##### 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
    March 31, 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

75001(Zip Code)(Address of principal executive
    offices)   (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 May 5, 2008 was 100.




---



##### 



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


Review Report of Independent Registered Public
    Accounting Firm


3Financial Statements


4Consolidated Balance Sheets (unaudited)


4Consolidated Statements of Income (unaudited)


5Consolidated Statements of Comprehensive Income
    (unaudited)


6Consolidated Statements of Cash Flows
    (unaudited)


7Notes to Consolidated Financial Statements
    (unaudited)


8Item 2.


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


22Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


35Item 4T.


Controls and Procedures


36PART II. Other InformationItem 1.


Legal Proceedings


36Item 6.


Exhibits


36Signatures





37Certification of Chief Executive Officer Pursuant to Section 302Certification of Chief Financial Officer Pursuant to Section 302Certification of Chief Executive Officer Pursuant to Section 906Certification of Chief Financial Officer Pursuant to Section 906     2




---



##### Table of Contents



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




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
 Consolidated
    Balance Sheets  March 31, 2008


December 31, 2007(Unaudited  in thousands,except per share amounts)ASSETSCash and cash equivalents

$
105,751


$
76,758Accounts receivable, net of allowance for doubtful accounts of
    $11,526 and $12,721, respectively


58,825



59,557Other receivables


13,618



8,974Inventories of supplies


9,568



9,495Prepaids and other current assets


20,524



20,056Total current assets


208,286



174,840Property and equipment, net


230,915



229,039Investments in affiliates


281,330



267,357Goodwill and intangible assets, net


1,587,462



1,590,820Other assets


26,677



15,337Total assets

$
2,334,670


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

$
20,837


$
22,982Accrued salaries and benefits


25,407



24,671Due to affiliates


89,406



62,500Accrued interest


21,662



13,436Current portion of long-term debt


27,480



25,311Other current liabilities


36,779



38,509Total current liabilities


221,571



187,409Long-term debt, less current portion


1,070,416



1,072,751Other long-term liabilities


25,941



17,950Deferred tax liability, net


115,449



109,414Total liabilities


1,433,377



1,387,524Minority interests


85,580



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






Additional paid-in capital


800,549



799,562Accumulated other comprehensive loss


(1,286
)


(1,485
)Retained earnings


16,450



8,729Total stockholders equity


815,713



806,806Total liabilities and stockholders equity

$
2,334,670


$
2,277,393    4




---



##### Table of Contents



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



PredecessorThree Months



Three MonthsEnded



EndedMarch 31, 2008



March 31, 2007(Unaudited  in thousands)Revenues:Net patient service revenues

$
148,462



$
144,533Management and contract service revenues


17,444




15,880Other revenues


1,266




1,357Total revenues


167,172




161,770Equity in earnings of unconsolidated affiliates


11,048




8,504Operating expenses:Salaries, benefits, and other employee costs


47,874




45,421Medical services and supplies


29,481




29,050Other operating expenses


28,264




27,055General and administrative expenses


10,428




14,976Provision for doubtful accounts


1,852




2,697Depreciation and amortization


9,424




10,234Total operating expenses


127,323




129,433Operating income


50,897




40,841Interest income


1,038




743Interest expense


(22,348
)



(7,925
)Other, net


1,068




55Total other expense, net


(20,242
)



(7,127
)Income before minority interests


30,655




33,714Minority interests in income of consolidated subsidiaries


(15,406
)



(15,772
)Income from continuing operations before income taxes


15,249




17,942Income tax expense


(7,577
)



(9,046
)Income from continuing operations


7,672




8,896Earnings (loss) from discontinued operations, net of tax


49




(236
)Net income

$
7,721



$
8,660    5




---



##### Table of Contents



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



PredecessorThree Months



Three MonthsEnded



EndedMarch 31, 2008



March 31, 2007(Unaudited  in thousands)Net income

$
7,721



$
8,660Other comprehensive income:Foreign currency translation adjustments


186




578Unrealized gain on interest rate swap, net of tax


13




Other comprehensive income


199




578Comprehensive income

$
7,920



$
9,238    6




---



##### Table of Contents



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



PredecessorThree Months



Three MonthsEnded



EndedMarch 31, 2008



March 31, 2007(Unaudited  in thousands)Cash flows from operating activities:Net income

