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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended September 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to .
 Commission
File Number: 333-117362
 IASIS HEALTHCARE LLC
  DELAWARE
    
    20-1150104(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)DOVER CENTRE117 SEABOARD LANE, BUILDING EFRANKLIN, TENNESSEE
    
    37067(Address of principal executive offices)
    
    (Zip Code)
 (615) 844-2747
   o þ
 þ o
 þ o
 þ
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TABLE OF CONTENTS
  
 PART IItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    24Item 2.
    
    Properties
    
    
    35Item 3.
    
    Legal Proceedings
    
    
    35Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    36PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    37Item 6.
    
    Selected Financial Data
    
    
    37Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    39Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    66Item 8.
    
    Financial Statements and Supplementary Data
    
    
    67Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
    
    
    101Item 9A.
    
    Controls and Procedures
    
    
    101Item 9B.
    
    Other Information
    
    
    101PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    101Item 11.
    
    Executive Compensation
    
    
    105Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    105Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    105Item 14.
    
    Principal Accountant Fees and Services
    
    
    105PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    105EX-10.27 Amendment Number 17 to ContractEX-21 LIST OF SUBSIDIARIESEX-31.1 SECTION 302 CERTIFICATION OF THE PEOEX-31.2 SECTION 302 CERTIFICATION OF THE PFO
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IASIS HEALTHCARE LLC
 
 PART I
 
 Item 1.
Business.
 Company Overview
  
    
    Salt Lake City, Utah;
    
    Phoenix, Arizona;
    
    Tampa-St. Petersburg, Florida;
    
    three cities in Texas, including San Antonio;
    
    Las Vegas, Nevada; and
    
    West Monroe, Louisiana
      Business Strategy
  Provide High-Quality Services
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
    
    dedicated corporate and hospital resources;
    
    on-going training and education of clinical personnel;
    
    focus on information systems;
    
    The Joint Commission accreditation at all hospitals;
    
    centers of excellence within our hospitals, across many different service lines;
    
    HealthGrades 5 Star ratings and top 5% of Hospitals awards at various hospitals;
    
    Solucients Top 100 Hospital Awards for process improvements at certain hospitals; and
    
    various other independent ratings.
 Focus on Operational Excellence
 
    
    using our advanced information systems platform across all of our hospitals to
provide us with accurate, real-time and cost-effective financial and clinical
information;
    
    utilizing our newly developed hospital medical management program (HMMP) to drive
improvements in case management and quality of care;
    
    expanding our profitable product lines and improving our business mix;
    
    focusing on efficient staffing, outsourcing programs and supply utilization;
    
    capitalizing on purchasing efficiencies and reducing operating costs through
monitoring compliance with our national group purchasing contract; and
    
    improving our processes for patient registration, including patient qualification
for financial assistance and point-of-service collections, billing, collections,
managed care contract compliance and all other aspects of our revenue cycle.
 Strategically Invest in Our Markets to Expand Services and Increase Revenue
 
    
    upgrading and expanding specialty services and surgical capacity, including
cardiology, orthopedics, womens services and sub-acute care;
    
    expanding emergency room capacity;
    
    updating our technology in surgery, such as robotic surgery, diagnostic imaging and
other medical equipment;
    
    increasing capacity and utilization of inpatient services at certain of our
hospitals; and
    
    enhancing the convenience and quality of our outpatient services, as well as
expanding outpatient specialty services.
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Recruit and Retain Quality Physicians
 
    
    dedicating corporate personnel and resources to physician recruitment;
    
    equipping our hospitals with technologically advanced equipment;
    
    enhancing physician convenience and access, including the development of medical
office space on or near our medical campuses;
    
    sponsoring training programs to educate physicians on advanced medical procedures;
    
    allowing physicians to remotely access clinical data through our information
systems, facilitating more convenient and timely patient care; and
    
    employing specialty physicians to meet community needs in certain markets.
 Continue to Develop Favorable Managed Care Relationships
 Selectively Pursue Acquisitions and Strategic Alliances
  Our Markets
  Salt Lake City, Utah
  Phoenix, Arizona
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Tampa-St. Petersburg, Florida
  Texas
  Las Vegas, Nevada
  West Monroe, Louisiana
  4




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Our Properties
  LicensedHospitals
    
    City
    
    BedsUtahDavis Hospital & Medical Center (1)
    
    Layton
    
    
    136Jordan Valley Medical Center (2)
    
    West Jordan
    
    
    96Pioneer Valley Hospital (3)
    
    West Valley City
    
    
    139Salt Lake Regional Medical Center
    
    Salt Lake City
    
    
    168ArizonaMesa General Hospital (4)
    
    Mesa
    
    
    126Mountain Vista Medical Center (5)
    
    Mesa
    
    
    178St. Lukes Medical Center (6)
    
    Phoenix
    
    
    338Tempe St. Lukes Hospital
    
    Tempe
    
    
    87FloridaMemorial Hospital of Tampa
    
    Tampa
    
    
    180Palms of Pasadena Hospital
    
    St. Petersburg
    
    
    307Town & Country Hospital
    
    Tampa
    
    
    201NevadaNorth Vista Hospital
    
    Las Vegas
    
    
    185TexasOdessa Regional Medical Center (7)
    
    Odessa
    
    
    196Southwest General Hospital (8)
    
    San Antonio
    
    
    327The Medical Center of Southeast Texas (9)
    
    Port Arthur
    
    
    224LouisianaGlenwood Regional Medical Center
    
    West Monroe
    
    
    237Total
    
    
    
    
    3,125
 
 (1)
    
    Owned by a limited partnership in which we own a 97.5% interest.(2)
    
    On July 1, 2007, Jordan Valley Medical Center acquired Pioneer Valley Hospital, a
wholly-owned subsidiary of IASIS. The combined entity is owned by a limited partnership in
which we own a 97.4% interest.(3)
    
    A separate campus of Jordan Valley Medical Center, which is leased under an agreement
that expires on January 31, 2019. We have options to extend the term of the lease through
January 31, 2039.(4)
    
    Leased under an agreement that expires on July 31, 2008. We are currently considering
renewing this lease agreement for a period of two years.(5)
    
    Owned by a limited partnership in which we own an 90.4% interet.(6)
    
    Includes St. Lukes Behavioral Hospital, which has 103 licensed beds.(7)
    
    Owned by a limited partnership in which we own an 88.8% interest.(8)
    
    Owned by a limited partnership in which we own a 93.6% interest.(9)
    
    Owned by a limited partnership in which we own an 87.5% interest.   5




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Hospital Operations
   
    
    the geographic location of our hospital facilities and their convenience for patients and physicians;
    
    our participation in managed care programs;
    
    utilization management practices of managed care plans;
    
    consolidation of managed care payors;
    
    capital investment at our facilities;
    
    the quality of our medical staff;
    
    competition from other healthcare providers;
    
    the size of and growth in local population;
    
    local economic conditions; and
    
    improved treatment protocols as a result of advances in medical technology and pharmacology.
  
    
    level of physician support;
    
    availability of nurses and other healthcare professionals;
    
    quality, skills and compassion of our employees;
    
    breadth of our services;
    
    physical capacity and level of technological advancement at our facilities; and
    
    emphasis on quality of care.
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Sources of Revenue
  
    
    the federal government, primarily under the Medicare program;
    
    state Medicaid programs, including managed Medicaid plans;
    
    managed care payors, including health maintenance organizations, preferred provider
organizations and managed Medicare plans; and
    
    individual patients and private insurers.
  Years Ended September 30,Payor Source
    
    2007
    
    2006
    
    2005Medicare
    
    
    25.5
    %
    
    
    24.3
    %
    
    
    26.6
    %Medicaid
    
    
    14.3
    
    
    
    14.6
    
    
    
    13.1Managed care
    
    
    45.1
    
    
    
    46.1
    
    
    
    44.4Self-pay and other
    
    
    15.1
    
    
    
    15.0
    
    
    
    15.9Total(1)
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 
 (1)
    
    For the years ended September 30, 2007, 2006 and 2005, net patient revenue comprised 75.6%,
75.0% and 76.8%, respectively, of our consolidated net revenue.  Competition
  
    
    our managed care contracting relationships;
    
    the number, availability, quality and specialties of physicians, nurses and other
healthcare professionals;
    
    the scope, breadth and quality of services;
    
    the reputation of our facilities and physicians;
    
    growth in hospital capacity in the markets we serve;
    
    the physical condition of our facilities and medical equipment;
    
    the location of our facilities and availability of physician office space;
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
    
    certificate of need restrictions, where applicable;
    
    the availability of parking or proximity to public transportation;
    
    accumulation, access and interpretation of publicly reported quality indicators;
    
    growth in outpatient service providers;
    
    charges for services; and
    
    the geographic coverage of our hospitals in the regions in which we operate.
    Employees And Medical Staff
   8




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Compliance Program
  Reimbursement
 Medicare
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Medicaid
  Annual Cost Reports
   Managed Care
  12




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Commercial Insurance
   Government Regulation and Other Factors
 Licensure, Certification and Accreditation
   Utilization Review
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Federal and State Fraud and Abuse Provisions
      
    
    payment of any incentive by the hospital when a physician refers a patient to the
hospital;
    
    use of free or significantly discounted office space or equipment for physicians in
facilities usually located close to the hospital;
    
    provision of free or significantly discounted billing, nursing, or other staff services;
    
    free training for a physicians office staff, including management and laboratory techniques;
    
    guarantees that provide that, if the physicians income fails to reach a
predetermined level, the hospital will pay any portion of the remainder;
    
    low-interest or interest-free loans, or loans which may be forgiven if a physician
refers patients to the hospital;
    
    payment of the costs of a physicians travel and expenses for conferences or a
physicians continuing education courses;
    
    coverage on the hospitals group health insurance plans at an inappropriately low
cost to the physician;
    
    rental of space in physician offices, at other than fair market value terms, by
persons or entities to which physicians refer;
    
    payment of services which require few, if any, substantive duties by the physician,
or payment for services in excess of the fair market value of the services rendered; or
    
    gainsharing, the practice of giving physicians a share of any reduction in a
hospitals costs for patient care attributable in part to the physicians efforts.
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The Federal False Claims Act and Similar State Laws
    Corporate Practice of Medicine/Fee Splitting
  The Health Insurance Portability and Accountability Act of 1996
  17




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The Emergency Medical Treatment and Active Labor Act
  Healthcare Reform
  18




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Conversion Legislation
  Healthcare Industry Investigations
   19




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 Certificates of Need
  Health Choice
  20




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
    
    waivers by health maintenance organizations of Medicare and Medicaid beneficiaries
obligation to pay cost-sharing amounts or to provide other incentives in order to
attract Medicare and Medicaid enrollees;
    
    certain discounts offered to prepaid health plans by contracting providers;
    
    certain price reductions offered to eligible managed care organizations; and
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
    
    certain price reductions offered by contractors with substantial financial risk to
managed care organizations.
  Environmental Matters
  
    
    the proper handling and disposal of medical waste, hazardous waste and low level
radioactive medical waste;
    
    the proper use, storage and handling of mercury and other hazardous materials;
    
    underground and above-ground storage tanks;
    
    management of hydraulic fluid or oil associated with elevators, chiller units or other equipment;
    
    management of asbestos-containing materials or lead-based paint present or likely to
be present at some locations; and
    
    air emission permits and standards for boilers or other equipment.
  Professional and General Liability Insurance
   22




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Our Information Systems
   
    
    patient accounting, including billing and collection of net revenue;
    
    financial, accounting, reporting and payroll;
    
    coding and compliance;
    
    laboratory, radiology and pharmacy systems;
    
    materials and asset management;
    
    negotiating, pricing and administering our managed care contracts; and
    
    monitoring of quality of care.
  
    
    enhance patient safety, automate medication administration and increase staff time
available for direct patient care;
    
    optimize staffing levels according to patient volumes, acuity and seasonal needs at each facility;
    
    perform product line analyses;
    
    continue to meet or exceed quality of care indicators on a current basis;
    
    effectively monitor registration, billing, collections, managed care contract
compliance and all other aspects of our revenue cycle;
    
    control supply costs by complying with our group purchasing organization contract; and
    
    effectively monitor financial results.
  Refinancing and Recapitalization Transaction
 Senior Secured Credit Facilities
  $300.0 Million Holding Senior Paid-in-Kind Loans
  23




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Item 1A.Risk Factors.
 Servicing Our Indebtedness Requires A Significant Amount of Cash. Our Ability To Generate
Sufficient Cash Depends On Numerous Factors Beyond Our Control, And We May Be Unable To Generate
Sufficient Cash Flow To Service Our Debt Obligations, Including Making Payments On Our 8 3/4% Notes
And Term Loans.
 3 4 3 4 3 4 3 4
 3 4
 
    
    our debt holders could declare all outstanding principal and interest to be due and
payable;
    
    our secured debt lenders could terminate their commitments and commence foreclosure
proceedings against our assets; and
    
    we could be forced into bankruptcy or liquidation.
 Our Substantial Level Of Indebtedness Could Adversely Affect Our Financial Condition And
Prevent Us From Fulfilling Our Obligations Under The 8 3/4 % Notes And Senior Secured Credit
Facilities.
 3 4 3 4 3 4
  
    
    it may be more difficult for us to satisfy our obligations, including debt service
requirements under our outstanding debt;
    
    our ability to obtain additional financing for working capital, acquisitions,
capital expenditures, debt service requirements, or other general corporate purposes
may be impaired;
    
    we must use a substantial portion of our cash flow to pay principal and interest on
our 8 3/4% notes, senior secured credit facilities, and other indebtedness which will
reduce the funds available to us for other purposes;
    
    we are more vulnerable to economic downturns and adverse industry conditions;
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
    
    our ability to capitalize on business opportunities and to react to competitive
pressures as compared to our competitors may be compromised due to our high level of
indebtedness; and
    
    our ability to borrow additional funds or to refinance indebtedness may be limited.
  An Increase In Interest Rates Would Increase The Cost Of Servicing Our Debt And Could Reduce
Our Profitability.
  If We Are Unable To Retain And Negotiate Favorable Contracts With Managed Care Plans, Our Net
Revenue May Be Reduced.
  Changes In Legislation and Regulations May Significantly Reduce Government Healthcare Spending
And Our Revenue.
  25




