480
)














(4,480
)






Other comprehensive loss


(4,543
)


(4,543
)






















Comprehensive income


2,372


$
1,144























1,228Balance, March 31, 2009


799,527







100







799,769



(88,551
)


51,930



36,379Distributions to noncontrolling interests


(962
)


























(962
)Purchases of noncontrolling interests


(288
)














(270
)










(18
)Sales of noncontrolling interests


(1,904
)














(1,953
)










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


495















495











Comprehensive income:Net income


18,314



16,752



















16,752



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


965



965















965







Foreign currency translation adjustments


30,643



30,643















30,643







Other comprehensive income


31,608



31,608























Comprehensive income


49,922


$
48,360























1,562Balance, June 30, 2009

$
846,790







100


$



$
798,041


$
(56,943
)

$
68,682


$
37,010    9




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##### Table of Contents



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


Six MonthsEnded


EndedJune 30,


June 30,2010


2009(Unaudited  in thousands)Cash flows from operating activities:Net income

$
56,668


$
54,839Adjustments to reconcile net income to net cash provided by
    operating activities:Provision for doubtful accounts


4,319



4,879Depreciation and amortization


16,786



17,865Loss on sale of equity interests and other


570



10,253Amortization of debt issue costs and discount


1,612



1,558Deferred income tax expense


7,242



9,889Equity in earnings of unconsolidated affiliates, net of
    distributions received


8,003



(8,057
)Equity-based compensation


923



996Increases (decreases) in cash from changes in operating assets
    and liabilities, net of effects from purchases of new businesses:Accounts receivable


(981
)


(4,076
)Other receivables


(68
)


(4,311
)Inventories of supplies, prepaids and other current assets


(3,073
)


(3,205
)Accounts payable and other current liabilities


(13,803
)


(4,930
)Long-term liabilities


740



965Net cash provided by operating activities


78,938



76,665Cash flows from investing activities:Purchases of new businesses and equity interests, net of cash
    received


(9,437
)


(7,942
)Proceeds from sale of equity interests


9,681



1,347Purchases of property and equipment


(17,330
)


(11,090
)Returns of capital from unconsolidated affiliates


618



2,140Increase in deposits and notes receivable


(758
)


(3,545
)Net cash used in investing activities


(17,226
)


(19,090
)Cash flows from financing activities:Proceeds from long-term debt


11,963



110Payments on long-term debt


(17,136
)


(14,216
)(Decrease) increase in cash held on behalf of unconsolidated
    affiliates and other


(22,332
)


60,600Sales of noncontrolling interests, net


1,168



126Distributions to noncontrolling interests


(29,485
)


(29,965
)Net cash provided by (used in) financing activities


(55,822
)


16,655Effect of exchange rate changes on cash


(79
)


222Net increase in cash and cash equivalents


5,811



74,452Cash and cash equivalents at beginning of period


34,890



49,435Cash and cash equivalents at end of period

$
40,701


$
123,887Supplemental information:Interest paid

$
34,805


$
36,056Income taxes paid


3,292



5,809Non-cash transactions:Assets acquired under capital lease obligations

$
5,188


$
1,569    10




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES



Notes to
    Consolidated Financial Statements (Unaudited)  (1)
    Basis of
    Presentation  (a)
    Description
    of Business  not-for-profit not-for-profit
      Form 10-K.
      (2)
    Investments
    in Unconsolidated Affiliates and Business Combinations  not-for-profit
   11




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##### Table of Contents



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


Six MonthsEnded


EndedJune 30,


June 30,2010


2009


2010


2009Unconsolidated facilities operated at period-end


112



107



112



107Income statement information:Revenues

$
325,660


$
289,037


$
619,471


$
561,548Operating expenses:Salaries, benefits, and other employee costs


74,545



68,613



146,766



133,752Medical services and supplies


76,632



66,332



145,843



127,597Other operating expenses


75,553



67,757



145,463



132,539Depreciation and amortization


13,844



12,454



26,823



25,031Total operating expenses


240,574



215,156



464,895



418,919Operating income


85,086



73,881



154,576



142,629Interest expense, net


(6,537
)


(6,344
)


(12,660
)