$
7,721



$
8,660Adjustments to reconcile net income to net cash provided by
    operating activities:(Gain) loss on discontinued operations


(49
)



236Provision for doubtful accounts


1,852




2,697Depreciation and amortization


9,424




10,234Amortization of debt issue costs


700




174Deferred income taxes


5,042




3,618Equity in earnings of unconsolidated affiliates, net of
    distributions received


(5,016
)



3,868Minority interests in income of consolidated subsidiaries, net
    of distributions paid


949




2,038Equity-based compensation


986




2,818Increases (decreases) in cash from changes in operating assets
    and liabilities, net of effects from purchases of new businesses:Accounts receivable


(2,042
)



(2,134
)Other receivables


(4,824
)



1,302Inventories of supplies, prepaids and other current assets


(340
)



(2,080
)Accounts payable and other current liabilities


5,532




889Long-term liabilities


(318
)



1,958Net cash provided by operating activities


19,617




34,278Cash flows from investing activities:Purchases of new businesses and equity interests, net of cash
    received


(8,440
)



(24,610
)Proceeds from sales of businesses and equity interests


1,682




9,812Purchases of property and equipment


(12,264
)



(4,761
)Returns of capital from unconsolidated affiliates


488




217Increase in deposits and notes receivable


415




6,326Net cash used in investing activities


(18,119
)



(13,016
)Cash flows from financing activities:Proceeds from long-term debt


7,752




Payments on long-term debt


(6,886
)



(6,599
)Proceeds from issuances of common stock and related tax benefit







3,907Increase in cash held on behalf of unconsolidated affiliates


26,949




2,295Returns of capital to minority interest holders


(371
)



(326
)Net cash provided by (used in) financing activities


27,444




(723
)Cash flows of discontinued operations:Operating cash flows


62




(1,107
)Investing cash flows







(744
)Financing cash flows







1,412Net cash provided by (used in) discontinued operations


62




(439
)Effect of exchange rate changes on cash and cash equivalents


(11
)



1Net increase in cash and cash equivalents


28,993




20,101Cash and cash equivalents at beginning of period


76,758




31,740Cash and cash equivalents at end of period

$
105,751



$
51,841Supplemental information:Interest paid

$
13,419



$
8,021Income taxes paid


1,500




1,424Non-cash transactions:Assets acquired under capital lease obligations

$
206



$
1,235    7




---



##### 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
    Three Months EndedMarch 31, 2007Net revenues

$
161,770Income from continuing operations


3,305   Form 10-K.
 8




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
    (Unaudited)  (Continued)
    (2)
    Discontinued
    Operations and Other Dispositions      Accounting for the Impairment or Disposal of Long-Lived
    Assets
  Successor



PredecessorThree Months



Three MonthsEnded



EndedMarch 31, 2008



March 31, 2007Revenues

$
61



$
1,239Income (loss) from discontinued operations before income taxes

$
26



$
(363
)Income tax (expense) benefit


(9
)



127Income (loss) from discontinued operations

$
17



$
(236
)Gain on sale of discontinued operations before income taxes

$
32



$
Income tax expense







Gain on sale of discontinued operations

$
32



$
      9




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
    (Unaudited)  (Continued)
    (3)
    Acquisitions
    and Equity Method Investments      
    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 payment of approximately $1.2 million related to
    various other purchases and sales of equity interests and
    contributions of cash to equity method investees. 10




---



##### Table of Contents



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


Three MonthsEnded


EndedMarch 31, 2008


March 31, 2007Unconsolidated facilities operated at period-end


98



83Income statement information:Revenues

$
229,324


$
177,057Equity in earnings of unconsolidated affiliates


13



53Operating expenses:Salaries, benefits, and other employee costs


57,295



44,818Medical services and supplies


46,163



35,934Other operating expenses


59,025



46,041Depreciation and amortization


12,046



8,777Total operating expenses


174,529



135,570Operating income


54,808



41,540Interest expense, net


(6,236
)


(3,722
)Other


(1
)