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Our Hospitals Face Competition For Patients From Other Hospitals And Healthcare Providers That
Could Impact Patient Volume.
  If We Continue To Experience Growth In Self-Pay Volume And Revenue, Our Financial Condition Or
Results Of Operations Could Be Adversely Affected.
  If We Are Unable To Attract And Retain Quality Medical Staffs, Our Financial Condition Or
Results Of Operations Could Be Adversely Affected.
  
    
    the number and quality of the physicians on the medical staffs of our hospitals;
    
    the admitting practices of those physicians; and
    
    our maintenance of good relations with those physicians.
  26




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Our Hospitals Face Competition For Staffing, Which May Increase Our Labor Costs And Reduce
Profitability.
  If We Fail To Continually Enhance Our Hospitals With The Most Recent Technological Advances In
Diagnostic And Surgical Equipment, Our Ability To Maintain And Expand Our Markets Will Be Adversely
Affected.
  If We Fail To Comply With Extensive Laws And Government Regulations, We Could Suffer
Penalties, Be Required To Alter Arrangements With Investors In Our Hospitals Or Be Required To Make
Significant Changes To Our Operations.
  
    
    billing for services;
    
    relationships with physicians and other referral sources;
    
    adequacy of medical care;
    
    quality of medical equipment and services;
    
    qualifications of medical and support personnel;
    
    confidentiality, maintenance and security issues associated with health-related
information and medical records;
    
    the screening, stabilization and transfer of patients who have emergency medical conditions;
    
    licensure and certification;
    
    operating policies and procedures;
    
    addition of facilities and services;
    
    provider-based reimbursement, including complying with requirements allowing
multiple locations of a hospital to be billed under the hospitals Medicare provider number;
and
    
    disclosures to patients, including disclosure of any physician ownership in a
hospital.
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
    
    criminal penalties;
    
    civil penalties, including the loss of our licenses to operate one or more of our facilities; and
    
    exclusion of one or more of our facilities from participation in the Medicare,
Medicaid and other federal and state healthcare programs.
 Congress Has Considered And May Enact Legislation That Would Impose Significant Restrictions
On Hospitals That Have Physician Owners, Including Our Hospitals That Have Physician Owners.
  Some Of Our Hospitals Will Be Required To Submit To The Department Information On Their
Relationships With Physicians, Including Information Regarding Physician Investors, And This
Submission Could Subject Such Hospitals And Us To Liability.
  28




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IAS Is The Subject Of A Qui Tam Action And Investigation By The OIG That If Ultimately
Resolved In A Manner Unfavorable To Us Could Have A Material Adverse Effect On Our Business,
Financial Condition And Results of Operations.
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 Providers In The Healthcare Industry Have Been The Subject Of Federal And State
Investigations, And We May Become Subject To Additional Investigations In The Future That Could
Result In Significant Liabilities Or Penalties To Us.
  29




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
    
    cost reporting and billing practices, including for Medicare outliers;
    
    financial arrangements with referral sources;
    
    physician recruitment activities;
    
    physician joint ventures; and
    
    hospital charges and collection practices for self-pay patients.
  Compliance With Section 404 Of The Sarbanes-Oxley Act May Negatively Impact Our Results Of
Operations And Failure To Comply May Subject The Company To Regulatory Scrutiny And A Loss Of
Investors Confidence In Our Internal Control Over Financial Reporting.
  A Failure Of Our Information Systems Would Adversely Affect Our Ability To Properly Manage Our
Operations.
  
    
    patient accounting, including billing and collection of net revenue;
    
    financial, accounting, reporting and payroll;
    
    coding and compliance;
    
    laboratory, radiology and pharmacy systems;
    
    materials and asset management;
    
    negotiating, pricing and administering managed care contracts; and
    
    monitoring quality of care.
  If Any One Of The Regions In Which We Operate Experiences An Economic Downturn Or Other
Material Change, Our Overall Business Results May Suffer.
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Health Choice
    
    
    24.4
    %Salt Lake City, Utah
    
    
    21.8
    %Phoenix, Arizona (excluding Health Choice)
    
    
    14.3
    %Three cities in Texas, including San Antonio
    
    
    18.4
    %Tampa-St. Petersburg, Florida
    
    
    11.5
    %Other
    
    
    9.6
    %
  We May Be Subject To Liabilities Because Of Claims Brought Against Our Facilities.
     Our Hospitals Face Increasing Insurance Costs That May Reduce Our Cash Flows And Net Earnings .
  31




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Operations At Our Hospitals Have Been And May Be Negatively Impacted By Certain Factors,
Including Severe Weather Conditions And The Impact Of Natural Disasters.
  If We Are Unable To Control Healthcare Costs At Health Choice, Our Profitability May Be
Adversely Affected.
  
    
    our ability to contract with cost-effective healthcare providers;
    
    the increased cost of individual healthcare services;
    
    the type and number of individual healthcare services delivered; and
    
    the occurrence of catastrophes, epidemics or other unforeseen occurrences.
  If Health Choices Contract With AHCCCS Was Discontinued, Our Net Revenue And Profitability
Would Be Adversely Affected.
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Significant Competition From Other Healthcare Companies And State Efforts To Regulate The Sale
Of Not-For-Profit Hospitals May Affect Our Ability To Acquire Hospitals.
  Difficulties With The Integration Of Acquisitions May Disrupt Our Ongoing Operations.
  Difficulties With Our New Hospital In Arizona May Require Unanticipated Start-up Costs And
Adversely Affect Our Business.
   Difficulties With Current Construction Projects Or New Construction Projects, Including The
Construction Of Additional Hospitals, Would Involve Significant Capital Expenditures Which Could
Have An Adverse Impact On Our Liquidity.
  33




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
    
    our ability to control construction costs;
    
    the failure of general contractors or subcontractors to perform under their contracts;
    
    adverse weather conditions;
    
    shortages of labor or materials;
    
    our ability to obtain necessary licensing and other required governmental authorizations; and
    
    other unforeseen problems and delays.
  If The Costs For Construction Materials And Labor Continue To Rise, Such Increased Costs Could
Have An Adverse Impact On The Return On Investment Relating To Various Expansion Projects.
  State Efforts To Regulate The Construction Or Expansion Of Hospitals Could Impair Our Ability
To Operate And Expand Our Operations.
  
    
    the purchase, construction or expansion of healthcare facilities;
    
    capital expenditures exceeding a prescribed amount; or
    
    changes in services or bed capacity.
  We Are Dependent On Key Personnel And The Loss Of One Or More Of Our Senior Management Team Or
Local Management Personnel Could Have A Material Adverse Effect On Our Business.
  Our Hospitals Are Subject To Potential Responsibilities And Costs Under Environmental Laws
That Could Lead To Material Expenditures Or Liability.
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If The Fair Value Of Our Reporting Units Declines, A Material Non-Cash Charge To Earnings From
Impairment Of Our Goodwill Could Result.
  
 Item 2.
Properties.
   
 Item 3.
Legal Proceedings.
 qui tam qui tam
 qui tam qui tam qui tam qui tam qui tam
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qui tam
  
 Item 4.
Submission of Matters to a Vote of Security Holders.
  36




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
   
 Item 6. Selected Financial Data.
   CombinedIASIS
    
    
    
    
    
    Basis
    
    IASIS
    
    
    IASJne 23,
    
    
    October 1,2004
    
    
    2003Year Ended
    
    Year Ended
    
    Year Ended
    
    Year Ended
    
    through
    
    
    through
    
    Year EndedSeptember 30,
    
    September 30,
    
    September 30,
    
    September 30,
    
    September 30,
    
    
    June 22,
    
    September 30,2007
    
    2006
    
    2005
    
    2004
    
    2004
    
    
    2004
    
    2003(dollars in thousands)
    
    
    (dollars in thousands)Statement
of Operations Data (1):Net revenue
    
    $
    1,849,984
    
    
    $
    1,625,996
    
    
    $
    1,523,727
    
    
    $
    1,386,634
    
    
    $
    389,474
    
    
    
    $
    997,160
    
    
    $
    1,088,156Costs and expenses:Salaries and
benefits
    
    
    566,112
    
    
    
    470,171
    
    
    
    442,173
    
    
    
    424,419
    
    
    
    115,538
    
    
    
    
    308,881
    
    
    
    375,509Supplies and
other operating
expenses
    
    
    500,837
    
    
    
    434,124
    
    
    
    396,573
    
    
    
    379,239
    
    
    
    103,926
    
    
    
    
    275,313
    
    
    
    316,681Medical claims
    
    
    372,075
    
    
    
    343,660
    
    
    
    302,204
    
    
    
    242,389
    
    
    
    74,051
    
    
    
    
    168,338
    
    
    
    128,595Provision for bad debts
    
    
    142,708
    
    
    
    141,774
    
    
    
    133,870
    
    
    
    126,952
    
    
    
    39,486
    
    
    
    
    87,466
    
    
    
    86,231Rentals and leases
    
    
    35,987
    
    
    
    34,956
    
    
    
    32,750
    
    
    
    31,998
    
    
    
    8,840
    
    
    
    
    23,158
    
    
    
    33,545Interest expense, net
    
    
    73,754
    
    
    
    69,687
    
    
    
    66,002
    
    
    
    59,394
    
    
    
    17,459
    
    
    
    
    41,935
    
    
    
    57,552Depreciation and amortization
    
    
    77,701
    
    
    
    71,925
    
    
    
    71,037
    
    
    
    68,084
    
    
    
    19,856
    
    
    
    
    48,228
    
    
    
    52,609Management fees
    
    
    4,746
    
    
    
    4,189
    
    
    
    3,791
    
    
    
    746
    
    
    
    746
    
    
    
    
    
    
    
    
    Hurricane-related expenses (2)
    
    
    
    
    
    
    
    
    
    
    4,762
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Business interruption
insurance recoveries (3)
    
    
    (3,443
    )
    
    
    (8,974
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss on early extinguishment
of debt (4)
    
    
    6,229
    
    
    
    
    
    
    
    
    
    
    
    52,084
    
    
    
    232
    
    
    
    
    51,852
    
    
    
    3,900Merger expenses (5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,750
    
    
    
    
    
    
    
    
    19,750
    
    
    
    Write-off of debt issue costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,850
    
    
    
    
    
    
    
    
    8,850
    
    
    
    Impairment of assets held for
sale (6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,741Total costs and expenses
    
    
    1,776,706
    
    
    
    1,561,512
    
    
    
    1,453,162
    
    
    
    1,413,905
    
    
    
    380,134
    
    
    
    
    1,033,771
    
    
    
    1,066,363
 37




---



##### Table of Contents



CombinedIASIS
    
    
    
    
    
    Basis
    
    IASIS
    
    
    IASJne 23,
    
    
    October 1,2004
    
    
    2003Year Ended
    
    Year Ended
    
    Year Ended
    
    Year Ended
    
    through
    
    
    through
    
    Year EndedSeptember 30,
    
    September 30,
    
    September 30,
    
    September 30,
    
    September 30,
    
    
    June 22,
    
    September 30,2007
    
    2006
    
    2005
    
    2004
    
    2004
    
    
    2004
    
    2003(dollars in thousands)
    
    
    (dollars in thousands)Earning (loss) from continuing
operations before gain (loss) on
disposal of assets, minority
interests, income taxes and
cumulative effect of a change in
accounting principle
    
    
    73,278
    
    
    
    64,484
    
    
    
    70,565
    
    
    
    (27,271
    )
    
    
    9,340
    
    
    
    
    (36,611
    )
    
    
    21,793Gain (loss) on disposal of assets,
net (6)
    
    
    (1,364
    )
    
    
    899
    
    
    
    (231
    )
    
    
    3,624
    
    
    
    (107
    )
    
    
    
    3,731
    
    
    
    588Minority interests
    
    
    (3,988
    )
    
    
    (3,546
    )
    
    
    (2,891
    )
    
    
    (4,305
    )
    
    
    (1,207
    )
    
    
    
    (3,098
    )
    
    
    (1,828
    )Earnings (loss) from continuing
operations before income taxes
and cumulative effect of a change
in accounting principle
    
    
    67,926
    
    
    
    61,837
    
    
    
    67,443
    
    
    
    (27,952
    )
    
    
    8,026
    
    
    
    
    (35,978
    )
    
    
    20,553Income tax expense
    
    
    26,322
    
    
    
    22,288
    
    
    
    26,851
    
    
    
    4,473
    
    
    
    3,321
    
    
    
    
    1,152
    
    
    
    Net earnings (loss) from
continuing operations before
cumulative effect of a change in
accounting principle
    
    
    41,604
    
    
    
    39,549
    
    
    
    40,592
    
    
    
    (32,425
    )
    
    
    4,705
    
    
    
    
    (37,130
    )
    
    
    20,553Loss from discontinued operations
and cumulative effect of a change
in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net earnings (loss)
    
    $
    41,604
    
    
    $
    39,549
    
    
    $
    40,592
    
    
    $
    (32,425
    )
    
    $
    4,705
    
    
    
    $
    (37,130
    )
    
    $
    20,553Balance Sheet Data (at end of
period):Cash and cash equivalents
    
    $
    
    
    
    $
    95,415
    
    
    $
    89,097
    
    
    $
    98,805
    
    
    $
    98,805
    
    
    
    $
    
    
    
    $
    101,070Total assets
    
    
    2,186,422
    
    
    
    1,967,835
    
    
    
    1,852,724
    
    
    