(12,376
)Other, net


1,410



986



1,851



1,340Income before income taxes

$
79,959


$
68,523


$
143,767


$
131,593Balance sheet information:Current assets

$
264,485


$
239,783


$
264,485


$
239,783Noncurrent assets


450,008



410,129



450,008



410,129Current liabilities


150,142



147,706



150,142



147,706Noncurrent liabilities


308,766



295,768



308,766



295,768     
    Payment of $1.3 million to obtain additional ownership in
    one facility in Destin, Florida;
    Payment of $0.4 million for an investment in a surgical
    facility the Company has been managing since May 2009 in the
    St. Louis area;
    Payment of $0.6 million for the rights to manage a surgical
    facility in the Dallas/Fort Worth, Texas area and to fund a
    transaction whereby an unconsolidated investee of the Company
    acquired an equity interest in the facility;
    Receipt of $7.9 million for the sale of a portion of the
    Companys equity ownership in one facility in Cincinnati,
    Ohio to a
    not-for-profit
    hospital, and;
    Net payment of approximately $0.8 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 (Unaudited) 
    (Continued)
    (3)
    Noncontrolling
    Interests      Three Months


Six Months


Three Months


Six MonthsEnded


Ended


Ended


EndedJune 30, 2010


June 30,2010


June 30, 2009


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

$
15,887


$
27,898


$
16,752


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


(1,496
)


(4,446
)


(1,953
)


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


(115
)


(143
)


(270
)


(723
)Net transfers to noncontrolling interests


(1,611
)


(4,589
)


(2,223
)


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

$
14,276


$
23,309


$
14,529


$
17,621   not-for-profit not-for-profit
   13




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements (Unaudited) 
    (Continued)
        2010NoncontrollingInterests RedeemableBalance, December 31, 2009

$
63,865Net income attributable to noncontrolling interests


12,128Distributions to noncontrolling interests


(12,452
)Purchases of noncontrolling interests


(195
)Sales of noncontrolling interests


3,708Deconsolidation of noncontrolling interests and other


75Balance, March 31, 2010


67,129Net income attributable to noncontrolling interests


13,964Distributions to noncontrolling interests


(13,881
)Purchases of noncontrolling interests


(229
)Sales of noncontrolling interests


1,923Purchase of new business


2,455Balance, June 30, 2010

$
71,361   14




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##### Table of Contents



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

$
51,961Net income attributable to noncontrolling interests


15,054Distributions to noncontrolling interests


(13,359
)Purchases of noncontrolling interests


(594
)Sales of noncontrolling interests


3,117Deconsolidation of noncontrolling interests and other


(2,189
)Balance, March 31, 2009


53,990Net income attributable to noncontrolling interests


14,544Distributions to noncontrolling interests


(14,780
)Purchases of noncontrolling interests


(345
)Sales of noncontrolling interests


2,926Deconsolidation of noncontrolling interests and other


(239
)Balance, June 30, 2009

$
56,096   (4)
    Other
    Investments       15




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements (Unaudited) 
    (Continued)
      (5)
    Interest
    Rate Swaps             16




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements (Unaudited) 
    (Continued)
        (6)
    Fair
    Value of Financial Instruments        (7)
    Equity-Based
    Compensation   17




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##### Table of Contents



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


Six Months


Three Months


Six MonthsEnded


Ended


Ended


EndedJune 30, 2010


June 30, 2010


June 30, 2009


June 30, 2009Salaries, benefits and other employee costs

$
162


$
365


$
183


$
384General and administrative expenses


283



558



240



481Other operating expenses










131



131Expense before income tax benefit


445



923



554



996Income tax benefit


(95
)


(195
)


(97
)


(189
)Total equity-based compensation expense, net of tax

$
350


$
728


$
457


$
807     Three Months


Six Months


Three Months


Six MonthsEnded


Ended


Ended


EndedJune 30, 2010


June 30, 2010


June 30, 2009


June 30, 2009Share awards

$
343


$
661


$
301


$
585Stock options


102



262



122



280Warrants










131



131Expense before income tax benefit


445



923



554



996Income tax benefit


(95
)


(195
)


(97
)


(189
)Total equity-based compensation expense, net of tax

$
350


$
728


$
457


$
807   1 2
  (8)
    Segment
    Disclosures   18




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##### Table of Contents



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


UnitedThree Months Ended June 30, 2010

States


Kingdom


TotalNet patient service revenues

$
103,793


$
24,816


$
128,609Other revenues


21,601







21,601Total revenues

$
125,394


$
24,816


$
150,210Depreciation and amortization

$
6,754


$
1,734


$
8,488Operating income


54,720



3,799



58,519Net interest expense


(17,044
)


(517
)


(17,561
)Income tax expense


(8,876
)


(795
)


(9,671
)Total assets


1,998,841



312,497



2,311,338Capital expenditures


6,843



5,876



12,719   United


UnitedSix Months Ended June 30, 2010

States


Kingdom


TotalNet patient service revenues

$
200,254


$
51,162


$
251,416Other revenues


43,638







43,638Total revenues

$
243,892


$
51,162


$
295,054Depreciation and amortization

$
13,385


$
3,401


$
16,786Operating income


101,421



8,157



109,578Net interest expense


(33,440
)