(1,717
)Income before income taxes

$
48,571


$
36,101Balance sheet information:Current assets

$
202,174


$
166,174Noncurrent assets


410,082



287,831Current liabilities


131,696



94,311Noncurrent liabilities


295,519



185,294   (4)
    Long-Term
    Debt  (a)
    Senior
    secured credit facility    (b)
    United
    Kingdom borrowings   11




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
    (Unaudited)  (Continued)
  (5)
    Interest
    Rate Swap    Accounting for
    Derivative Instruments and Hedging Activities
        (6)
    Equity-Based
    Compensation     12




---



##### Table of Contents



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



PredecessorThree Months



Three MonthsEnded



EndedMarch 31, 2008



March 31, 2007Equity in earnings of unconsolidated affiliates

$




$
20Salaries, benefits and other employee costs


409




809General and administrative expenses


241




2,012Other operating expenses


336




Minority interests in income of consolidated subsidiaries







(23
)Expense before income tax benefit


986




2,818Income tax benefit


(172
)



(885
)Total equity-based compensation expense, net of tax

$
814



$
1,933  13




---



##### Table of Contents



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



PredecessorThree Months



Three MonthsEnded



EndedMarch 31, 2008



March 31, 2007Share awards

$
283



$
2,327Stock options


367




390Warrants


336




ESPP







101Expense before income tax benefit


986




2,818Income tax benefit


(172
)



(885
)Total equity-based compensation expense, net of tax

$
814



$
1,933   (7)
    Segment
    Disclosures  Disclosures About Segments of an Enterprise and Related
    Information,
  SuccessorThree Months EndedMarch 31, 2008United States


United Kingdom


TotalNet patient service revenues

$
115,983


$
32,479


$
148,462Other revenues


18,710







18,710Total revenues

$
134,693


$
32,479


$
167,172Depreciation and amortization

$
7,611


$
1,813


$
9,424Operating income


43,747



7,150



50,897Net interest expense


(19,822
)


(1,488
)


(21,310
)Income tax expense


(5,937
)


(1,640
)


(7,577
)Total assets


1,954,673



379,997



2,334,670Capital expenditures


2,954



9,516



12,470   14




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
    (Unaudited)  (Continued)
  PredecessorThree Months EndedMarch 31, 2007United States


United Kingdom


TotalNet patient service revenues

$
116,286


$
28,247


$
144,533Other revenues


17,237







17,237Total revenues

$
133,523


$
28,247


$
161,770Depreciation and amortization

$
7,797


$
2,437


$
10,234Operating income


36,157



4,684



40,841Net interest expense


(5,988
)


(1,194
)


(7,182
)Income tax expense


(7,872
)


(1,174
)


(9,046
)Total assets


1,077,759



205,407



1,283,166Capital expenditures


4,310



1,686



5,996   (8)
    Related
    Party Transactions      (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
 15




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
    (Unaudited)  (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
  (11)
    Subsequent
    Events    (12)
    Condensed
    Consolidating Financial Statements  7 8 1 4
  Form S-4
 16




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
    (Unaudited)  (Continued)
  Condensed
    Consolidating Balance Sheets:
  As of March 31, 2008Non-Participating


Consolidation


ConsolidatedGuarantors


Investees


Adjustments


TotalAssetsCurrent assets:Cash and cash equivalents

$
95,872


$
9,879


$



$
105,751Accounts receivable, net






58,791



34



58,825Other receivables


33,505



47,831



(67,718
)


13,618Inventories of supplies






9,568







9,568Prepaids and other current assets


18,560



2,035



(71
)


20,524Total current assets


147,937



128,104



(67,755
)


208,286Property and equipment, net


15,165



214,681



1,069



230,915Investments in affiliates


972,071



1,468



(692,209
)


281,330Goodwill and intangible assets, net


829,897



379,967



377,598



1,587,462Other assets


102,000



1,062



(76,385
)


26,677Total assets

$
2,067,070


$
725,282


$
(457,682
)

$
2,334,670Liabilities and Stockholders EquityCurrent liabilities:Accounts payable

$
361


$
21,528


$
(1,052
)

$
20,837Accrued expenses and other


192,078



45,431



(64,255
)


173,254Current portion of long-term debt


4,262



24,854



(1,636
)


27,480Total current liabilities


196,701



91,813



(66,943
)


221,571Long-term debt, less current portion


925,705



156,340



(11,629
)