    1,724,161
    
    
    
    1,724,161
    
    
    
    
    
    
    
    
    1,029,999Long-term debt and capital
lease obligations (including
current portion)
    
    
    1,031,657
    
    
    
    896,945
    
    
    
    904,808
    
    
    
    912,754
    
    
    
    912,754
    
    
    
    
    
    
    
    
    664,434Stockholders equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    176,099Members equity
    
    
    691,514
    
    
    
    656,496
    
    
    
    616,947
    
    
    
    573,705
    
    
    
    573,705
    
    
    
    
    
    
    
    
    
 
 (1)
    
    The results of North Vista Hospital are included from February 1, 2004, the date of
acquisition. The results of Glenwood and Alliance are included from
January 31, 2007 and  May 31, 2007, respectively,  the dates of the
acquisitions.(2)
    
    Results for the year ended September 30, 2005 include an adverse financial impact of
approximately $4.8 million before income taxes relating to property damage to our facility in
Port Arthur, Texas, as a result of Hurricane Rita.(3)
    
    Results for the years ended September 30, 2007 and 2006 include $3.4 million and $9.0
million, respectively, of business interruption insurance recoveries received in connection
with the temporary closure and disruption of operations at The Medical Center of Southeast
Texas, in Port Arthur, Texas, as a result of Hurricane Rita. Cumulative business interruption
insurance recoveries of $12.4 million received-to-date have been reduced by related insurance
deductibles of $4.6 million.(4)
    
    Results for the year ended September 30, 2007 include a $6.2 million loss on extinguishment
of debt related to the refinancing of our senior secured credit facilities.(5)
    
    Merger expenses include legal and advisory expenses and special bonus compensation of IAS
incurred in connection with its acquisition by the investor group led by TPG.(6)
    
    During 2003, we recorded an impairment charge of $11.7 million on the Rocky Mountain Medical
Center net assets held for sale to reflect the estimated net proceeds from the potential sale
of the property. During the quarter ended March 31, 2004, we sold the Rocky Mountain Medical
Center property and recorded a gain on the sale of this property of approximately $3.6
million. 38




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##### Table of Contents



Selected Operating Data
  Year Ended September 30,2007
    
    2006
    
    2005Acute CareNumber of acute care hospital facilities
at end of period (1)
    
    
    16
    
    
    
    14
    
    
    
    14Beds in service at end of period
    
    
    2,691
    
    
    
    2,206
    
    
    
    2,219Average length of stay (days) (2)
    
    
    4.57
    
    
    
    4.56
    
    
    
    4.43Occupancy rates (average beds in service)
    
    
    50.7
    %
    
    
    50.9
    %
    
    
    48.3
    %Admissions (3)
    
    
    98,372
    
    
    
    88,701
    
    
    
    88,836Adjusted admissions (4)
    
    
    158,371
    
    
    
    144,929
    
    
    
    145,346Patient days (5)
    
    
    449,646
    
    
    
    404,292
    
    
    
    393,523Adjusted patient days (4)
    
    
    697,562
    
    
    
    638,192
    
    
    
    620,717Net patient revenue per adjusted admission (6)
    
    $
    8,754
    
    
    $
    8,325
    
    
    $
    7,946Health Choice (7):Medicaid covered lives
    
    
    122,437
    
    
    
    110,813
    
    
    
    113,589Dual-eligible lives (8)
    
    
    3,482
    
    
    
    3,937
    
    
    
    Medical loss ratio (9)
    
    
    85.2
    %
    
    
    87.2
    %
    
    
    88.0
    %
 
 (1)
    
    Excludes St. Lukes Behavioral Hospital. Beginning January 31, 2007, includes
Glenwood Regional Medical Center. Beginning July 23, 2007, includes Mountain Vista
Medical Center.(2)
    
    Represents the average number of days that a patient stayed in our hospitals.(3)
    
    Represents the total number of patients admitted to our hospitals for stays in
excess of 23 hours. Management and investors use this number as a general measure of
inpatient volume.(4)
    
    Adjusted admissions and adjusted patient days are general measures of combined
inpatient and outpatient volume. We compute
adjusted admissions/patient days by multiplying admissions/patient days by gross
patient revenue and then dividing that number
by gross inpatient revenue.(5)
    
    Represents the number of days our beds were occupied by inpatients over the
period.(6)
    
    Includes the impact of our uninsured discount program, which became effective
in the third quarter of fiscal 2006. The uninsured discount program offers discounts to
all uninsured patients receiving healthcare services who do not qualify for assistance
under state Medicaid, other federal or state assistance plans or charity. The uninsured
discount program had the effect of reducing net revenue and the provision for bad debts
by generally corresponding amounts.(7)
    
    Includes our MAPD SNP effective January 1, 2006.(8)
    
    Represents members eligible for Medicare and Medicaid benefits under Health
Choices contract with CMS to provide coverage as a MAPD SNP.(9)
    
    Represents medical claims expense as a percentage of premium revenue, including
claims paid to our hospitals. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
  
    
    Forward Looking Statements;
    
    Executive Overview;
    
    Critical Accounting Policies and Estimates;
    
    Results of Operations Summary;
    
    Liquidity and Capital Resources;
    
    Off-Balance Sheet Arrangements; and
 39




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##### Table of Contents




    
    Recent Accounting Pronouncements.
  FORWARD LOOKING STATEMENTS
  EXECUTIVE OVERVIEW
  
    
    Salt Lake City, Utah;
    
    Phoenix, Arizona;
    
    Tampa-St. Petersburg, Florida;
    
    three cities in Texas, including San Antonio;
    
    Las Vegas, Nevada; and
    
    West Monroe, Louisiana.
     40




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##### Table of Contents



Revenue and Volume Trends
     41




---



##### Table of Contents



Year EndedSeptember 30,2007
    
    2006
    
    2005Medicare
    
    
    32.7
    %
    
    
    32.3
    %
    
    
    35.5
    %Medicaid
    
    
    16.8
    
    
    
    17.5
    
    
    
    16.5Managed care
    
    
    42.9
    
    
    
    42.8
    
    
    
    40.8Self-pay and other
    
    
    7.6
    
    
    
    7.4
    
    
    
    7.2Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
   42




---



##### Table of Contents




    
    a provision allocating $250.0 million per year for federal years 2006-2008 to pay
for healthcare costs of undocumented aliens;
    
    provisions generally providing hospitals with more reimbursement for outpatient
drugs;
    
    a provision increasing our reimbursement by reducing the labor share percentage from
71% to 62% for hospitals with wage indices less than 1.0; and
    
    a provision eliminating the requirement that hospitals must obtain secondary payment
information from all Medicare beneficiaries receiving reference laboratory services.
  43




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Significant Industry Trends
  Pay for Performance Reimbursement
  44




---



##### Table of Contents



Growth in Bad Debts Resulting From Increased Self-Pay Volume and Revenue
   September 30,
    
    September 30,2007
    
    2006Insured receivables
    
    
    66.7%
    
    
    
    60.4%Uninsured receivables
    
    
    33.3%
    
    
    
    39.6%Total
    
    
    100.0%
    
    
    
    100.0%
  45




---



##### Table of Contents



September 30,
    
    September 30,2007
    
    20060 to 90 days
    
    
    71.8
    %
    
    
    62.7
    %91 to 180 days
    
    
    15.5
    %
    
    
    17.7
    %Over 180 days
    
    
    12.7
    %
    
    
    19.6
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
  Additional Charity Care and Charges to the Uninsured
  Sub-Acute Care Services
  Physician Integration
   46




---



##### Table of Contents



Nursing Shortage
  Decreased Federal and State Funding for Medicaid Programs
  Implementation of Our Quality Initiatives
  
    
    Deployment of proprietary information systems to provide daily tracking of care
provided to patients in any core measures category;
    
    Implementation of a strategy to retain nurses, ultimately providing an improved
continuum of care thru continuity;
    
    Development and implementation of a hospital medical management program;
    
    Ongoing training and education of medical and non-medical personnel related to
quality performance indicators;
    
    Monthly review of the 27 quality indicators prescribed by CMS for reporting
beginning January 1, 2008;
    
    Monitoring of additional quality measures above the requirement to receive the
full annual payment update;
    
    Rapid response teams in place at all of our hospitals to provide more timely and
efficient care;
    
    Engagement of an external group to conduct unannounced mock Joint Commission surveys;
    
    Alignment of hospital management incentive compensation with quality performance
indicators; and
    
    Additional staffing to collect and report quality information and to facilitate
action plans to address areas for improvement.
 Changes in Patient Service Mix
  47




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##### Table of Contents



Volatility of Insurance Costs
   CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   Allowance for Doubtful Accounts.
 
    
    Revenue and volume trends by payor, particularly the self-pay components;
    
    Changes in the aging and payor mix of accounts receivable, including increased
focus on accounts due from the uninsured and accounts that represent co-payments and
deductibles due from patients;
    
    Historical write-off and collection experience using a hindsight or look-back approach;
    
    Cash collections as a percentage of net patient revenue less bad debt expense;
    
    Trending of days revenue in accounts receivable; and
 48




---



##### Table of Contents




    
    Various allowance coverage statistics.
   Allowance for Contractual Discounts and Settlement Estimates.
    49




---



##### Table of Contents



Insurance Reserves.
   Year ended September 30, 2007
    
    $
    (6.6
    )Year ended September 30, 2006
    
    $
    0.6Year ended September 30, 2005
    
    $
    0.2
  50




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##### Table of Contents



Year ended September 30, 2007
    
    $
    (1.0
    )Year ended September 30, 2006
    
    $
    (3.3
    )Year ended September 30, 2005
    
    $
    1.9
 Medical Claims Payable.
 Goodwill and Other Intangibles. Business
Combinations
 Income Taxes.
  51




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##### Table of Contents



RESULTS OF OPERATIONS SUMMARY
  Year Ended
    
    Year Ended
    
    Year EndedSeptember 30, 2007
    
    September 30, 2006
    
    September 30, 2005Consolidated ($ in thousands)
    
    Amount
    
    Percentage
    
    Amount
    
    Percentage
    
    Amount
    
    PercentageNet revenue:Acute care revenue
    
    $
    1,399,343
    
    
    
    75.6
    %
    
    $
    1,219,474
    
    
    
    75.0
    %
    
    $
    1,170,483
    
    
    
    76.8
    %Premium revenue
    
    
    450,641
    
    
    
    24.4
    %
    
    
    406,522
    
    
    
    25.0
    %
    
    
    353,244
    
    
    
    23.2
    %Total net revenue
    
    
    1,849,984
    
    
    
    100.0
    %
    
    
    1,625,996
    
    
    
    100.0
    %
    
    
    1,523,727
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    566,112
    
    
    
    30.6
    %
    
    
    470,171
    
    
    
    28.9
    %
    
    
    442,173
    
    
    
    29.0
    %Supplies
    
    
    214,088
    
    
    
    11.6
    %
    
    
    187,799
    
    
    
    11.5
    %
    
    
    184,875
    
    
    
    12.1
    %Medical claims
    
    
    372,075
    
    
    
    20.1
    %
    
    
    343,660
    
    
    
    21.1
    %
    
    
    302,204
    
    
    
    19.8
    %Other operating expenses
    
    
    286,749
    
    
    
    15.5
    %
    
    
    246,325
    
    
    
    15.2
    %
    
    
    211,698
    
    
    
    13.9
    %Provision for bad debts
    
    
    142,708
    
    
    
    7.7
    %
    
    
    141,774
    
    
    
    8.7
    %
    
    
    133,870
    
    
    
    8.8
    %Rentals and leases
    
    
    35,987
    
    
    
    1.9
    %
    
    
    34,956
    
    
    
    2.2
    %
    
    
    32,750
    
    
    
    2.1
    %Interest expense, net
    
    
    73,754
    
    
    
    4.0
    %
    
    
    69,687
    
    
    
    4.3
    %
    
    
    66,002
    
    
    
    4.4
    %Depreciation and amortization
    
    
    77,701
    
    
    
    4.2
    %
    
    
    71,925
    
    
    
    4.4
    %
    
    
    71,037
    
    
    
    4.7
    %Management fees
    
    
    4,746
    
    
    
    0.3
    %
    
    
    4,189
    
    
    
    0.3
    %
    
    
    3,791
    
    
    
    0.3
    %Hurricane-related expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,762
    
    
    
    0.3
    %Loss on extinguishment of debt
    
    
    6,229
    
    
    
    0.3
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Business interruption insurance
recoveries
    
    
    (3,443
    )
    
    
    (0.2
    )%
    
    
    (8,974
    )
    
    
    (0.6
    )%
    
    
    
    
    
    
    Total costs and expenses
    
    
    1,776,706
    
    
    
    96.0
    %
    
    
    1,561,512
    
    
    
    96.0
    %
    
    
    1,453,162
    
    
    
    95.4
    %Earnings before gain (loss) on disposal of
assets, minority interests
and income taxes
    
    
    73,278
    
    
    
    4.0
    %
    
    
    64,484
    
    
    
    4.0
    %
    
    
    70,565
    
    
    
    4.6
    %Gain (loss) on disposal of assets, net
    
    
    (1,364
    )
    
    
    (0.1
    )%
    
    
    899
    
    
    
    0.0
    %
    
    
    (231
    )
    
    
    0.0
    %Minority interests
    
    
    (3,988
    )
    
    
    (0.2
    )%
    
    
    (3,546
    )
    
    
    (0.2
    )%
    
    
    (2,891
    )
    
    
    (0.2
    )%Earnings before income taxes
    
    
    67,926
    
    
    
    3.7
    %
    
    
    61,837
    
    
    
    3.8
    %
    
    
    67,443
    
    
    
    4.4
    %Income tax expense
    
    
    26,322
    
    
    
    1.4
    %
    
    
    22,288
    
    
    
    1.4
    %
    
    
    26,851
    
    
    