(1,870
)


(35,310
)Income tax expense


(15,817
)


(1,610
)


(17,427
)Total assets


1,998,841



312,497



2,311,338Capital expenditures


11,472



11,046



22,518   United


UnitedThree Months Ended June 30, 2009

States


Kingdom


TotalNet patient service revenues

$
106,436


$
26,380


$
132,816Other revenues


23,551







23,551Total revenues

$
129,987


$
26,380


$
156,367Depreciation and amortization

$
7,170


$
1,740


$
8,910Operating income


51,662



5,650



57,312Net interest income (expense)


(16,674
)


373



(16,301
)Income tax expense


(6,305
)


(1,692
)


(7,997
)Total assets


2,045,195



325,408



2,370,603Capital expenditures


3,744



2,377



6,121   19




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##### Table of Contents



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


UnitedSix Months Ended June 30, 2009

States


Kingdom


TotalNet patient service revenues

$
216,639


$
50,752


$
267,391Other revenues


46,116







46,116Total revenues

$
262,755


$
50,752


$
313,507Depreciation and amortization

$
14,685


$
3,180


$
17,865Operating income


102,631



11,103



113,734Net interest expense


(33,694
)


(360
)


(34,054
)Income tax expense


(11,552
)


(3,068
)


(14,620
)Total assets


2,045,195



325,408



2,370,603Capital expenditures


8,540



4,119



12,659   (9)
    Related
    Party Transactions    (10)
    Commitments
    and Contingencies      (11)
    Subsequent
    Events   20




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##### Table of Contents



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


Consolidation


ConsolidatedAs of June 30,  2010

Guarantors


Investees


Adjustments


TotalASSETSCurrent assets:Cash and cash equivalents

$
28,448


$
12,253


$



$
40,701Accounts receivable, net






50,186



35



50,221Other receivables


47,564



40,174



(67,547
)


20,191Inventories of supplies


452



7,855







8,307Prepaids and other current assets


26,528



3,034







29,562Total current assets


102,992



113,502



(67,512
)


148,982Property and equipment, net


14,843



185,240



392



200,475Investments in unconsolidated affiliates


964,575







(621,449
)


343,126Goodwill and intangible assets, net


892,365



335,677



361,053



1,589,095Other assets


98,728



3,351



(72,419
)


29,660Total assets

$
2,073,503


$
637,770


$
(399,935
)

$
2,311,338LIABILITIES AND EQUITYLiabilities and EquityCurrent liabilities:Accounts payable

$
1,257


$
19,717


$



$
20,974Accrued expenses and other


196,551



53,638



(66,170
)


184,019Current portion of long-term debt


5,479



22,392



(2,114
)


25,757Total current liabilities


203,287



95,747



(68,284
)


230,750Long-term debt, less current portion


951,753



94,713



(6,033
)


1,040,433Other long-term liabilities


153,801



10,857



(746
)


163,912Parents equity


764,662



415,342



(415,342
)


764,662Noncontrolling interests






21,111



90,470



111,581Total liabilities and equity

$
2,073,503


$
637,770


$
(399,935
)

$
2,311,338   22




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##### Table of Contents



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


Consolidation


ConsolidatedAs of December 31, 2009

Guarantors


Investees


Adjustments


TotalASSETSCurrent assets:Cash and cash equivalents

$
27,430


$
7,460


$



$
34,890Accounts receivable, net






54,202



35



54,237Other receivables


46,975



45,776



(77,505
)


15,246Inventories of supplies


428



8,361







8,789Prepaids and other current assets


26,264



4,518







30,782Total current assets


101,097



120,317



(77,470
)


143,944Property and equipment, net


16,197



181,857



452



198,506Investments in unconsolidated affiliates


1,027,814







(672,315
)


355,499Goodwill and intangible assets, net


857,802



353,212



391,173



1,602,187Other assets


96,205



2,213



(73,162
)


25,256Total assets

$
2,099,115


$
657,599


$
(431,322
)

$
2,325,392LIABILITIES AND EQUITYCurrent liabilities:Accounts payable

$
1,396


$
22,079


$



$
23,475Accrued expenses and other


235,904



50,200



(75,956
)


210,148Current portion of long-term debt


5,480



20,116



(2,259
)


23,337Total current liabilities


242,780



92,395



(78,215
)


256,960Long-term debt, less current portion


952,311



118,892



(23,012
)


1,048,191Other long-term liabilities


146,072



13,122



(821
)


158,373Parents equity


757,952



412,362



(412,362
)


757,952Noncontrolling interests






20,828



83,088



103,916Total liabilities and equity

$
2,099,115


$
657,599


$
(431,322
)

