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                                                                   EXHIBIT 10.7


                              SECOND AMENDMENT TO
                  AMENDED AND RESTATED OPERATING AGREEMENT OF
                           MEDCATH OF TUCSON, L.L.C.


         THIS SECOND AMENDMENT (the "Amendment") to the Amended and Restated
Operating Agreement (the "Operating Agreement") of MedCath of Tucson, L.L.C.
(the "Company") is made and entered pursuant to Section 11.2 of the Operating
Agreement.

                                    RECITALS

         WHEREAS, the Members desire to amend the Operating Agreement in
accordance with the terms of this Amendment.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency which is hereby acknowledged, the Members agree as follows:

         1.       Section 1.4 of the Operating Agreement shall be deleted in
its entirety and the following new Section 1.4 shall be substituted in lieu
thereof:

                  1.4      "Board" shall mean the Board of Directors of the
         Company, which shall manage the Company in accordance with the terms
         hereof. The Board shall consist of nine (9) Board members and shall
         include five (5) members designated from time to time by SAHI, one of
         whom may be the president or chief executive officer of the Company,
         three (3) members designated from time to time by the Investor Members
         one (1) of whom shall be the medical director of the Hospital, and one
         (1) member designated from time to time by CHN. Each Board member may
         be removed and replaced at any time and for any reason by the Member
         or Members who are entitled hereunder to designate such Board member.

         2.       Section 3.1(b) of the Operating Agreement shall be deleted in
its entirety and the following Section 3.1(b) shall be substituted in lieu
thereof:

                  (b)      New Investor Members may make additional Capital
         Contributions of up to an additional Three Hundred Thousand Dollars
         ($300,000.00) to the Company, in which event CHN and SAHI shall,
         within thirty (30) days thereafter also make additional Capital
         Contributions of up to Three Hundred Thousand Dollars ($300,000) with
         CHN contributing thirty percent (30%) of such additional Capital
         Contributions and SAHI contributing seventy percent (70%) of such
         additional Capital Contributions so that CHN and SAHI maintain their
         respective Membership Interests. The Membership Interest of each
         Member shall be determined based upon the percentage of the actual
         Capital Contributions made by each Member relative to the Capital
         Contributions made by all Members subject, however, to any assignments
         of Membership Interests made by any Member in accordance with the
         terms of this Agreement, as amended.


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         3.       The following provision is hereby inserted at the end of
Section 3.1 of the Operating Agreement as subsection (c):

                  (c)      Notwithstanding anything in this Section 3.1,
         Section 1.25 or any other provision of this Agreement, the Membership
         Interests owned by the Members of the Company as of the date the
         Second Amendment to this Agreement becomes effective shall be as
         follows:

                           SAHI                      58.72%

                           CHN                       19.98%

                           Investor Members          21.30%

         4.       Section 3.5(a) of the Operating Agreement shall be deleted in
its entirety and the following new Section 3.5(a) shall be substituted in lieu
thereof:

                  (a)      First, the Company shall use commercially reasonable
         efforts to borrow such funds from a bank or other lender on terms and
         conditions reasonably acceptable to the Company. If the Company is
         unable, within a reasonable time, to borrow such funds from a
         financial institution, SAHI shall loan seventy percent (70%) of such
         funds and CHN shall loan thirty percent (30%) of such funds to the
         Company from time to time at an annual rate of interest equal to the
         Prime Rate plus one percent (1%) per annum. Such loans shall be
         secured by the Company's assets. Interest shall be paid monthly in
         arrears and principal shall be repaid as the Company has funds
         available therefor in accordance with Section 6.1. All loans obtained
         hereunder shall be subject to the approval of the Board, which
         approval shall not be unreasonably withheld or delayed; provided that
         all loans and lease financing made by any third party or Affiliate of
         SAHI prior to the date hereof are hereby deemed approved.

         5.       In the second line of Section 3.6(b) of the Operating
Agreement, the reference to "Schedule C" shall be deleted and its place shall
be inserted "Schedule B".