    1.7
    %Net earnings
    
    $
    41,604
    
    
    
    2.3
    %
    
    $
    39,549
    
    
    
    2.4
    %
    
    $
    40,592
    
    
    
    2.7
    %
 52




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##### Table of Contents



Year Ended
    
    Year Ended
    
    Year EndedSeptember 30, 2007
    
    September 30, 2006
    
    September 30, 2005Acute Care ($ in thousands)
    
    Amount
    
    Percentage
    
    Amount
    
    Percentage
    
    Amount
    
    PercentageNet revenue:Acute care revenue
    
    $
    1,399,343
    
    
    
    99.2
    %
    
    $
    1,219,474
    
    
    
    99.1
    %
    
    $
    1,170,483
    
    
    
    99.3
    %Revenue between segments
    
    
    11,970
    
    
    
    0.8
    %
    
    
    10,857
    
    
    
    0.9
    %
    
    
    8,475
    
    
    
    0.7
    %Total net revenue (1)
    
    
    1,411,313
    
    
    
    100.0
    %
    
    
    1,230,331
    
    
    
    100.0
    %
    
    
    1,178,958
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    551,309
    
    
    
    39.1
    %
    
    
    457,540
    
    
    
    37.2
    %
    
    
    431,609
    
    
    
    36.6
    %Supplies
    
    
    213,803
    
    
    
    15.1
    %
    
    
    187,515
    
    
    
    15.2
    %
    
    
    184,676
    
    
    
    15.7
    %Other operating expenses
    
    
    271,653
    
    
    
    19.2
    %
    
    
    233,041
    
    
    
    18.9
    %
    
    
    200,411
    
    
    
    17.0
    %Provision for bad debts
    
    
    142,708
    
    
    
    10.1
    %
    
    
    141,774
    
    
    
    11.5
    %
    
    
    133,870
    
    
    
    11.4
    %Rentals and leases
    
    
    34,825
    
    
    
    2.5
    %
    
    
    33,874
    
    
    
    2.8
    %
    
    
    31,849
    
    
    
    2.7
    %Interest expense, net
    
    
    73,754
    
    
    
    5.2
    %
    
    
    69,687
    
    
    
    5.7
    %
    
    
    66,002
    
    
    
    5.6
    %Depreciation and amortization
    
    
    74,141
    
    
    
    5.3
    %
    
    
    68,539
    
    
    
    5.6
    %
    
    
    67,840
    
    
    
    5.7
    %Management fees
    
    
    4,746
    
    
    
    0.3
    %
    
    
    4,189
    
    
    
    0.3
    %
    
    
    3,791
    
    
    
    0.3
    %Hurricane-related expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,762
    
    
    
    0.4
    %Loss on extinguishment of debt
    
    
    6,229
    
    
    
    0.4
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Business interruption insurance recoveries
    
    
    (3,443
    )
    
    
    (0.2
    )%
    
    
    (8,974
    )
    
    
    (0.7
    )%
    
    
    
    
    
    
    Total costs and expenses
    
    
    1,369,725
    
    
    
    97.0
    %
    
    
    1,187,185
    
    
    
    96.5
    %
    
    
    1,124,810
    
    
    
    95.4
    %Earnings before gain (loss) on disposal of
assets, minority interests
and income taxes
    
    
    41,588
    
    
    
    3.0
    %
    
    
    43,146
    
    
    
    3.5
    %
    
    
    54,148
    
    
    
    4.6
    %Gain (loss) on disposal of assets, net
    
    
    (1,364
    )
    
    
    (0.1
    )%
    
    
    953
    
    
    
    0.1
    %
    
    
    (231
    )
    
    
    0.0
    %Minority interests
    
    
    (3,988
    )
    
    
    (0.3
    )%
    
    
    (3,546
    )
    
    
    (0.3
    )%
    
    
    (2,891
    )
    
    
    (0.3
    )%Earnings before income taxes
    
    $
    36,236
    
    
    
    2.6
    %
    
    $
    40,553
    
    
    
    3.3
    %
    
    $
    51,026
    
    
    
    4.3
    %
 
 (1)
    
    Revenue between segments is eliminated in our consolidated results. Year Ended
    
    Year Ended
    
    Year EndedSeptember 30, 2007
    
    September 30, 2006
    
    September 30, 2005Health Choice ($ in thousands)
    
    Amount
    
    Percentage
    
    Amount
    
    Percentage
    
    Amount
    
    PercentagePremium revenue
    
    $
    450,641
    
    
    
    100.0
    %
    
    $
    406,522
    
    
    
    100.0
    %
    
    $
    353,244
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    14,803
    
    
    
    3.3
    %
    
    
    12,631
    
    
    
    3.1
    %
    
    
    10,564
    
    
    
    3.0
    %Supplies
    
    
    285
    
    
    
    0.1
    %
    
    
    284
    
    
    
    0.1
    %
    
    
    199
    
    
    
    0.1
    %Medical claims (1)
    
    
    384,045
    
    
    
    85.2
    %
    
    
    354,517
    
    
    
    87.2
    %
    
    
    310,679
    
    
    
    88.0
    %Other operating expenses
    
    
    15,096
    
    
    
    3.3
    %
    
    
    13,284
    
    
    
    3.3
    %
    
    
    11,287
    
    
    
    3.2
    %Rentals and leases
    
    
    1,162
    
    
    
    0.3
    %
    
    
    1,082
    
    
    
    0.3
    %
    
    
    901
    
    
    
    0.2
    %Depreciation and amortization
    
    
    3,560
    
    
    
    0.8
    %
    
    
    3,386
    
    
    
    0.8
    %
    
    
    3,197
    
    
    
    0.9
    %Total costs and expenses
    
    
    418,951
    
    
    
    93.0
    %
    
    
    385,184
    
    
    
    94.8
    %
    
    
    336,827
    
    
    
    95.4
    %Earnings before loss on disposal of assets
    
    
    31,690
    
    
    
    7.0
    %
    
    
    21,338
    
    
    
    5.2
    %
    
    
    16,417
    
    
    
    4.6
    %Loss of disposal of assets, net
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    0.0
    %
    
    
    
    
    
    
    Earnings before income taxes
    
    $
    31,690
    
    
    
    7.0
    %
    
    $
    21,284
    
    
    
    5.2
    %
    
    $
    16,417
    
    
    
    4.6
    %
 
 (1)
    
    Medical claims paid to our hospitals of $12.0 million, $10.9 million and $8.5 million for the
years ended September 30, 2007, 2006 and 2005, respectively, are eliminated in our consolidated
results. 53




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Supplemental Non-GAAP Disclosures
  Operating Measures Adjusted for Comparative Analysis(in thousands, except for statistical measures)Year Ended September 30, 2007Non-GAAPGAAP
    
    Uninsured
    
    Adjusted
    
    GAAP %
    
    Non-GAAP %Amounts
    

Discounts (1)
    
    Amounts (2)
    
    of Revenue
    
    of Revenue (2)Acute Care SegmentNet revenue(3)
    
    $
    1,411,313
    
    
    $
    52,956
    
    
    $
    1,464,269
    
    
    
    100.0
    %
    
    
    100.0
    %Salaries and benefits
    
    
    551,309
    
    
    
    
    
    
    
    551,309
    
    
    
    39.1
    
    
    
    37.7Supplies
    
    
    213,803
    
    
    
    
    
    
    
    213,803
    
    
    
    15.1
    
    
    
    14.6Other operating expenses
    
    
    271,653
    
    
    
    
    
    
    
    271,653
    
    
    
    19.2
    
    
    
    18.6Provision for bad debts
    
    
    142,708
    
    
    
    52,956
    
    
    
    195,664
    
    
    
    10.1
    
    
    
    13.4Rentals and leases
    
    
    34,825
    
    
    
    
    
    
    
    34,825
    
    
    
    2.5
    
    
    
    2.4Net patient revenue per
adjusted admission
    
    $
    8,754
    
    
    $
    335
    
    
    $
    9,089Percentage change from
prior year
    
    
    5.2
    %
    
    
    
    
    
    
    7.4
    %Same-Facility(4)Net revenue(3)
    
    $
    1,332,257
    
    
    $
    50,552
    
    
    $
    1,382,809Net patient revenue per
adjusted admission
    
    $
    8,846
    
    
    $
    341
    
    
    $
    9,187Percentage change from
prior year
    
    
    6.3
    %
    
    
    
    
    
    
    8.5
    %
 Year Ended September 30, 2006Non-GAAPUninsured
    
    Adjusted
    
    GAAP %
    
    Non-GAAP %GAAP Amounts
    

Discounts (1)
    
    Amounts (2)
    
    of Revenue
    
    of Revenue (2)Acute Care SegmentNet revenue(3)
    
    $
    1,230,331
    
    
    $
    20,306
    
    
    $
    1,250,637
    
    
    
    100.0
    %
    
    
    100.0
    %Salaries and benefits
    
    
    457,540
    
    
    
    
    
    
    
    457,540
    
    
    
    37.2
    
    
    
    36.6Supplies
    
    
    187,515
    
    
    
    
    
    
    
    187,515
    
    
    
    15.2
    
    
    
    15.0Other operating expenses
    
    
    233,041
    
    
    
    
    
    
    
    233,041
    
    
    
    18.9
    
    
    
    18.6Provision for bad debts
    
    
    141,774
    
    
    
    20,306
    
    
    
    162,080
    
    
    
    11.5
    
    
    
    13.0Rentals and leases
    
    
    33,874
    
    
    
    
    
    
    
    33,874
    
    
    
    2.8
    
    
    
    2.7Net patient revenue per
adjusted admission
    
    $
    8,325
    
    
    $
    140
    
    
    $
    8,465Percentage change from
prior year
    
    
    4.8
    %
    
    
    
    
    
    
    6.5
    %
 
 (1)
    
    Includes the impact of discounts provided to uninsured patients for the period. In
the acute care segment, we recorded $53.0 million and $20.3 million of uninsured discounts
during the years ended September 30, 2007 and 2006, respectively.(2)
    
    Acute care revenue, the provision for bad debts and certain operating expense
categories as a percentage of acute care revenue have been adjusted to present certain
financial measures on a basis comparative with prior periods (non-GAAP financial measures).
Management believes these non-GAAP financial measures are useful to investors for the purpose
of providing disclosures of our results of operations consistent with those used 54




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by management. While management believes these non-GAAP financial measures provide useful
information for period-to-period comparisons, investors are encouraged to use GAAP measures
when evaluating financial performance or liquidity.(3)
    
    Acute care revenue represents total net revenue of the segment prior to the
elimination of revenue between segments(4)
    
    Includes the effect of the Alliance acquisition completed on May 31, 2007. Upon
acquisition, Alliance was immediately merged into Odessa Regional Hospital to form Odessa
Regional Medical Center. Years Ended September 30, 2007 and 2006
 Net revenue
      Salaries and benefits
 55




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Supplies
 Medical claims
 Other operating expenses qui tam
 Provision for bad debts
 Interest expense, net
 56




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Depreciation and amortization
 Income tax expense
 Net earnings
 Years Ended September 30, 2006 and 2005
 Net revenue
    57




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Salaries and benefits
 Supplies
 Medical claims
 Other operating expenses qui tam
 Provision for bad debts
 Interest expense, net
 58




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Depreciation and amortization
 Income tax expense
 Net earnings
 Summary of Operations by Quarter
  Quarter EndedSept. 30,
    
    June 30,
    
    March 31,
    
    Dec. 31,2007(1)
    
    2007(2)
    
    2007(3)
    
    2006(in thousands)Net revenue
    
    $
    489,823
    
    
    $
    470,625
    
    
    $
    472,702
    
    
    $
    416,834Earnings before income taxes
    
    
    13,038
    
    
    
    9,412
    
    
    
    28,231
    
    
    
    17,244Net earnings
    
    
    7,758
    
    
    
    6,308
    
    
    
    16,955
    
    
    
    10,583
 Quarter EndedSept. 30,
    
    June 30
    
    March 31,
    
    Dec. 31,2006(4)
    
    2006(5)
    
    2006(6)
    
    2005(in thousands)Net revenue
    
    $
    407,600
    
    
    $
    420,963
    
    
    $
    417,968
    
    
    $
    379,465Earnings before income taxes
    
    
    15,587
    
    
    
    25,364
    
    
    
    18,927
    
    
    
    1,962Net earnings
    
    
    11,054
    
    
    
    15,912
    
    
    
    11,423
    
    
    
    1,162
 
 (1)
    
    Results for the quarter ended September 30, 2007 include a $2.9 million and a
$392,000 reduction in prior year estimates for professional and general liability
losses and workers compensation claims, respectively, as a result of our semi-annual
actuarial studies.(2)
    
    Results for the quarter ended June 30, 2007 include $1.5 million in business
interruption insurance recoveries and $6.2 million in loss on extinguishment of debt.(3)
    
    Results for the quarter ended March 31, 2007 include a $3.8 million and a
$648,000 reduction in prior year estimates for professional and general liability
losses and workers compensation claims, respectively, as a result of our semi-annual
actuarial studies.(4)
    
    Results for the quarter ended September 30, 2006 include $654,000 in business
interruption insurance recoveries. Also included is a $3.5 million increase in prior
year estimates for professional and general liability losses and a $3.1 million
reduction in prior year estimates for workers compensation claims as a result of our
semi-annual actuarial studies.(5)
    
    Results for the quarter ended June 30, 2006 include $8.3 million in business
interruption insurance recoveries. 59




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##### Table of Contents



(6)
    
    Results for the quarter ended March 31, 2006 include a $2.9 million and a
$228,000 reduction in prior year estimates for professional and general liability
losses and workers compensation claims, respectively, as a result of our semi-annual
actuarial studies. LIQUIDITY AND CAPITAL RESOURCES
   Available cash
    