$
2,325,392  23




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##### Table of Contents



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


Consolidation


ConsolidatedFor the Six Months Ended June 30, 2010

Guarantors


Investees


Adjustments


TotalRevenues

$
46,996


$
259,090


$
(11,032
)

$
295,054Equity in earnings of unconsolidated affiliates


63,416



1,212



(32,121
)


32,507Operating expenses, excluding depreciation and amortization


33,129



179,132



(11,064
)


201,197Depreciation and amortization


3,699



12,979



108



16,786Operating income


73,584



68,191



(32,197
)


109,578Interest expense, net


(30,632
)


(4,588
)


(90
)


(35,310
)Other income (expense), net


(94
)


(815
)


736



(173
)Income from before income taxes


42,858



62,788



(31,551
)


74,095Income tax expense


(14,960
)


(2,467
)






(17,427
)Net income


27,898



60,321



(31,551
)


56,668Less: Net income attributable to noncontrolling interests






(5,417
)


(23,353
)


(28,770
)Net income attributable to Parent

$
27,898


$
54,904


$
(54,904
)

$
27,898   Non-Participating


Consolidation


ConsolidatedFor the Six Months Ended June 30, 2009

Guarantors


Investees


Adjustments


TotalRevenues

$
48,646


$
276,369


$
(11,508
)

$
313,507Equity in earnings of unconsolidated affiliates


66,693



1,707



(40,203
)


28,197Operating expenses, excluding depreciation and amortization


38,697



182,935



(11,527
)


210,105Depreciation and amortization


3,594



14,065



206



17,865Operating income


73,048



81,076



(40,390
)


113,734Interest expense, net


(30,322
)


(4,021
)


289



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


(10,128
)


62



(155
)


(10,221
)Income from before income taxes


32,598



77,117



(40,256
)


69,459Income tax expense


(10,159
)


(4,461
)






(14,620
)Net income


22,439



72,656



(40,256
)


54,839Less: Net income attributable to noncontrolling interests






(4,806
)


(27,594
)


(32,400
)Net income attributable to Parent

$
22,439


$
67,850


$
(67,850
)

$
22,439  24




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##### Table of Contents



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


Consolidation


ConsolidatedSix Months Ended June 30, 2010

Guarantors


Investees


Adjustments


TotalCash flows from operating activities:Net income

$
27,898


$
60,321


$
(31,551
)

$
56,668Changes in operating and intercompany assets and liabilities and
    noncash items included in net income


3,769



12,343



6,158



22,270Net cash provided by operating activities


31,667



72,664



(25,393
)


78,938Cash flows from investing activities:Purchases of property and equipment, net


(1,421
)


(15,909
)






(17,330
)Purchases and sales of businesses and equity interests, net


244











244Other items, net


(3,265
)


5,155



(2,030
)


(140
)Net cash provided by (used in) investing activities


(4,442
)


(10,754
)


(2,030
)


(17,226
)Cash flows from financing activities:Long-term borrowings, net


367



(6,457
)


917



(5,173
)Purchases and sales of noncontrolling interests, net


912



256







1,168Distributions to noncontrolling interests






(54,879
)


25,394



(29,485
)Decrease in cash held on behalf of noncontrolling interest
    holders and other


(27,486
)


4,042



1,112



(22,332
)Net cash provided by (used in) financing activities


(26,207
)


(57,038
)


27,423



(55,822
)Effect of exchange rate changes on cash






(79
)






(79
)Net increase in cash


1,018



4,793







5,811Cash at the beginning of the period


27,430



7,460







34,890Cash at the end of the period

$
28,448


$
12,253


$



$
40,701   25




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##### Table of Contents



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


Consolidation


ConsolidatedSix Months Ended June 30, 2009

Guarantors


Investees


Adjustments


TotalCash flows from operating activities:Net income

$
22,439


$
72,656


$
(40,256
)

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


(2,323
)


9,846



14,303



21,826Net cash provided by operating activities


20,116



82,502



(25,953
)


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


(1,195
)


(9,895
)






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


(6,693
)


98







(6,595
)Other items, net


(2,122
)


(7,532
)


8,249



(1,405
)Net cash used in investing activities


(10,010
)


(17,329
)


8,249



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


(5,117
)


(9,609
)


620



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


126











126Distributions to noncontrolling interests






(55,918
)


25,953



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


68,132



1,337



(8,869
)


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


63,141



(64,190
)