1,070,416Other long-term liabilities


128,951



13,657



(1,218
)


141,390Minority interests






14,032



71,548



85,580Stockholders equity


815,713



449,440



(449,440
)


815,713Total liabilities and stockholders equity

$
2,067,070


$
725,282


$
(457,682
)

$
2,334,670   17




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
    (Unaudited)  (Continued)
  As of December 31, 2007Non-Participating


Consolidation


ConsolidatedGuarantors


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 Stockholders 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



83,063Stockholders equity


806,806



442,925



(442,925
)


806,806Total liabilities and stockholders equity

$
2,005,972


$
718,413


$
(446,992
)

$
2,277,393  18




---



##### 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 Three Months Ended March 31, 2008 
    Successor

Guarantors


Investees


Adjustments


TotalRevenues

$
23,019


$
150,309


$
(6,156
)

$
167,172Equity in earnings of affiliates


29,324



204



(18,480
)


11,048Operating expenses, excluding depreciation and amortization


20,665



103,384



(6,150
)


117,899Depreciation and amortization


1,829



7,413



182



9,424Operating income


29,849



39,716



(18,668
)


50,897Interest expense, net


(17,961
)


(3,349
)






(21,310
)Other income (expense)


1,089



56



(77
)


1,068Income before minority interests


12,977



36,423



(18,745
)


30,655Minority interests in income of consolidated subsidiaries






(2,242
)


(13,164
)


(15,406
)Income from continuing operations before income taxes


12,977



34,181



(31,909
)


15,249Income tax expense


(5,305
)


(2,278
)


6



(7,577
)Income from continuing operations


7,672



31,903



(31,903
)


7,672Earnings from discontinued operations, net of tax


49











49Net income

$
7,721


$
31,903


$
(31,903
)

$
7,721   Non-Participating


Consolidation


ConsolidatedFor the Three Months Ended March 31, 2007 
    Predecessor

Guarantors


Investees


Adjustments


TotalRevenues

$
22,258


$
147,001


$
(7,489
)

$
161,770Equity in earnings of affiliates


24,450



125



(16,071
)


8,504Operating expenses, excluding depreciation and amortization


24,863



101,975



(7,639
)


119,199Depreciation and amortization


1,801



7,808



625



10,234Operating income


20,044



37,343



(16,546
)


40,841Interest expense, net


(4,190
)


(2,992
)






(7,182
)Other income (expense)


121



(707
)


641



55Income before minority interests


15,975



33,644



(15,905
)


33,714Minority interests in income of consolidated subsidiaries






(4,147
)


(11,625
)


(15,772
)Income from continuing operations before income taxes


15,975



29,497



(27,530
)


17,942Income tax expense


(7,079
)


(1,966
)


(1
)


(9,046
)Income from continuing operations


8,896



27,531



(27,531
)


8,896Loss from discontinued operations, net of tax


(236
)










(236
)Net income

$
8,660


$
27,531


$
(27,531
)

$
8,660  19




---



##### 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


ConsolidatedFor the Three Months Ended March 31, 2008 
    Successor

Guarantors


Investees


Adjustments


TotalCash flows from operating activities:Net income (loss)

$
7,721


$
31,903


$
(31,903
)

$
7,721Gain on discontinued operations


(49
)










(49
)Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


(1,380
)


9,052



4,273



11,945Net cash provided by (used in) operating activities


6,292



40,955



(27,630
)


19,617Cash flows from investing activities:Purchases of property and equipment, net


(401
)


(11,863
)






(12,264
)Purchases and sales of new businesses and equity interests, net


(6,758
)










(6,758
)Other items


1,051



(4,532
)


4,384



903Net cash (used in) provided by investing activities


(6,108
)


(16,395
)


4,384



(18,119
)Cash flows from financing activities:Long-term borrowings, net


(1,076
)


1,812



130



866Increase in cash held on behalf of minority interest holders and
    other


30,037



(26,575
)


23,116



26,578Net cash provided by (used in) financing activities


28,961



(24,763
)


23,246



27,444Net cash provided by discontinued operations


62











62Effect of exchange rate changes on cash






(11
)






(11
)Net increase (decrease) in cash


29,207



(214
)