    $
    Available capacity under our senior secured revolving credit facility
    
    
    220.9Available capacity under our senior secured delayed draw term loan
    
    
    39.0Net available liquidity at September 30, 2007
    
    $
    259.9
      60




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
    
    $58.0 million to $62.0 million for the two patient tower expansions in Utah;
    
    $67.0 million to $73.0 million for other growth and new business projects;
    
    $65.0 million to $70.0 million in replacement or maintenance related projects at our
hospitals; and
    
    $15.0 million in hardware and software related costs in connection with the
implementation of our advanced clinical information system, as well as other
information systems projects.
    Overview of Cash Flow Activities for the Years Ended September 30, 2007 and 2006
  2007
    
    2006Cash flows from operating activities
    
    $
    126.3
    
    
    $
    157.1Cash flows from investing activities
    
    
    (329.6
    )
    
    
    (146.2
    )Cash flows from financing activities
    
    
    107.9
    
    
    
    (4.6
    )
 61




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Operating Activities
  Investing Activities
   
    
    $94.9 million for the construction and equipping of Mountain Vista Medical Center;
    
    $85.6 million for various expansion and renovation projects at our hospitals; and
    
    $14.9 million in hardware and software related to our advanced clinicals and other
information systems projects.
 Financing Activities
  Debt Instruments
  
    
    $854.0 million in senior secured credit facilities; and
    
    $475.0 million in 8 3/4% senior subordinated notes due 2014.
 $854.0 Million Senior Secured Credit Facilities
  62




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$475.0 Million 8 3/4% Senior Subordinated Notes Due 2014
  $300.0 Million Holdings Senior PIK Loans
  63




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Other
  OFF-BALANCE SHEET ARRANGEMENTS
   Tabular Disclosure of Contractual Obligations
  Payments Due By PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More than1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years
    
    
    Total(in millions)Contractual Cash
Obligations:Long-term debt,
with interest (1)
    
    $
    90.3
    
    
    $
    182.9
    
    
    $
    179.5
    
    
    $
    1,153.0
    
    
    $
    1,605.7Capital lease
obligations, with
interest
    
    
    3.6
    
    
    
    1.6
    
    
    
    0.6
    
    
    
    
    
    
    
    5.8Medical claims
    
    
    81.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81.3Operating leases
    
    
    40.0
    
    
    
    39.4
    
    
    
    26.4
    
    
    
    55.2
    
    
    
    161.0Estimated
self-insurance
liabilities
    
    
    11.2
    
    
    
    11.6
    
    
    
    15.6
    
    
    
    16.0
    
    
    
    54.4Purchase obligations
    
    
    14.9
    
    
    
    5.4
    
    
    
    0.8
    
    
    
    0.2
    
    
    
    21.3Subtotal
    
    $
    241.3
    
    
    $
    240.9
    
    
    $
    222.9
    
    
    $
    1,224.4
    
    
    $

    1,929.5
 Amount of Commitment Expiration Per PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More than1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years
    
    
    Total(in millions)Other Commitments:Construction and
improvement commitments
    
    $
    81.3
    
    
    $
    14.0
    
    
    $
    
    
    
    $
    
    
    
    $
    95.3Guarantees of
surety bonds
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5
 64




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##### Table of Contents



Amount of Commitment Expiration Per PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More than1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years
    
    
    Total(in millions)Letters of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44.1
    
    
    
    44.1Minimum revenue
guarantees
    
    
    8.2
    
    
    
    9.5
    
    
    
    2.8
    
    
    
    
    
    
    
    20.5Other commitments
    
    
    1.2
    
    
    
    0.7
    
    
    
    0.1
    
    
    
    
    
    
    
    2.0Subtotal
    
    
    91.2
    
    
    
    24.2
    
    
    
    2.9
    
    
    
    44.1
    
    
    
    162.4Total obligations
and commitments
    
    $
    332.5
    
    
    $
    265.1
    
    
    $
    225.8
    
    
    $
    1,268.5
    
    
    $
    2,091.9
 
 (1)
    
    We used 7.5%, the weighted average interest rate incurred on our senior secured credit
facilities in fiscal 2007, which accrues actual interest at a variable rate. Actual
interest will vary based on changes in interest rates. Seasonality
  RECENT ACCOUNTING PRONOUNCEMENTS
 , Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109 Accounting for Income Taxes
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations Business Combinations
 65




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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
   66




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Item 8. Financial Statements and Supplementary Data
 IASIS Healthcare LLC
Index to Consolidated Financial Statements
 PageReport of Independent Registered Public Accounting Firm
    
    
    68Consolidated Balance Sheets at September 30, 2007 and 2006
    
    
    69Consolidated Statements of Operations for the Years Ended September
30, 2007, 2006 and 2005
    
    
    70Consolidated Statements of Members Equity for the Years Ended
September 30, 2007, 2006 and 2005
    
    
    71Consolidated Statements of Cash Flows for the Years Ended September
30, 2007, 2006 and 2005
    
    
    72Notes to Consolidated Financial Statements
    
    
    74
 67




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Report of Independent Registered Public Accounting Firm
 
     
 68




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IASIS
HEALTHCARE LLC
 
 CONSOLIDATED BALANCE SHEETS  (In thousands)
 September 30,
    
    
    September 30,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    95,415Accounts receivable,
less allowance for
doubtful accounts of $97,800 and
$109,900 at September 30, 2007 and
2006, respectively
    
    
    248,281
    
    
    
    182,452Inventories
    
    
    43,697
    
    
    
    34,299Deferred income taxes
    
    
    29,629
    
    
    
    41,416Prepaid expenses and other current assets
    
    
    45,023
    
    
    
    41,841Total current assets
    
    
    366,630
    
    
    
    395,423Property and equipment, net
    
    
    980,437
    
    
    
    727,048Goodwill
    
    
    756,593
    
    
    
    756,479Other intangible assets, net
    
    
    36,000
    
    
    
    39,000Other assets, net
    
    
    46,762
    
    
    
    49,885Total assets
    
    $
    2,186,422
    
    
    $
    1,967,835LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Accounts payable
    
    $
    98,488
    
    
    $
    73,351Salaries and benefits payable
    
    
    40,124
    
    
    
    29,082Accrued interest payable
    
    
    18,865
    
    
    
    19,965Medical claims payable
    
    
    81,309
    
    
    
    81,822Other accrued expenses and other current liabilities
    
    
    44,276
    
    
    
    49,087Current portion of long-term debt and capital lease obligations
    
    
    8,036
    
    
    
    7,432Total current liabilities
    
    
    291,098
    
    
    
    260,739Long-term debt and capital lease obligations
    
    
    1,023,621
    
    
    
    889,513Deferred income taxes
    
    
    93,402
    
    
    
    81,179Other long-term liabilities
    
    
    50,831
    
    
    
    47,611Minority interest
    
    
    35,956
    
    
    
    32,297Members Equity:Members equity
    
    
    691,514
    
    
    
    656,496Total liabilities and members equity
    
    $
    2,186,422
    
    
    $
    1,967,835
  69




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IASIS
HEALTHCARE LLC
 
 CONSOLIDATED STATEMENTS OF OPERATIONS  (In thousands)
 Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2005Net revenue:Acute care revenue
    
    $
    1,399,343
    
    
    $
    1,219,474
    
    
    $
    1,170,483Premium revenue
    
    
    450,641
    
    
    
    406,522
    
    
    
    353,244Total net revenue
    
    
    1,849,984
    
    
    
    1,625,996
    
    
    
    1,523,727Costs and expenses:Salaries and benefits
    
    
    566,112
    
    
    
    470,171
    
    
    
    442,173Supplies
    
    
    214,088
    
    
    
    187,799
    
    
    
    184,875Medical claims
    
    
    372,075
    
    
    
    343,660
    
    
    
    302,204Other operating expenses
    
    
    286,749
    
    
    
    246,325
    
    
    
    211,698Provision for bad debts
    
    
    142,708
    
    
    
    141,774
    
    
    
    133,870Rentals and leases
    
    
    35,987
    
    
    
    34,956
    
    
    
    32,750Interest expense, net
    
    
    73,754
    
    
    
    69,687
    
    
    
    66,002Depreciation and amortization
    
    
    77,701
    
    
    
    71,925
    
    
    
    71,037Management fees
    
    
    4,746
    
    
    
    4,189
    
    
    
    3,791Hurricane-related expenses
    
    
    
    
    
    
    
    
    
    
    4,762Loss on extinguishment of debt
    
    
    6,229
    
    
    
    
    
    
    
    Business interruption insurance recoveries
    
    
    (3,443
    )
    
    
    (8,974
    )
    
    
    Total costs and expenses
    
    
    1,776,706
    
    
    
    1,561,512
    
    
    
    1,453,162Earnings before gain (loss) on disposal of
assets, minority interests and income taxes
    
    
    73,278
    
    
    
    64,484
    
    
    
    70,565Gain (loss) on disposal of assets, net
    
    
    (1,364
    )
    
    
    899
    
    
    
    (231
    )Minority interests
    
    
    (3,988
    )
    
    
    (3,546
    )
    
    
    (2,891
    )Earnings before income taxes
    
    
    67,926
    
    
    
    61,837
    
    
    
    67,443Income tax expense
    
    
    26,322
    
    
    
    22,288
    
    
    
    26,851Net earnings
    
    $
    41,604
    
    
    $
    39,549
    
    
    $
    40,592
 See accompanying notes.
 70




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IASIS
HEALTHCARE LLC
 
 CONSOLIDATED STATEMENTS OF MEMBERS EQUITY  (In thousands, except share amounts)
 MembersEquityBalance at September 30, 2004
    
    $
    573,705Purchase price consideration for vested rollover options
    
    
    2,650Net earnings
    
    
    40,592Balance at September 30, 2005
    
    $
    616,947Net earnings
    
    
    39,549Balance at September 30, 2006
    
    $
    656,496Distribution to parent for debt financing costs
    
    
    (6,586
    )Net earnings
    
    
    41,604Balance at September 30, 2007
    
    $
    691,514
  71




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##### Table of Contents



IASIS HEALTHCARE LLC
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2005Cash flows from operating activities:Net earnings
    
    $
    41,604
    
    
    $
    39,549
    
    
    $
    40,592Adjustments to reconcile net earnings to net cash
provided by operating activities:Depreciation and amortization
    
    
    77,701
    
    
    
    71,925
    
    
    
    71,037Amortization of loan costs
    
    
    2,942
    
    
    
    2,960
    
    
    
    5,789Minority interests
    
    
    3,988
    
    
    
    3,546
    
    
    
    2,891Deferred income taxes
    
    
    24,245
    
    
    
    21,002
    
    
    
    25,600Loss (gain) on disposal of assets, net
    
    
    1,364
    
    
    
    (899
    )
    
    
    231Hurricane-related expenses
    
    
    
    
    
    
    
    
    
    
    4,762Loss on extinguishment of debt
    
    
    5,091
    
    
    
    
    
    
    
    Changes in operating assets and liabilities, net of
the effect of acquisitions:Accounts receivable, net
    
    
    (49,480
    )
    
    
    (15,996
    )
    
    
    (1,176
    )Inventories, prepaid expenses and other current assets
    
    
    (5,641
    )
    
    
    (16,566
    )
    
    
    (7,556
    )Accounts payable, other accrued expenses and other
accrued liabilities
    
    
    24,520
    
    
    
    51,623
    
    
    
    6,983Net cash provided by operating activities
    
    
    126,334
    
    
    
    157,144
    
    
    
    149,153Cash flows from investing activities:Purchases of property and equipment
    
    
    (195,393
    )
    
    
    (146,928
    )
    
    
    (142,368
    )Cash paid for acquisitions
    
    
    (141,585
    )
    
    
    
    
    
    
    (1,359
    )Investment in joint venture
    
    
    
    
    
    
    
    
    
    
    (3,732
    )Proceeds from sale of assets
    
    
    1,026
    
    
    
    147
    
    
    
    Change in other assets
    
    
    6,314
    
    
    
    598
    
    
    
    (4,275
    )Net cash used in investing activities
    
    
    (329,638
    )
    
    
    (146,183
    )
    
    
    (151,734
    )Cash flows from financing activities:Payment of debt and capital lease obligations
    
    
    (650,780
    )
    
    
    (7,863
    )
    
    
    (10,849
    )Proceeds from debt borrowings
    
    
    778,800
    
    
    
    
    
    
    
    2,274Debt financing costs incurred
    
    
    (8,200
    )
    
    
    
    
    
    
    (487
    )Distribution to parent for debt financing costs
    
    
    (6,586
    )
    
    
    
    
    
    
    Distribution of minority interests
    
    
    (4,850
    )
    
    
    (2,507
    )
    
    
    (4,092
    )Proceeds received from sale of (costs paid for)
partnership interests
    
    
    (495
    )
    
    
    5,727
    
    
    
    6,027Net cash provided by (used in) financing activities
    
    
    107,889
    
    
    
    (4,643
    )
    
    
    (7,127
    )Increase (decrease) in cash and cash equivalents
    
    
    (95,415
    )
    
    
    6,318
    
    
    
    (9,708
    )Cash and cash equivalents at beginning of period
    
    
    95,415
    
    
    
    89,097
    
    
    
    98,805Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    95,415
    
    
    $
    89,097Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    80,647
    
    
    $
    72,271
    
    
    $
    61,363Cash paid for income taxes, net
    
    $
    7,710
    
    
    $
    1,082
    
    
    $
    2,421Cash paid in loss on extinguishment of debt
    
    $
    1,138
    
    
    $
    
    
    
    $
    
 72




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IASIS HEALTHCARE LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)  (In thousands)
 Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2005Supplemental schedule of noncash investing
and financing activities:Capital lease obligations resulting from
acquisitions
    
    $
    5,037
    
    
    $
    
    
    
    $
    Property and equipment in accounts payable
    
    $
    6,401
    
    
    $
    14,546
    
    
    $
    7,449Partnership interests issued for acquisition
    
    $
    3,517
    
    
    $
    
    
    