         6.       Section 3.7 of the Operating Agreement shall be deleted in
its entirety and the following new Section 3.7 shall be substituted in lieu
thereof:

                  3.7      CHN Guarantees. CHN agrees to guarantee, on a
         several basis, thirty percent (30%) of loans or lease financing first
         incurred by the Company after July 31, 1999 (excluding any existing
         obligation of the Company that is refinanced after July 31, 1999), and
         to provide security for such guarantees, on the same terms and
         conditions as guarantees and collateral are hereafter agreed to from
         time to time by SAHI or its Affiliates, it being the intent of the
         parties hereto that SAHI and its Affiliates be responsible for seventy
         percent (70%) of the obligations and liabilities for all such
         guarantees and such collateral and CHN and its Affiliates be
         responsible for thirty percent (30%) of the obligations and


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         liabilities for all such guarantees and such collateral and to receive
         proportionately equal compensation therefor pursuant to Section
         5.6(b)(ii). CHN and its Affiliates agree to provide financial
         statements from time to time and such other information as are
         reasonably requested by any party providing loans or leasing to the
         Company and agree to promptly execute such additional documents and
         agreements as SAHI shall reasonably request that CHN execute for
         purposes of fulfilling the intent of this Section 3.7.

         7.       In the fourth line of Section 3.8 of the Operating Agreement,
the phrase "five percent" shall be deleted and in its place shall be inserted
"three percent (3%)".

         8.       The following provision shall be inserted as the second
paragraph of Section 5.9(d) of the Operating Agreement:

                           Notwithstanding the terms of this Section 5.9(d) or
                  any other provision herein to the contrary, CHN and its
                  Affiliates shall be entitled from time to time to provide at
                  St. Mary's and St. Joseph's in Tucson, Arizona only (i)
                  medical care required for each of the following: routine
                  cardiac care, treatment for arrhythmias, treatment for acute
                  myocardial infarctions and treatment for unstable angina,
                  exclusive, however, of any cardiac surgical procedures; (ii)
                  pacemaker and defibrillation insertions; (iii) diagnostic
                  cardiac catheterizations; (iv) high risk emergency PTCA; and
                  (v) low risk elective angioplasties (patients must have 20%
                  or less myocardium involvement and single vessel disease).
                  Other than those services set forth in (i) through (v) of
                  this Section 5.9(d), CHN and its Affiliates may not provide
                  any cardiac surgery, high risk elective PTCA (patients having
                  greater than 20% myocardium involvement and/or multiple
                  vessel disease), and the placement of stents in patients
                  provided however that CHN and its Affiliates shall not permit
                  physicians at St. Mary's and St. Joseph's to place stents in
                  patients unless, while angioplasties are being performed on
                  such patients, the placement of stents during such procedures
                  becomes medically necessary as determined by the attending
                  physician. In order to monitor CHN's compliance with the
                  terms of this Section 5.9(d), the Company shall be entitled
                  to reasonable access at least quarterly to appropriate and
                  applicable records of CHN and to appropriate management
                  personnel of CHN and physicians on the medical staffs of St.
                  Mary's and St. Joseph's. CHN shall develop written
                  guidelines, which shall be reviewed and approved by the
                  Company (which approval will not be unreasonably withheld),
                  to be provided to management personnel of CHN and physicians
                  on the medical staffs of St. Mary's and St. Joseph's in order
                  to ensure their compliance with the terms of this Section
                  5.9.

         9.       Section 5.14(e) of the Operating Agreement shall be deleted
in its entirety and the following new Section 5.14(e) shall be substituted in
lieu thereof:


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                  (e)      Any action taken by the Board shall require the
         affirmative vote of at least a majority of the Board members present
         at a meeting at which a quorum is present; however, any of the
         following actions taken by the Board shall also require the
         affirmative vote of the Board member appointed by CHN and at least one
         Board member appointed by SAHI:

                           (i)      The approval of the annual budget of the
                  Company for both operations and capital expenditures;

                           (ii)     Any capital expenditure not included in the
                  approved annual budget which is in excess of Twenty-Five
                  Thousand Dollars ($25,000.00);

                           (iii)    Any change in the purposes of the Company
                  or in its statement of philosophy and values, as set forth in
                  Sections 2.3 and 2.6 respectively; and

                           (iv)     Any loan by SAHI and CHN under Section
                  3.5(a) or any guaranty by CHN under Section 3.7.