17,704



16,655Effect of exchange rate changes on cash






222







222Net increase in cash


73,247



1,205







74,452Cash at the beginning of the period


42,025



7,410







49,435Cash at the end of the period

$
115,272


$
8,615


$



$
123,887  26




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##### Table of Contents



ITEM 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-Q.
  Forward-Looking
    Statements
  Form 10-Q, Form 10-Q.
  Overview
  not-for-profit
     27




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##### Table of Contents



Critical
    Accounting Policies and Estimates
         28




---



##### Table of Contents



Acquisitions,
    Equity Investments and Development Projects
      Effective Date

Facility Location


AmountInvestmentsApril 2010


Destin, Florida(1
)

$
1.3 millionApril 2010


St. Louis, Missouri(2
)


0.4 millionMay 2010


Mansfield, Texas(3
)


0.6 millionVarious


Various(4
)


0.8 million3.1 millionSalesJune 2010


Cincinnati, Ohio(5
)


7.9 millionTotal





$
4.8 million     (1)
    
    Acquisition of an additional noncontrolling interest in a
    surgical facility in which we already held an investment This
    facility is jointly owned with local physicians.(2)
    
    Acquisition of a noncontrolling interest in a surgical facility
    in which we already provided management services. This facility
    is jointly owned with one of our hospital partners and local
    physicians.(3)
    
    Acquisition of a noncontrolling interest in and right to manage
    a surgical facility in which we previously had no involvement.
    This facility is jointly owned with one of our hospital partners
    and local physicians.(4)
    
    Represents the net purchase of additional ownership and equity
    contributions in various other unconsolidated affiliates.(5)
    
    Sale of a portion of our equity ownership in one facility to a
    hospital partner.    Deconsolidations
  not-for-profit
 29




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##### Table of Contents



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


Six MonthsEnded


EndedJune 30,


June 30,2010


2009


2010


2009Net patient service revenues


86
%


85
%


85
%


85
%Management and contract service revenues


13



12



14



12Other revenues


1



3



1



3Total revenues


100
%


100
%


100
%


100
%       Three Months


Six MonthsEnded


EndedJune 30,


June 30,2010


2009


2010


2009Management of surgical facilities

$
13,068


$
11,486


$
25,618


$
22,667Contract services provided to hospitals, physicians and related
    entities


7,410



7,782



14,603



15,385Total management and contract service revenues

$
20,478


$
19,268


$
40,221


$
38,052    30




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##### Table of Contents



Three Months


Six MonthsEnded


EndedJune 30,


June 30,2010


2009


2010


2009United States


83
%


83
%


83
%


84
%United Kingdom


17



17



17



16Total


100
%


100
%


100
%


100
%     Results
    of Operations
    Three Months


Six MonthsEnded June 30,


Ended June 30,USPI

2010


2009


2010


2009Total revenues


100.0
%


100.0
%


100.0
%


100.0
%Equity in earnings of unconsolidated affiliates


12.1



9.4



11.0



9.0Operating expenses, excluding depreciation and amortization


(67.5
)


(67.0
)


(68.2
)


(67.0
)Depreciation and amortization


(5.7
)


(5.7
)


(5.7
)


(5.7
)/Operating income


38.9



36.7



37.1



36.3Interest and other expense, net


(11.8
)


(10.6
)


(12.0
)


(14.1
)Income from before income taxes


27.1



26.1



25.1



22.2Income tax expense


(6.4
)


(5.1
)


(5.9
)


(4.7
)Net income


20.7



21.0



19.2



17.5Less: Net income attributable to noncontrolling interests


(10.1
)


(10.3
)


(9.7
)


(10.3
)Net income attributable to USPIs common stockholder


10.6
%


10.7
%


9.5
%


7.2
%   not-for-profit
  Three Months


Six MonthsEnded June 30,


Ended June 30,USPIs Unconsolidated Affiliates

2010


2009


2010


2009Total revenues


100.0
%


100.0
%


100.0
%


100.0
%Operating expenses, excluding depreciation and amortization


(69.6
)


(70.0
)


(70.7
)


(70.1
)Depreciation and amortization


(4.3
)


(4.3
)


(4.3
)


(4.5
)Operating income


26.1



25.7



25.0



25.4Interest and other expense, net


(1.6
)


(1.9
)


(1.7
)


(1.9
)Income before income taxes


24.5



23.8



23.3



23.5Income tax expense


(0.4
)


(0.5
)


(0.6
)


(0.6
)Net income


24.1
%


23.3
%


22.7
%


22.9
%  31




---



##### Table of Contents



Executive
    Summary
    year-over-year
  non-for-profit year-to-date
  year-to-date year-over-year year-to-date
  year-over-year
  year-over-year year-to-date
 32