    $
    
  73




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##### Table of Contents



IASIS HEALTHCARE LLC
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. ORGANIZATION AND BASIS OF PRESENTATION
  
    
    Salt Lake City, Utah;
    
    Phoenix, Arizona;
    
    Tampa-St. Petersburg, Florida;
    
    three cities in Texas, including San Antonio;
    
    Las Vegas, Nevada; and
    
    West Monroe, Louisiana.
      2. SIGNIFICANT ACCOUNTING POLICIES
 Net Revenue
 Acute Care Revenue
    74




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Premium Revenue
      75




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Cash and Cash Equivalents
  Accounts Receivable
   Allowance for Doubtful Accounts
  
    
    Revenue and volume trends by payor, particularly the self-pay components;
    
    Changes in the aging and payor mix of accounts receivable, including increased
focus on accounts due from the uninsured and accounts that represent co-payments
and deductibles due from patients;
    
    Historical write-off and collection experience using a hindsight or look-back
approach;
    
    Cash collections as a percentage of net patient revenue less bad debt expense;
    
    Trending of days revenue in accounts receivable; and
    
    Various allowance coverage statistics.
  Inventories
  Long-lived Assets
  76




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Property and Equipment
  Goodwill and Other Intangible Assets
  Other Assets
  Insurance Reserves
  Income Taxes
  77




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Minority Interest in Consolidated Entities
  Medical Claims Payable
    Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2005Medical claims payable as of October 1
    
    $
    81,822
    
    
    $
    60,201
    
    
    $
    55,421Medical claims expense incurred during the year:Related to current year
    
    
    396,152
    
    
    
    362,636
    
    
    
    308,157Related to prior years
    
    
    (12,107
    )
    
    
    (8,119
    )
    
    
    2,522Total expenses
    
    
    384,045
    
    
    
    354,517
    
    
    
    310,679Medical claims payments during the year:Related to current year
    
    
    (317,798
    )
    
    
    (282,326
    )
    
    
    (248,841
    )Related to prior years
    
    
    (66,760
    )
    
    
    (50,570
    )
    
    
    (57,058
    )Total payments
    
    
    (384,558
    )
    
    
    (332,896
    )
    
    
    (305,899
    )Medical claims payable as of September 30
    
    $
    81,309
    
    
    $
    81,822
    
    
    $
    60,201
 Stock Based Compensation
 Accounting for Stock Issued to Employees Accounting for Stock
Based Compensation
 Share-Based Payment Statement of Cash Flows
 78




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Fair Value of Financial Instruments
  Management Services Agreement
  Reclassifications
  Recently Issued Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109 Accounting for Income Taxes
 79




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations Business Combinations
 3. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
  September 30,
    
    
    September 30,2007
    
    
    2006Senior secured credit facilities
    
    $
    547,805
    
    
    $
    415,438Senior subordinated notes
    
    
    475,000
    
    
    
    475,000Capital leases and other obligations
    
    
    8,852
    
    
    
    6,5071,031,657
    
    
    
    896,945Less current maturities
    
    
    8,036
    
    
    
    7,432$
    1,023,621
    
    
    $
    889,513
 Senior Secured Credit Facilities
   80




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     8 3/4% Senior Subordinated Notes
  $300.0 Million Holdings Senior Paid-in-Kind Loans
  4. ACQUISITIONS
 Acquisition
of Glenwood Regional Medical Center
 81




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Fair value of assets acquired and liabilities assumed:Assets acquiredAccounts receivable, net
    
    $
    11,487Inventory, prepaid expenses and other current assets
    
    
    4,828Property and equipment
    
    
    68,244Other long-term assets
    
    
    1,529Total assets acquired
    
    $
    86,088Liabilities assumed
    
    $
    8,005
 Acquisition of Alliance Hospital
   Fair value of assets acquired and liabilities assumed:Assets acquiredAccounts receivable, net
    
    $
    4,230Inventory, prepaid expenses and other current assets
    
    
    2,695Property and equipment
    
    
    70,522Total assets acquired
    
    $
    77,447Liabilities assumed
    
    $
    10,863
  82




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 5. PROPERTY AND EQUIPMENT
  September 30,
    
    
    September 30,2007
    
    
    2006Land
    
    $
    102,427
    
    
    $
    97,951Buildings and improvements
    
    
    597,942
    
    
    
    388,200Equipment
    
    
    476,359
    
    
    
    312,9451,176,728
    
    
    
    799,096Less accumulated depreciation and amortization
    
    
    (241,268
    )
    
    
    (168,725
    )935,460
    
    
    
    630,371Construction-in-progress (estimated cost to
complete at September 30, 2007 - $99.9
million)
    
    
    44,977
    
    
    
    96,677$
    980,437
    
    
    $
    727,048
  6. GOODWILL AND OTHER INTANGIBLE ASSETS
  Acute
    
    
    HealthCare
    
    
    Choice
    
    
    TotalBalance at September 30, 2005
    
    $
    748,618
    
    
    $
    5,757
    
    
    $
    754,375Adjustment resulting from change in purchase price
allocation
    
    
    2,104
    
    
    
    
    
    
    
    2,104Balance at September 30, 2006
    
    $
    750,722
    
    
    $
    5,757
    
    
    $
    756,479Adjustment resulting from surgery center acquisition
    
    
    349
    
    
    
    
    
    
    
    349Adjustments in deferred tax assets and liabilities
    
    
    (235
    )
    
    
    
    
    
    
    (235
    )Balance at September 30, 2007
    
    $
    750,836
    
    
    $
    5,757
    
    
    $
    756,593
  7. MINIMUM REVENUE GUARANTEES
  Application of FASB Interpretation
No. 45 to Minimum Revenue Guarantees Granted to a Business or Its Owners
 83




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    8. MEMBERS EQUITY
 Common Interests of IASIS
  9. STOCK OPTIONS
 Management Rollover Options
  2004 Stock Option Plan
   2004 Stock Option Plan
    

    Rollover OptionsWeighted
    
    
    
    
    
    
    
    
    WeightedOption Price

    
    
    Average Exercise
    
    
    
    

       Option Price
    

    
    Average ExerciseOptions
    
    
    Per Share
    
    
    Price
    
Options
    
    
    Per Share
    
    
    PriceOptions
outstanding at September 30, 2004
    
1,105,750
    
    
    
    $20.00
    
    
    $
    20.00
    
166,413
    
    
    
    $8.75-$437.48
    
    
    $
    17.16Granted
    
503,563
    
    
    
    $20.00
    
    
    $
    20.00
    

    
    
    
    
    
    
    
    Exercised
    

    
    
    
    
    
    
    
    
    

    
    
    
    
    
    
    
    Cancelled/forfeited
    
(98,550
)
    
    
    $20.00
    
    
    $
    20.00
    

    
    
    
    
    
    
    
    Options
outstanding at September 30, 2005
    
1,510,763
    
    
    
    $20.00
    
    
    $
    20.00
    
166,413
    
    
    
    $8.75-$437.48
    
    
    $
    17.16Granted
    
237,472
    
    
    
    $35.68
    
    
    $
    35.68
    

    
    
    
    
    
    
    
    Exercised
    

    
    
    
    
    
    
    
    
    

    
    
    
    
    
    
    
    Cancelled/forfeited
    
(152,750
)
    
    
    $20.00-$35.68
    
    
    $
    20.61
    
    
    
    
    
    
    
    
    
    Options
outstanding at September 30, 2006
    
1,595,485
    
    
    
    $20.00-$35.68
    
    
    $
    22.28
    
166,413
    
    
    
    $8.75-$437.48
    
    
    $
    17.16Granted
    
7,080
    
    
    
    $34.75-$35.68
    
    
    $
    35.54
    

    
    
    
    
    
    
    
    Exercised
    

    
    
    
    
    
    
    
    
    

    
    
    
    
    
    
    
    Cancelled/forfeited
    
(111,440
)
    
    
    $20.00-$35.68
    
    
    $
    25.61
    
(3,263
)
    
    
    $437.48
    
    
    $
    437.48Options
outstanding at September 30, 2007
    
1,491,125
    
    
    
    $20.00-$35.68
    
    
    $
    22.09
    
163,150
    
    
    
    $8.75
    
    
    $
    8.75Options
exercisable at September 30, 2007
    
792,001
    
    
    
    $20.00-$35.68
    
    
    $
    20.78
    
163,150
    
    
    
    $8.75
    
    
    $
    8.75
 84




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Year Ended
    
    
    Year EndedSeptember 30, 2006
    
    

September 30, 2005Net earnings as reported
    
    $
    39,549
    
    
    $
    40,592Deduct: Total stock based
employee compensation
determined under fair value
based method for all awards,
net of related tax effects
    
    
    (1,360
    )
    
    
    (1,158
    )Pro forma net earnings
    
    $
    38,189
    
    
    $
    39,434
  Options Granted
    
    Options GrantedOn or After
    
    Prior toOctober 1, 2006
    
    October 1, 2006Risk-free interest
    
    

    4.5
%
    
    

    4.6
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    36.9
    %
    
    
    N/AExpected option life
    
    7.2 years
    
    8.8 years
  10. INCOME TAXES
  Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2005Current:Federal
    
    $
    373
    
    
    $
    1,095
    
    
    $
    1,241State
    
    
    1,704
    
    
    
    192
    
    
    
    10Deferred:Federal
    
    
    23,302
    
    
    
    19,718
    
    
    
    21,168State
    
    
    943
    
    
    
    1,283
    
    
    
    4,432$
    26,322
    
    
    $
    22,288
    
    
    $
    26,851
  Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30, 2007
    
    
    September 30, 2006
    
    
    September 30, 2005Federal statutory rate
    
    $
    23,774
    
    
    $
    21,643
    
    
    $
    23,605State income taxes,
net of federal income
tax benefit
    
    
    1,720
    
    
    
    959
    
    
    
    2,887Other non-deductible
expenses
    
    
    335
    
    
    
    681
    
    
    
    385Change in valuation
allowance charged to
federal tax provision
    
    
    541
    
    
    
    
    
    
    
    Other items, net
    
    
    (48
    )
    
    
    (995
    )
    
    
    (26
    )Provision for income
taxes
    
    $
    26,322
    
    
    $
    22,288
    
    
    $
    26,851
 85




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  September 30,
    
    
    September 30,2007
    
    
    2006Assets
    
    
    Liabilities
    
    
    Assets
    
    
    LiabilitiesDepreciation and fixed asset basis differences
    
    $
    
    
    
    $
    57,492
    
    
    $
    
    
    
    $
    52,991Amortization and intangible asset basis differences
    
    
    
    
    
    
    55,509
    
    
    
    
    
    
    
    47,802Allowance for doubtful accounts
    
    
    15,303
    
    
    
    
    
    
    
    26,663
    
    
    
    Professional liability
    
    
    14,459
    
    
    
    
    
    
    
    14,331
    
    
    
    Accrued expenses and other liabilities
    
    
    12,803
    
    
    
    
    
    
    
    10,581
    
    
    
    Deductible carryforwards and credits
    
    
    9,955
    
    
    
    
    
    
    
    11,615
    
    
    
    Other, net
    
    
    594
    
    
    
    
    
    
    
    1,238
    
    
    
    Valuation allowance
    
    
    (3,886
    )
    
    
    
    
    
    
    (3,398
    )
    
    
    Total
    
    $
    49,228
    
    
    $
    113,001
    
    
    $
    61,030
    
    
    $
    100,793
     11. CONTINGENCIES
 Net Revenue
  86




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Professional, General and Workers Compensation Liability Risks
   Health Choice
  Capital Expenditure Commitments
  Variable Interest Entities
  87




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Acquisitions
  Other
 qui tam qui tam
 qui tam qui tam qui tam qui tam qui tam
 qui tam
 88




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 12. LEASES
   Capital
    
    
    OperatingLeases
    
    
    Leases2008
    
    $
    3,558
    
    
    $
    30,9692009
    
    
    1,088
    
    
    
    21,5892010
    
    
    507
    
    
    
    17,8542011
    
    
    371
    
    
    
    14,3822012
    
    
    224
    
    
    
    12,032Thereafter
    
    
    
    
    
    
    55,244Total minimum lease payments
    
    $
    5,748
    
    
    $
    152,070Amount representing interest (at rates ranging from 4.4% to 13.4%)
    
    
    324Present
value of net minimum lease payments (including $3.4 million classified as current)
    
    $
    5,424
  13. RETIREMENT PLANS
  14. SEGMENT AND GEOGRAPHIC INFORMATION
  89




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For the Year Ended September 30, 2007Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    1,399,343
    
    
    $
    
    
    
    $
    
    
    
    $
    1,399,343Premium revenue
    
    
    
    
    
    
    450,641
    
    
    
    
    
    
    
    450,641Revenue between segments
    
    
    11,970
    
    
    
    
    
    
    
    (11,970
    )
    
    
    Total net revenue
    
    
    1,411,313
    
    
    
    450,641
    
    
    
    (11,970
    )
    
    
    1,849,984Salaries and benefits
    
    
    551,309
    
    
    
    14,803
    
    
    
    
    
    
    
    566,112Supplies
    
    
    213,803
    
    
    
    285
    
    
    
    
    
    
    
    214,088Medical claims
    
    
    
    
    
    
    384,045
    
    
    
    (11,970
    )
    
    
    372,075Other operating expenses
    
    
    271,653
    
    
    
    15,096
    
    
    
    
    
    
    
    286,749Provision for bad debts
    
    
    142,708
    
    
    
    
    
    
    
    
    
    
    
    142,708Rentals and leases
    
    
    34,825
    
    
    
    1,162
    
    
    
    
    
    
    
    35,987Business interruption insurance recoveries
    
    
    (3,443
    )
    
    
    
    
    
    
    
    
    