                  In the case of (i), (ii) and (iv) above, the affirmative vote
         of the Board member appointed by CHN shall not be unreasonably
         withheld.

         10.      In the second line of Section 6.1(b) of the Operating
Agreement, the reference to "3.6(b)" shall be deleted and in its place shall be
inserted "3.8".

         11.      The following is hereby inserted as the second and third
paragraphs of Section 6.1(c) of the Operating Agreement:

                           From time to time, the Company may receive
                  short-term working capital advances from SAHI or its
                  Affiliates and CHN or its Affiliates in anticipation of the
                  collection of accounts receivable, which advances shall be
                  promptly repaid by the Company upon collection of its
                  accounts receivable. The Members acknowledge and agree that
                  any such short-term advances made by SAHI, CHN or their
                  Affiliates shall not be considered loans under this Section
                  6.1 and shall not be subject to the allocation and
                  distribution requirements set forth in this Section 6.1.

         12.      The following provision is hereby inserted at the end of
Section 6.2(a):

                  , provided that the Capital Accounts and Capital
                  Contributions of each of SAHI, CHN and the Investor Members
                  (in the aggregate with respect to the Investor Members) was
                  $966,364 as of July 31, 1999 for purposes of calculating all
                  distributions, allocations and all other allocations of
                  Income or Loss under this Agreement; provided further that
                  Capital Accounts shall be further adjusted to reflect events
                  subsequent to July 31, 1999 including,


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                  without limitation, assignments of Membership Interests made
                  in accordance with the terms of this Agreement, as amended.

         13.      The following provision is hereby inserted at the end of
Section 12.11 of the Operating Agreement as subsection (c):

                  (c)      In the event that the Ethical and Religious
         Directives for Catholic Healthcare Services as promulgated by the
         United States Catholic Conference are hereafter finally amended so as
         to prohibit CHN's continued ownership in the Company, and a qualified
         independent canon lawyer concludes in writing that CHN is required to
         withdraw from the Company for such reasons, then CHN shall be
         permitted to terminate its membership in the Company. If CHN
         terminates its membership in the Company under this Section 12.11(c),
         the Board (excluding CHN's representative) shall cause the Company to
         either (i) purchase CHN's Membership Interest for a purchase price
         equal to the greater of (x) the Formula Purchase Price (to be paid in
         accordance with the Payment Method) or (y) the amount of the
         unreturned Capital Contributions (counting all prior distributions by
         the Company as a return of Capital Contributions and adjusted for
         assignments of Membership Interests made in accordance with the terms
         of this Agreement, as amended) made by CHN with respect to its
         Membership Interest (to be paid in accordance with the Payment
         Method), in which event CHN shall be bound by the provisions of
         Section 5.9 for a period of five (5) years after such purchase or (ii)
         allow CHN to withdraw as a Member (without a return of any Capital
         Contributions after the date of withdrawal), in which event CHN shall
         thereafter be bound by the restrictions of Section 5.9 for a period to
         two (2) years after withdrawal.

         14.      All terms not defined herein shall have the meaning provided
therefor in the Operating Agreement.

         15.      Except as expressly provided herein, all terms and conditions
of the Operating Agreement shall remain in full force and effect.

         16.      This Amendment shall be effective only (i) when approved by
the Members in accordance with Section 11.2 of the Operating Agreement, and
(ii) if both the transaction contemplated by that certain Securities Exchange
Agreement between MedCath Corporation and CHN dated April 20, 2001 and the
initial public offering of common stock of MedCath Corporation are completed.


                    [remainder of page intentionally blank]


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         IN WITNESS WHEREOF, the Members have approved and consented to this
Amendment as of the 27th day of July, 2001.


[***]






[***] These portions of this exhibit have been omitted and filed separately
with the Commission pursuant to a request for confidential treatment.


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