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##### Table of Contents



Our
    Business and Key Measures
  not-for-profit day-to-day
  
    our share of each facilitys net income or loss, which is
    computed by multiplying the facilitys net income or loss
    times the percentage of each facilitys equity interests
    owned by us.
    management services revenues, computed as a percentage of each
    facilitys net revenues (often net of bad debt
    expense); and  day-to-day
      
    equity in earnings of unconsolidated affiliates: our share of
    the net income of each facility, which is based on the
    facilities net income or loss and the percentage of the
    facilitys outstanding equity interests owned by
    us; and
    management and administrative services revenues: income we earn
    in exchange for managing the
    day-to-day
    operations of each facility, usually quantified as a percentage
    of each facilitys net revenues less bad debt expense.    
    The results of operations of USPIs unconsolidated
    affiliates
    USPIs average ownership share in the facilities we
    operate; and
    Facility operating indicators, such as systemwide revenue
    growth, same store revenue growth, and same store operating
    margins 33




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##### Table of Contents



Our
    Consolidated and Unconsolidated Results
    Three Months Ended June 30,2010


2009


Variance to Prior YearUSPI as





USPI as





USPI asReported





Reported





ReportedUnder


Unconsolidated


Under


Unconsolidated


Under


UnconsolidatedGAAP


Affiliates


GAAP


Affiliates


GAAP


AffiliatesRevenues:Net patient service revenues

$
128,609


$
325,077


$
132,816


$
287,333


$
(4,207
)

$
37,744Management and administrative services revenues


20,478







19,268







1,210



Other income


1,123



583



4,283



1,704



(3,160
)


(1,121
)Total revenues


150,210



325,660



156,367



289,037



(6,157
)


36,623Equity in earnings of unconsolidated affiliates


18,219







14,639







3,580



Operating expenses:Salaries, benefits and other employee costs


40,831



74,545



42,991



68,613



(2,160
)


5,932Medical services and supplies


24,571



76,632



24,815



66,332



(244
)


10,300Other operating expenses


24,465



67,480



24,397



60,964



68



6,516General and administrative expenses


9,119







9,755







(636
)


Provision for doubtful accounts


2,436



8,073



2,826



6,793



(390
)


1,280Depreciation and amortization


8,488



13,844



8,910



12,454



(422
)


1,390Total operating expenses


109,910



240,574



113,694



215,156



(3,784
)


25,418Operating income


58,519



85,086



57,312



73,881



1,207



11,205Interest income


62



91



1,275



91



(1,213
)


Interest expense


(17,623
)


(6,628
)


(17,576
)


(6,435
)


(47
)


(193
)Other, net


(265
)


1,410



(157
)


986



(108
)


424Total other expenses, net


(17,826
)


(5,127
)


(16,458
)


(5,358
)


(1,368
)


231Income before income taxes


40,693



79,959



40,854



68,523



(161
)


11,436Income tax expense


(9,671
)


(1,343
)


(7,997
)


(1,395
)


(1,674
)


52Net income


31,022


$
78,616



32,857


$
67,128



(1,835
)

$
11,488Less: Net income attributable to noncontrolling interests


(15,135
)






(16,105
)






970Net income attributable to USPIs common stockholder

$
15,887






$
16,752






$
(865
)USPIs equity in earnings of unconsolidated affiliates





$
18,219






$
14,639






$
3,580   34




---



##### Table of Contents



Six Months Ended June 30,2010


2009


Variance to Prior YearUSPI as





USPI as





USPI asReported





Reported





ReportedUnder


Unconsolidated


Under


Unconsolidated


Under


UnconsolidatedGAAP


Affiliates


GAAP


Affiliates


GAAP


AffiliatesRevenues:Net patient service revenues

$
251,416


$
618,369


$
267,391


$
559,125


$
(15,975
)

$
59,244Management and administrative services revenues


40,221







38,052







2,169



Other income


3,417



1,102



8,064



2,423



(4,647
)


(1,321
)Total revenues


295,054



619,471



313,507



561,548



(18,453
)


57,923Equity in earnings of unconsolidated affiliates


32,507







28,197







4,310



Operating expenses:Salaries, benefits and other employee costs


81,463



146,766



85,865



133,752



(4,402
)


13,014Medical services and supplies


49,856



145,843



50,568



127,597



(712
)


18,246Other operating expenses


47,891



130,986



48,694



120,353



(803
)


10,633General and administrative expenses


17,668







20,099







(2,431
)


Provision for doubtful accounts


4,319



14,477



4,879



12,186



(560
)


2,291Depreciation and amortization


16,786



26,823



17,865



25,031



(1,079
)


1,792Total operating expenses


217,983



464,895



227,970



418,919



(9,987
)


45,976Operating income


109,578



154,576



113,734



142,629



(4,156
)