    
    (3,443
    )Adjusted EBITDA(1)
    
    
    200,458
    
    
    
    35,250
    
    
    
    
    
    
    
    235,708Interest expense, net
    
    
    73,754
    
    
    
    
    
    
    
    
    
    
    
    73,754Depreciation and amortization
    
    
    74,141
    
    
    
    3,560
    
    
    
    
    
    
    
    77,701Loss on extinguishment of debt
    
    
    6,229
    
    
    
    
    
    
    
    
    
    
    
    6,229Management fees
    
    
    4,746
    
    
    
    
    
    
    
    
    
    
    
    4,746Earnings before loss on disposal of
assets, minority interests and income
taxes
    
    
    41,588
    
    
    
    31,690
    
    
    
    
    
    
    
    73,278Loss on disposal of assets, net
    
    
    (1,364
    )
    
    
    
    
    
    
    
    
    
    
    (1,364
    )Minority interests
    
    
    (3,988
    )
    
    
    
    
    
    
    
    
    
    
    (3,988
    )Earnings before income taxes
    
    $
    36,236
    
    
    $
    31,690
    
    
    $
    
    
    
    $
    67,926Segment assets
    
    $
    2,035,386
    
    
    $
    151,036
    
    
    
    
    
    
    $
    2,186,422Capital expenditures
    
    $
    194,920
    
    
    $
    473
    
    
    
    
    
    
    $
    195,393Goodwill
    
    $
    750,836
    
    
    $
    5,757
    
    
    
    
    
    
    $
    756,593
 For the Year Ended September 30, 2006Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    1,219,474
    
    
    $
    
    
    
    $
    
    
    
    $
    1,219,474Premium revenue
    
    
    
    
    
    
    406,522
    
    
    
    
    
    
    
    406,522Revenue between segments
    
    
    10,857
    
    
    
    
    
    
    
    (10,857
    )
    
    
    Total net revenue
    
    
    1,230,331
    
    
    
    406,522
    
    
    
    (10,857
    )
    
    
    1,625,996Salaries and benefits
    
    
    457,540
    
    
    
    12,631
    
    
    
    
    
    
    
    470,171Supplies
    
    
    187,515
    
    
    
    284
    
    
    
    
    
    
    
    187,799Medical claims
    
    
    
    
    
    
    354,517
    
    
    
    (10,857
    )
    
    
    343,660Other operating expenses
    
    
    233,041
    
    
    
    13,284
    
    
    
    
    
    
    
    246,325Provision for bad debts
    
    
    141,774
    
    
    
    
    
    
    
    
    
    
    
    141,774Rentals and leases
    
    
    33,874
    
    
    
    1,082
    
    
    
    
    
    
    
    34,956Business interruption insurance recoveries
    
    
    (8,974
    )
    
    
    
    
    
    
    
    
    
    
    (8,974
    )Adjusted EBITDA(1)
    
    
    185,561
    
    
    
    24,724
    
    
    
    
    
    
    
    210,285Interest expense, net
    
    
    69,687
    
    
    
    
    
    
    
    
    
    
    
    69,687Depreciation and amortization
    
    
    68,539
    
    
    
    3,386
    
    
    
    
    
    
    
    71,925Management fees
    
    
    4,189
    
    
    
    
    
    
    
    
    
    
    
    4,189Earnings before gain (loss) on disposal
of assets, minority interests and income
taxes
    
    
    43,146
    
    
    
    21,338
    
    
    
    
    
    
    
    64,484Gain (loss) on disposal of assets, net
    
    
    953
    
    
    
    (54
    )
    
    
    
    
    
    
    899Minority interests
    
    
    (3,546
    )
    
    
    
    
    
    
    
    
    
    
    (3,546
    )Earnings before income taxes
    
    $
    40,553
    
    
    $
    21,284
    
    
    $
    
    
    
    $
    61,837Segment assets
    
    $
    1,833,737
    
    
    $
    134,098
    
    
    
    
    
    
    $
    1,967,835Capital expenditures
    
    $
    146,299
    
    
    $
    629
    
    
    
    
    
    
    $
    146,928Goodwill
    
    $
    750,722
    
    
    $
    5,757
    
    
    
    
    
    
    $
    756,479
 90




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IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For the Year Ended September 30, 2005Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    1,170,483
    
    
    $
    
    
    
    $
    
    
    
    $
    1,170,483Premium revenue
    
    
    
    
    
    
    353,244
    
    
    
    
    
    
    
    353,244Revenue between segments
    
    
    8,475
    
    
    
    
    
    
    
    (8,475
    )
    
    
    Total net revenue
    
    
    1,178,958
    
    
    
    353,244
    
    
    
    (8,475
    )
    
    
    1,523,727Salaries and benefits
    
    
    431,609
    
    
    
    10,564
    
    
    
    
    
    
    
    442,173Supplies
    
    
    184,676
    
    
    
    199
    
    
    
    
    
    
    
    184,875Medical claims
    
    
    
    
    
    
    310,679
    
    
    
    (8,475
    )
    
    
    302,204Other operating expenses
    
    
    200,411
    
    
    
    11,287
    
    
    
    
    
    
    
    211,698Provision for bad debts
    
    
    133,870
    
    
    
    
    
    
    
    
    
    
    
    133,870Rentals and leases
    
    
    31,849
    
    
    
    901
    
    
    
    
    
    
    
    32,750Hurricane-related expenses
    
    
    4,762
    
    
    
    
    
    
    
    
    
    
    
    4,762Adjusted EBITDA(1)
    
    
    191,781
    
    
    
    19,614
    
    
    
    
    
    
    
    211,395Interest expense, net
    
    
    66,002
    
    
    
    
    
    
    
    
    
    
    
    66,002Depreciation and amortization
    
    
    67,840
    
    
    
    3,197
    
    
    
    
    
    
    
    71,037Management fees
    
    
    3,791
    
    
    
    
    
    
    
    
    
    
    
    3,791Earnings before loss on disposal
of assets, minority interests
and income taxes
    
    
    54,148
    
    
    
    16,417
    
    
    
    
    
    
    
    70,565Loss on disposal of assets, net
    
    
    (231
    )
    
    
    
    
    
    
    
    
    
    
    (231
    )Minority interests
    
    
    (2,891
    )
    
    
    
    
    
    
    
    
    
    
    (2,891
    )Earnings before income taxes
    
    $
    51,026
    
    
    $
    16,417
    
    
    $
    
    
    
    $
    67,443Segment assets
    
    $
    1,756,404
    
    
    $
    96,320
    
    
    
    
    
    
    $
    1,852,724Capital expenditures
    
    $
    141,625
    
    
    $
    743
    
    
    
    
    
    
    $
    142,368Goodwill
    
    $
    748,618
    
    
    $
    5,757
    
    
    
    
    
    
    $
    754,375
 
 (1)
    
    Adjusted EBITDA represents net earnings before interest expense, income tax expense,
depreciation and amortization, loss on extinguishment of debt, gain (loss) on disposal of
assets, minority interests and management fees. Management fees represent monitoring and
advisory fees paid to TPG, the Companys majority financial sponsor, and certain other members
of IASIS Investment LLC. Management routinely calculates and communicates adjusted EBITDA and
believes that it is useful to investors because it is commonly used as an analytical indicator
within the healthcare industry to evaluate hospital performance, allocate resources and
measure leverage capacity and debt service ability. In addition, the Company uses adjusted
EBITDA as a measure of performance for its business segments and for incentive compensation
purposes. Adjusted EBITDA should not be considered as a measure of financial performance under
GAAP, and the items excluded from adjusted EBITDA are significant components in understanding
and assessing financial performance. Adjusted EBITDA should not be considered in isolation or
as an alternative to net earnings, cash flows generated by operating, investing, or financing
activities or other financial statement data presented in the consolidated financial
statements as an indicator of financial performance or liquidity. Adjusted EBITDA, as
presented, differs from what is defined under the Companys senior secured credit facilities
and may not be comparable to similarly titled measures of other companies. 15. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  September 30,
    
    
    September 30,2007
    
    
    2006Employee health insurance payable
    
    $
    8,622
    
    
    $
    8,274Taxes other than income taxes
    
    
    8,847
    
    
    
    8,095Construction retention payable
    
    
    2,190
    
    
    
    5,320Other
    
    
    24,617
    
    
    
    27,398$
    44,276
    
    
    $
    49,087
 91




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 16. ALLOWANCE FOR DOUBTFUL ACCOUNTS
  AccountsWritten Off,Beginning
    
    Provision for
    
    
    
    
    
    Net of
    
    
    
    
    
    EndingBalance
    
    Bad Debts
    
    Other (1)
    
    Recoveries
    
    Acquisitions
    
    BalanceYear Ended
September 30,
2005
    
    $
    102,481
    
    
    
    133,870
    
    
    
    (1,560
    )
    
    
    (131,172
    )
    
    
    
    
    
    $
    103,619Year Ended
September 30,
2006
    
    $
    103,619
    
    
    
    141,774
    
    
    
    
    
    
    
    (135,516
    )
    
    
    
    
    
    $
    109,877Year Ended
September 30,
2007
    
    $
    109,877
    
    
    
    142,708
    
    
    
    
    
    
    
    (167,900
    )
    
    
    13,144
    
    
    $
    97,829
 
 (1)
    
    Included in the allowance for doubtful accounts are amounts representing estimated
uncollectible accounts receivable from managed care companies and other third-party payors.
Such amounts were recorded as adjustments to revenue during fiscal year 2005. Effective
October 1, 2005, these adjustments have been recorded as a component of the provision for bad
debts.  17. HURRICANE RITA INSURANCE RECOVERIES
  18. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
   92




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    (4,052
    )
    
    $
    4,052
    
    
    $
    
    
    
    $
    Accounts receivable, net
    
    
    
    
    
    
    146,603
    
    
    
    101,678
    
    
    
    
    
    
    
    248,281Inventories
    
    
    
    
    
    
    23,473
    
    
    
    20,224
    
    
    
    
    
    
    
    43,697Deferred income taxes
    
    
    29,629
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,629Prepaid expenses and other current assets
    
    
    
    
    
    
    25,165
    
    
    
    19,858
    
    
    
    
    
    
    
    45,023Total current assets
    
    
    29,629
    
    
    
    191,189
    
    
    
    145,812
    
    
    
    
    
    
    
    366,630Property and equipment, net
    
    
    
    
    
    
    430,223
    
    
    
    550,214
    
    
    
    
    
    
    
    980,437Intercompany
    
    
    
    
    
    
    (8,437
    )
    
    
    8,437
    
    
    
    
    
    
    
    Net investment in and advances to subsidiaries
    
    
    1,627,879
    
    
    
    
    
    
    
    
    
    
    
    (1,627,879
    )
    
    
    Goodwill
    
    
    21,774
    
    
    
    161,431
    
    
    
    573,388
    
    
    
    
    
    
    
    756,593Other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    36,000
    
    
    
    
    
    
    
    36,000Other assets, net
    
    
    21,006
    
    
    
    20,599
    
    
    
    5,157
    
    
    
    
    
    
    
    46,762Total assets
    
    $
    1,700,288
    
    
    $
    795,005
    
    
    $
    1,319,008
    
    
    $
    (1,627,879
    )
    
    $
    2,186,422Liabilities and Members EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    61,170
    
    
    $
    37,318
    
    
    $
    
    
    
    $
    98,488Salaries and benefits payable
    
    
    
    
    
    
    26,104
    
    
    
    14,020
    
    
    
    
    
    
    
    40,124Accrued interest payable
    
    
    18,865
    
    
    
    (2,301
    )
    
    
    2,301
    
    
    
    
    
    
    
    18,865Medical claims payable
    
    
    
    
    
    
    
    
    
    
    81,309
    
    
    
    
    
    
    
    81,309Other accrued expenses and other current
liabilities
    
    
    
    
    
    
    25,176
    
    
    
    19,100
    
    
    
    
    
    
    
    44,276Current portion of long-term debt and
capital lease obligations
    
    
    4,542
    
    
    
    3,494
    
    
    
    10,929
    
    
    
    (10,929
    )
    
    
    8,036Total current liabilities
    
    
    23,407
    
    
    
    113,643
    
    
    
    164,977
    
    
    
    (10,929
    )
    
    
    291,098Long-term debt and capital lease obligations
    
    
    1,018,415
    
    
    
    5,206
    
    
    
    410,042
    
    
    
    (410,042
    )
    
    
    1,023,621Deferred income taxes
    
    
    93,402
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93,402Other long-term liabilities
    
    
    
    
    
    
    49,809
    
    
    
    1,022
    
    
    
    
    
    
    
    50,831Minority interest
    
    
    
    
    
    
    35,956
    
    
    
    
    
    
    
    
    
    
    
    35,956Total liabilities
    
    
    1,135,224
    
    
    
    204,614
    
    
    
    576,041
    
    
    
    (420,971
    )
    
    
    1,494,908Members equity
    
    
    565,064
    
    
    
    590,391
    
    
    
    742,967
    
    
    
    (1,206,908
    )
    
    
    691,514Total liabilities and members equity
    
    $
    1,700,288
    
    
    $
    795,005
    
    
    $
    1,319,008
    
    
    $
    (1,627,879
    )
    
    $
    2,186,422
 93




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IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    94,518
    
    
    $
    897
    
    
    $
    
    
    
    $
    95,415Accounts receivable, net
    
    
    
    
    
    
    96,632
    
    
    
    85,820
    
    
    
    
    
    
    
    182,452Inventories
    
    
    
    
    
    
    19,709
    
    
    
    14,590
    
    
    
    
    
    
    
    34,299Deferred income taxes
    
    
    41,416
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,416Prepaid expenses and other current assets
    
    
    
    
    
    
    22,674
    
    
    
    19,167
    
    
    
    
    
    
    
    41,841Total current assets
    
    
    41,416
    
    
    
    233,533
    
    
    