28,993Cash at the beginning of the period


66,665



10,093







76,758Cash at the end of the period

$
95,872


$
9,879


$



$
105,751   20




---



##### Table of Contents



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


Consolidation


ConsolidatedFor the Three Months Ended March 31, 2007 
    Predecessor

Guarantors


Investees


Adjustments


TotalCash flows from operating activities:Net income (loss)

$
8,660


$
27,531


$
(27,531
)

$
8,660Loss on discontinued operations


236











236Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


9,314



17,564



(1,496
)


25,382Net cash provided by (used in) operating activities


18,210



45,095



(29,027
)


34,278Cash flows from investing activities:Purchases of property and equipment, net


(366
)


(4,395
)






(4,761
)Purchases and sales of new businesses and equity interests, net


(14,798
)










(14,798
)Other items


5,636



(5,483
)


6,390



6,543Net cash provided by (used in) investing activities


(9,528
)


(9,878
)


6,390



(13,016
)Cash flows from financing activities:Long-term borrowings, net


(511
)


(6,436
)


348



(6,599
)Proceeds from issuance of common stock


3,907











3,907Other items


7,779



(28,099
)


22,289



1,969Net cash provided by (used in) financing activities


11,175



(34,535
)


22,637



(723
)Net cash used in discontinued operations


(439
)










(439
)Effect of exchange rate changes on cash






1







1Net increase in cash


19,418



683







20,101Cash at the beginning of the period


23,934



7,806







31,740Cash at the end of the period

$
43,352


$
8,489


$



$
51,841  21




---



##### 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
       22




---



##### Table of Contents



Critical
    Accounting Policies and Estimates
            Merger
    Transaction
  Form 10-K
   23




---



##### Table of Contents



Acquisitions,
    Equity Investments and Development Projects
      
    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 payment of approximately $1.2 million related to
    various other purchases and sales of equity interests and
    contributions of cash to equity method investees.  Discontinued
    Operations and Other Dispositions
          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 24




---



##### Table of Contents



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 MonthsEndedMarch 31,2008


2007Net patient service revenues


89
%


89
%Management and contract service revenues


10



10Other revenues


1



1Total revenues


100
%


100
%       Three MonthsEndedMarch 31,2008


2007Management of surgical facilities

$
9,653


$
8,242Contract services provided to physicians, hospitals and related
    entities


7,791



7,638Total management and contract service revenues

$
17,444


$
15,880     Three MonthsEndedMarch 31,2008


2007United States


81
%


83
%United Kingdom


19



17Total


100
%


100
%    25




---



##### Table of Contents



Equity in
    Earnings of Unconsolidated Affiliates
    Three MonthsEndedMarch 31,2008


2007Revenues

$
229,324


$
177,057Equity in earnings of unconsolidated affiliates


13



53Operating expenses:Salaries, benefits, and other employee costs


57,295



44,818Medical services and supplies


46,163



35,934Other operating expenses


59,025



46,041Depreciation and amortization


12,046



8,777Total operating expenses


174,529



135,570Operating income


54,808



41,540Interest expense, net


(6,236
)


(3,722
)Other


(1
)


(1,717
)Income before income taxes

$
48,571


$
36,101Long-term debt

$
282,183


$
176,046USPIs equity in earnings of unconsolidated affiliates


11,048



8,504USPIs imputed weighted average ownership percentage based
    on affiliates pre-tax income(1)


22.7
%


23.6
%USPIs imputed weighted average ownership percentage based
    on affiliates debt(2)


25.9
%


29.4
%Unconsolidated facilities operated at period end


98



83     (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 March 31, 2008 as compared to prior
    period primarily as a result of our largest U.S. facility,
    in which we own a 25% interest, borrowing to finance a major
    expansion during 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. 26




---



##### Table of Contents



Results
    of Operations
    Three MonthsEndedMarch 31,2008


2007Total revenues


100.0
%


100.0
%Equity in earnings of unconsolidated affiliates


6.6



5.3Operating expenses, excluding depreciation and amortization


(70.5
)


(73.7
)Depreciation and amortization


(5.7
)


(6.4
)Operating income


30.4



25.2Minority interests in income of consolidated entities


(9.2
)


(9.7
)Interest and other expense, net


(12.1
)