11,947Interest income


426



192



1,741



276



(1,315
)


(84
)Interest expense


(35,736
)


(12,852
)


(35,795
)


(12,652
)


59



(200
)Other, net


(173
)


1,851



(10,221
)


1,340



10,048



511Total other expenses, net


(35,483
)


(10,809
)


(44,275
)


(11,036
)


8,792



227Income before income taxes


74,095



143,767



69,459



131,593



4,636



12,174Income tax expense


(17,427
)


(3,155
)


(14,620
)


(3,090
)


(2,807
)


(65
)Net income


56,668


$
140,612



54,839


$
128,503



1,829


$
12,109Less: Net income attributable to noncontrolling interests


(28,770
)






(32,400
)






3,630Net income attributable to USPIs common stockholder

$
27,898






$
22,439






$
5,459USPIs equity in earnings of unconsolidated affiliates





$
32,507






$
28,197






$
4,310     Three Months


Six MonthsEnded June 30,


Ended June 30,2010


2009


2010


2009Long-term debt

$
295,343


$
286,366


$
295,343


$
286,366USPIs imputed weighted average ownership percentage based
    on affiliates pre-tax income(1)


22.8
%


21.6
%


22.6
%


21.7
%USPIs imputed weighted average ownership percentage based
    on affiliates debt(2)


24.8
%


25.1
%


24.8
%


25.1
%Unconsolidated facilities operated at period end


112



107



112



107     (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. 35




---



##### Table of Contents



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 is a
    non-GAAP measure but management believes it provides further
    useful information about its involvement in equity method
    investments.  year-to-date
  Our
    Ownership Interests in the Facilities We Operate
    Six Months Ended


Year Ended


Six Months EndedJune 30,


December 31,


June 30,2010


2009


2009Equity method facilities(1)


22.6
%


21.5
%


21.4
%Consolidated facilities(2)


47.0
%


48.1
%


49.1
%Total(3)


29.3
%


29.4
%


30.5
%     (1)
    
    Computed for unconsolidated facilities by dividing (a) our
    total equity in earnings of unconsolidated affiliates by
    (b) the aggregate net income of U.S. surgical facilities we
    account for under the equity method.(2)
    
    Computed for consolidated facilities by dividing (a) the
    aggregate net income of U.S. surgical facilities we operate less
    our total noncontrolling interests in income of consolidated
    subsidiaries by (b) the aggregate net income of our
    consolidated U.S. surgical facilities.(3)
    
    Computed in total by dividing our share of the facilities
    net income, defined as the sum of (a) in footnotes
    (1) and (2), by the aggregate net income of our U.S.
    surgical facilities, defined as the sum of (b) in footnotes
    (1) and (2).  not-for-profit
   36




---



##### Table of Contents



Revenues
    Three Months EndedJune 30, 2010USPI as Reported


UnconsolidatedUnder GAAP


AffiliatesTotal revenues, three months ended June 30, 2009

$
156,367


$
289,037Add: Revenue from acquired facilities


1,785



7,688Less: Revenue of disposed facilities






(3,611
)Less: Revenue of deconsolidated facilities


(2,960
)


2,960Impact of exchange rate


(977
)


Adjusted base period


154,215



296,074(Decrease) increase from operations


(3,907
)


26,628Non-facility based revenue


(98
)


2,958Total revenues, three months ended June 30, 2010

$
150,210


$
325,660   Six Months EndedJune 30, 2010USPI as Reported


UnconsolidatedUnder GAAP


AffiliatesTotal revenues, six months ended June 30, 2009

$
313,507


$
561,548Add: Revenue from acquired facilities


3,407



14,551Less: Revenue of disposed facilities






(9,475
)Less: Revenue of deconsolidated facilities


(11,110
)


11,110Impact of exchange rate


1,137



Adjusted base period


306,941



577,734(Decrease) increase from operations


(10,639
)


39,007Non-facility based revenue


(1,248
)


2,730Total revenues, six months ended June 30, 2010

$
295,054


$
619,471     Facility
    Growth
   37




---



##### Table of Contents



year-over-year
      Three Months


Six MonthsEnded


EndedJune 30, 2010


June 30, 2010United States facilities:Net revenue


6
%


4
%Surgical cases



%


(1
)%Net revenue per case(1)


6
%


5
%United Kingdom facilities:Adjusted admissions


(6
)%


(5
)%Net revenue using actual exchange rates


(6
)%


1
%Net revenue using constant exchange rates(2)


(2
)%


(1
)%All same store facilities:Net revenue using actual exchange rates


5
%


4
%     (1)
    
    Our overall domestic same store growth in net revenue per case
    for the three and six months ended June 30, 2010, was
    favorably impacted by the 12% growth at our thirteen same store
    hospitals, which on average perform more complex cases and thus
    earn a higher average net revenue per case than ambulatory
    surgery centers. The net revenue per case growth at our
    ambulatory surgery centers was 3% during the second quarter of
    2010.(2)
    
    Calculated using 2010 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
    not-for-profit
 38




---



##### Table of Contents



June 30,2010


2009United States facilities(1):With a hospital partner


114



105Without a hospital partner


54



61Total U.S. facilities


168



166United Kingdom facilities


4



4Total facilities operated


172



170Change from June 30, 2009:De novo (newly constructed)


3Acquisition


6Disposals(2)


(7
)Total increase in number of facilities


2     (1)
    
    At June 30, 2010, physicians own a portion of all of these
    facilities.(2)
    
    We sold our ownership interests in facilities in Cleveland,
    Ohio; San Antonio, Texas; Baton Rouge, Louisiana; and
    Oxnard, California. We merged one of our surgery centers into
    one of our hospitals in Oklahoma, and also merged two of our
    surgery centers into one location in Ohio.  Facility
    Operating Margins
  year-over-year not-for-profit
  ramp-up not-for-profit
   39




---



##### Table of Contents



year-over-year
  Three Months Ended





Six Months EndedJune 30, 2010


(Decrease)


June 30, 2010


(Decrease)United States facilities:With a hospital partner


26.5
%


(30
) bps


25.2
%


(120
) bpsWithout a hospital partner


31.7
%


(60
) bps


30.9
%


(200
) bpsTotal U.S. facilities


27.6
%


(40
) bps


26.4
%


(140
) bpsUnited Kingdom facilities(2)


23.5
%


(10
) bps


24.4
%


(120
) 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 2010 exchange rates for both periods. Although
    this computation represents a non-GAAP measure, we believe that
    using a constant currency translation rate more accurately
    reflects the trend of the business. In addition, the
    $1.0 million unfavorable impact of a payment of value-added
    tax in the first quarter of 2010 has been excluded from U.K.
    same store facility operating margins. The favorable impact of
    this value-added tax recorded in the second quarter of 2009 was
    also excluded.  Three
    Months Ended June 30, 2010 Compared to Three Months Ended
    June 30, 2009
          year-over-year
 40




---



##### Table of Contents



year-over-year
  Six
    Months Ended June 30, 2010 Compared to Six Months Ended
    June 30, 2009
           41




---



##### Table of Contents



year-over-year year-over-year
  Liquidity
    and Capital Resources
  Cash
    Flows
        Debt
   42




---



##### Table of Contents



Senior
    secured credit facility
  sub-facility, sub-facility;
      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:Senior secured credit facility(1)

$
519,078


$
5,265


$
18,530


$
495,283


$
Senior subordinated notes, due 2017(1)


240,000















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


197,515















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


54,984



10,048



44,936







Other debt at operating subsidiaries(1)


23,997



6,203



9,101



5,234



3,459Interest on long-term debt obligations(2)


352,586



61,602



120,368



94,261



76,355Capitalized lease obligations(3)


50,796



8,118



11,964



7,495



23,219Operating lease obligations


84,587



14,094



24,957



16,844



28,692Total contractual cash obligations

$
1,523,543


$
105,330


$
229,856


$
619,117


$
569,240     (1)
    
    Scheduled principal payments 44




---



##### Table of Contents



(2)
    
    Represents interest due on long-term debt obligations. For
    variable rate debt, the interest is calculated using the
    June 30, 2010 rates applicable to each debt instrument and
    also gives effect to the interest rate swaps designated in a
    cash flow hedging relationship against portions of the U.K.
    credit facility and senior secured credit facility in the U.S.(3)
    
    Includes related principal and interest.  Debt
    at Operating Subsidiaries
        Related
    Party Transactions
    ITEM 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  variable-to-fixed
 45




---



##### Table of Contents



ITEM 4.
    Controls
    and Procedures  Form 10-Q.
 PART II 
    OTHER INFORMATION  ITEM 1.
    Legal
    Proceedings   46




---



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

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

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

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

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

Certification of Chief Financial Officer pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002.     *
    
    Filed herewith 47




---



##### Table of Contents



SIGNATURES      By:
    /s/  Mark
    A. Kopser   Executive Vice President
    and Chief Financial Officer
    (Principal Financial Officer)
    By:
    /s/  J.
    Anthony Martin   Vice President, Corporate Controller,
    and Chief Accounting Officer
    (Principal Accounting Officer)
 48




---



##### Table of Contents



Exhibit Index
  3
.1

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

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

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

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

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

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

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

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