(4.4
)Income from continuing operations before income taxes


9.1



11.1Income tax expense


(4.5
)


(5.6
)Income from continuing operations


4.6



5.5Loss from discontinued operations






(0.1
)Net income


4.6
%


5.4
%   Executive
    Summary
          Revenues
   27




---



##### Table of Contents



ramp-up
    Three MonthsEndedMarch 31, 2008United States facilities:Net revenue


7.9
%Surgical cases


0.4
%Net revenue per case(1)


7.4
%United Kingdom facilities:Net revenue using actual exchange rates


15.0
%Net revenue using constant exchange rates(2)


13.6
%All same store facilities:Net revenue using actual exchange rates


8.5
%     (1)
    
    Our overall domestic 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. In addition, net revenue per case at
    our ambulatory surgery centers increased by 6.2% as compared to
    the first quarter of 2007, after having increased by 1.8% during
    the year ended December 31, 2007. The favorable impact 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 related
    to dates of service prior to January 1, 2008.(2)
    
    Calculated using first quarter 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. 28




---



##### Table of Contents



Joint
    Ventures With Not-For-Profit Hospitals
    March 31,


March 31,2008


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


95



81Without a hospital partner


61



64Total U.S. facilities


156



145United Kingdom facilities


3



3Total facilities operated


159



148Change from March 31, 2007:De novo (newly constructed)


9Acquisition


8Disposals(2)


(6
)Total increase in number of facilities


11     (1)
    
    At March 31, 2008, physicians own a portion of all of these
    facilities.(2)
    
    We sold our ownership interests in facilities in Sarasota,
    Florida; Atlanta, Georgia; Baltimore, Maryland; Houston, Texas;
    and Decatur, Alabama. Additionally, we ceased managing a
    facility effective October 1, 2007, although we still hold
    an ownership interest.  Facility
    Operating Margins
     29




---



##### Table of Contents



Three MonthsEnded


IncreaseMarch 31, 2008


(Decrease)United States facilities:With a hospital partner


22.1
%


(200)bpsWithout a hospital partner


31.4
%


(230)bpsTotal U.S. facilities


24.8
%


(240)bpsUnited Kingdom facilities


27.0
%


220bps     (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. The favorable impact of a settlement of a contract
    dispute with a major payer has been excluded from these growth
    rates, as it related to dates of service prior to
    January 1, 2008.  Three
    Months Ended March 31, 2008 Compared to Three Months Ended
    March 31, 2007
     30




---



##### Table of Contents



Form 10-K
    Liquidity
    and Capital Resources
  Cash
    Flows
  ,
   31




---



##### Table of Contents



Debt
    Senior
    secured credit facility
  buy-up buy-up buy-ups
    Senior
    subordinated notes
  7 8 1 4
 32




---



##### Table of Contents



payment-in-kind 1 4
  United
    Kingdom borrowings
       33




---



##### Table of Contents



Contractual
    Cash Obligations
    Payments Due by PeriodWithin


Years


Years


BeyondContractual Cash Obligations

Total


1 Year


2 and 3


4 and 5


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

$
699,442


$
40,201


$
80,327


$
78,881


$
500,033Senior subordinated notes, due 2017


435,250



21,300



42,600



42,600



328,750Senior subordinated toggle notes, due 2017


369,583



18,500



37,000



37,000



277,083Amended and restated U.K. credit facility


110,897



12,228



26,852



25,670



46,147Other debt at operating subsidiaries


42,791



12,468



17,984



6,629



5,710Capitalized lease obligations


78,925



8,538



15,832



12,349



42,206Operating lease obligations


151,968



14,804



24,185



90,916



22,063Total contractual cash obligations

$
1,888,856


$
128,039


$
244,780


$
294,045


$
1,221,992     (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 March 31, 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.  Debt
    at Operating Subsidiaries
      Related
    Party Transactions
   34




---



##### Table of Contents



New
    Accounting Pronouncements
  Business Combinations
  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
  ITEM 3.
    Quantitative
    and Qualitative Disclosures About Market Risk     35




---



##### Table of Contents



ITEM 4T.
    Controls
    and Procedures  Form 10-Q.
 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 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. 36




---



##### 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)
   37




---



##### 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 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. 38