    120,474
    
    
    
    
    
    
    
    395,423Property and equipment, net
    
    
    
    
    
    
    367,744
    
    
    
    359,304
    
    
    
    
    
    
    
    727,048Intercompany
    
    
    
    
    
    
    (98,098
    )
    
    
    98,098
    
    
    
    
    
    
    
    Net investment in and advances to subsidiaries
    
    
    1,479,245
    
    
    
    
    
    
    
    
    
    
    
    (1,479,245
    )
    
    
    Goodwill
    
    
    22,008
    
    
    
    161,659
    
    
    
    572,812
    
    
    
    
    
    
    
    756,479Other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    39,000
    
    
    
    
    
    
    
    39,000Other assets, net
    
    
    20,715
    
    
    
    21,361
    
    
    
    7,809
    
    
    
    
    
    
    
    49,885Total assets
    
    $
    1,563,384
    
    
    $
    686,199
    
    
    $
    1,197,497
    
    
    $
    (1,479,245
    )
    
    $
    1,967,835Liabilities and Members EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    47,443
    
    
    $
    25,908
    
    
    $
    
    
    
    $
    73,351Salaries and benefits payable
    
    
    
    
    
    
    17,927
    
    
    
    11,155
    
    
    
    
    
    
    
    29,082Accrued interest payable
    
    
    19,965
    
    
    
    (1,517
    )
    
    
    1,517
    
    
    
    
    
    
    
    19,965Medical claims payable
    
    
    
    
    
    
    
    
    
    
    81,822
    
    
    
    
    
    
    
    81,822Other accrued expenses and other current
liabilities
    
    
    
    
    
    
    35,834
    
    
    
    13,253
    
    
    
    
    
    
    
    49,087Current portion of long-term debt and
capital lease obligations
    
    
    4,402
    
    
    
    2,009
    
    
    
    7,317
    
    
    
    (6,296
    )
    
    
    7,432Total current liabilities
    
    
    24,367
    
    
    
    101,696
    
    
    
    140,972
    
    
    
    (6,296
    )
    
    
    260,739Long-term debt and capital lease obligations
    
    
    886,188
    
    
    
    2,939
    
    
    
    262,199
    
    
    
    (261,813
    )
    
    
    889,513Deferred income taxes
    
    
    81,179
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,179Other long-term liabilities
    
    
    
    
    
    
    15,245
    
    
    
    32,366
    
    
    
    
    
    
    
    47,611Minority interest
    
    
    
    
    
    
    32,297
    
    
    
    
    
    
    
    
    
    
    
    32,297Total liabilities
    
    
    991,734
    
    
    
    152,177
    
    
    
    435,537
    
    
    
    (268,109
    )
    
    
    1,311,339Members equity
    
    
    571,650
    
    
    
    534,022
    
    
    
    761,960
    
    
    
    (1,211,136
    )
    
    
    656,496Total liabilities and members equity
    
    $
    1,563,384
    
    
    $
    686,199
    
    
    $
    1,197,497
    
    
    $
    (1,479,245
    )
    
    $
    1,967,835
 94




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands)
 For the Year Ended September 30, 2007Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    757,622
    
    
    $
    653,691
    
    
    $
    (11,970
    )
    
    $
    1,399,343Premium revenue
    
    
    
    
    
    
    
    
    
    
    450,641
    
    
    
    
    
    
    
    450,641Total net revenue
    
    
    
    
    
    
    757,622
    
    
    
    1,104,332
    
    
    
    (11,970
    )
    
    
    1,849,984Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    341,152
    
    
    
    224,960
    
    
    
    
    
    
    
    566,112Supplies
    
    
    
    
    
    
    132,379
    
    
    
    81,709
    
    
    
    
    
    
    
    214,088Medical claims
    
    
    
    
    
    
    
    
    
    
    384,045
    
    
    
    (11,970
    )
    
    
    372,075Other operating expenses
    
    
    
    
    
    
    151,788
    
    
    
    134,961
    
    
    
    
    
    
    
    286,749Provision for bad debts
    
    
    
    
    
    
    80,024
    
    
    
    62,684
    
    
    
    
    
    
    
    142,708Rentals and leases
    
    
    
    
    
    
    15,468
    
    
    
    20,519
    
    
    
    
    
    
    
    35,987Interest expense, net
    
    
    73,754
    
    
    
    
    
    
    
    30,108
    
    
    
    (30,108
    )
    
    
    73,754Depreciation and amortization
    
    
    
    
    
    
    45,433
    
    
    
    32,268
    
    
    
    
    
    
    
    77,701Loss on extinguishment of debt
    
    
    6,229
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,229Management fees
    
    
    4,746
    
    
    
    (13,936
    )
    
    
    13,936
    
    
    
    
    
    
    
    4,746Business interruption insurance
recoveries
    
    
    
    
    
    
    
    
    
    
    (3,443
    )
    
    
    
    
    
    
    (3,443
    )Equity in earnings of affiliates
    
    
    (122,548
    )
    
    
    
    
    
    
    
    
    
    
    122,548
    
    
    
    Total costs and expenses
    
    
    (37,819
    )
    
    
    752,308
    
    
    
    981,747
    
    
    
    80,470
    
    
    
    1,776,706Earnings (loss) before loss on
disposal of assets, minority
interests and income taxes
    
    
    37,819
    
    
    
    5,314
    
    
    
    122,585
    
    
    
    (92,440
    )
    
    
    73,278Loss on disposal of assets, net
    
    
    
    
    
    
    (963
    )
    
    
    (401
    )
    
    
    
    
    
    
    (1,364
    )Minority interests
    
    
    
    
    
    
    (3,988
    )
    
    
    
    
    
    
    
    
    
    
    (3,988
    )Earnings (loss) before income taxes
    
    
    37,819
    
    
    
    363
    
    
    
    122,184
    
    
    
    (92,440
    )
    
    
    67,926Income tax expense
    
    
    26,322
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,322Net earnings (loss)
    
    $
    11,497
    
    
    $
    363
    
    
    $
    122,184
    
    
    $
    (92,440
    )
    
    $
    41,604
 95




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands)
 For the Year Ended September 30, 2006Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    673,781
    
    
    $
    556,550
    
    
    $
    (10,857
    )
    
    $
    1,219,474Premium revenue
    
    
    
    
    
    
    
    
    
    
    406,522
    
    
    
    
    
    
    
    406,522Total net revenue
    
    
    
    
    
    
    673,781
    
    
    
    963,072
    
    
    
    (10,857
    )
    
    
    1,625,996Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    277,841
    
    
    
    192,330
    
    
    
    
    
    
    
    470,171Supplies
    
    
    
    
    
    
    118,467
    
    
    
    69,332
    
    
    
    
    
    
    
    187,799Medical claims
    
    
    
    
    
    
    
    
    
    
    354,517
    
    
    
    (10,857
    )
    
    
    343,660Other operating expenses
    
    
    
    
    
    
    146,746
    
    
    
    99,579
    
    
    
    
    
    
    
    246,325Provision for bad debts
    
    
    
    
    
    
    80,650
    
    
    
    61,124
    
    
    
    
    
    
    
    141,774Rentals and leases
    
    
    
    
    
    
    14,461
    
    
    
    20,495
    
    
    
    
    
    
    
    34,956Interest expense, net
    
    
    69,687
    
    
    
    
    
    
    
    21,981
    
    
    
    (21,981
    )
    
    
    69,687Depreciation and amortization
    
    
    
    
    
    
    41,456
    
    
    
    30,469
    
    
    
    
    
    
    
    71,925Management fees
    
    
    4,189
    
    
    
    (12,171
    )
    
    
    12,171
    
    
    
    
    
    
    
    4,189Business interruption insurance
recoveries
    
    
    
    
    
    
    
    
    
    
    (8,974
    )
    
    
    
    
    
    
    (8,974
    )Equity in earnings of affiliates
    
    
    (115,489
    )
    
    
    
    
    
    
    
    
    
    
    115,489
    
    
    
    Total costs and expenses
    
    
    (41,613
    )
    
    
    667,450
    
    
    
    853,024
    
    
    
    82,651
    
    
    
    1,561,512Earnings (loss) before gain (loss) on
disposal of assets, minority
interests and income taxes
    
    
    41,613
    
    
    
    6,331
    
    
    
    110,048
    
    
    
    (93,508
    )
    
    
    64,484Gain (loss) on disposal of assets, net
    
    
    
    
    
    
    2,209
    
    
    
    (1,310
    )
    
    
    
    
    
    
    899Minority interests
    
    
    
    
    
    
    (3,546
    )
    
    
    
    
    
    
    
    
    
    
    (3,546
    )Earnings (loss) before income taxes
    
    
    41,613
    
    
    
    4,994
    
    
    
    108,738
    
    
    
    (93,508
    )
    
    
    61,837Income tax expense
    
    
    22,288
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,288Net earnings (loss)
    
    $
    19,325
    
    
    $
    4,994
    
    
    $
    108,738
    
    
    $
    (93,508
    )
    
    $
    39,549
 96




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands)
 For the Year Ended September 30, 2005Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    661,972
    
    
    $
    516,986
    
    
    $
    (8,475
    )
    
    $
    1,170,483Premium revenue
    
    
    
    
    
    
    
    
    
    
    353,244
    
    
    
    
    
    
    
    353,244Total net revenue
    
    
    
    
    
    
    661,972
    
    
    
    870,230
    
    
    
    (8,475
    )
    
    $
    1,523,727Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    265,848
    
    
    
    176,325
    
    
    
    
    
    
    
    442,173Supplies
    
    
    
    
    
    
    122,379
    
    
    
    62,496
    
    
    
    
    
    
    
    184,875Medical claims
    
    
    
    
    
    
    
    
    
    
    310,679
    
    
    
    (8,475
    )
    
    
    302,204Other operating expenses
    
    
    
    
    
    
    123,451
    
    
    
    88,247
    
    
    
    
    
    
    
    211,698Provision for bad debts
    
    
    
    
    
    
    78,010
    
    
    
    55,860
    
    
    
    
    
    
    
    133,870Rentals and leases
    
    
    
    
    
    
    11,841
    
    
    
    20,909
    
    
    
    
    
    
    
    32,750Interest expense, net
    
    
    66,002
    
    
    
    
    
    
    
    19,207
    
    
    
    (19,207
    )
    
    
    66,002Depreciation and amortization
    
    
    
    
    
    
    43,073
    
    
    
    27,964
    
    
    
    
    
    
    
    71,037Management fees
    
    
    3,791
    
    
    
    (11,132
    )
    
    
    11,132
    
    
    
    
    
    
    
    3,791Hurricane-related expenses
    
    
    
    
    
    
    
    
    
    
    4,762
    
    
    
    
    
    
    
    4,762Equity in earnings of affiliates
    
    
    (119,769
    )
    
    
    
    
    
    
    
    
    
    
    119,769
    
    
    
    Total costs and expenses
    
    
    (49,976
    )
    
    
    633,470
    
    
    
    777,581
    
    
    
    92,087
    
    
    
    1,453,162Earnings (loss) before loss on
disposal of assets, minority
interests and income taxes
    
    
    49,976
    
    
    
    28,502
    
    
    
    92,649
    
    
    
    (100,562
    )
    
    
    70,565Loss on disposal of assets, net
    
    
    
    
    
    
    (223
    )
    
    
    (8
    )
    
    
    
    
    
    
    (231
    )Minority interests
    
    
    
    
    
    
    (2,891
    )
    
    
    
    
    
    
    
    
    
    
    (2,891
    )Earnings (loss) before income taxes
    
    
    49,976
    
    
    
    25,388
    
    
    
    92,641
    
    
    
    (100,562
    )
    
    
    67,443Income tax expense
    
    
    26,851
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,851Net earnings (loss)
    
    $
    23,125
    
    
    $
    25,388
    
    
    $
    92,641
    
    
    $
    (100,562
    )
    
    $
    40,592
 97




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands)
 For the Year Ended September 30, 2007Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    11,497
    
    
    $
    363
    
    
    $
    122,184
    
    
    $
    (92,440
    )
    
    $
    41,604Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    45,433
    
    
    
    32,268
    
    
    
    
    
    
    
    77,701Amortization of loan costs
    
    
    2,942
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,942Minority interests
    
    
    
    
    
    
    3,988
    
    
    
    
    
    
    
    
    
    
    
    3,988Deferred income taxes
    
    
    24,245
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,245Loss on disposal of assets
    
    
    
    
    
    
    963
    
    
    
    401
    
    
    
    
    
    
    
    1,364Loss on extinguishment of debt
    
    
    5,091
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,091Equity in earnings of affiliates
    
    
    (122,548
    )
    
    
    
    
    
    
    
    
    
    
    122,548
    
    
    
    Changes in operating assets and liabilities, net of the
effect of acquisitions:Accounts receivable, net
    
    
    
    
    
    
    (37,852
    )
    
    
    (11,628
    )
    
    
    
    
    
    
    (49,480
    )Inventories, prepaid expenses and other current assets
    
    
    
    
    
    
    (2,011
    )
    
    
    (3,630
    )
    
    
    
    
    
    
    (5,641
    )Accounts payable, other accrued expenses and other
accrued liabilities
    
    
    (1,099
    )
    
    
    9,353
    
    
    
    16,266
    
    
    
    
    
    
    
    24,520Net cash provided by (used in) operating activities
    
    
    (79,872
    )
    
    
    20,237
    
    
    
    155,861
    
    
    
    30,108
    
    
    
    126,334Cash flows from investing activitiesPurchases of property and equipment
    
    
    
    
    
    
    (45,998
    )
    
    
    (149,395
    )
    
    
    
    
    
    
    (195,393
    )Cash paid for acquisitions
    
    
    
    
    
    
    (78,083
    )
    
    
    (63,502
    )
    
    
    
    
    
    
    (141,585
    )Proceeds from sale of assets
    
    
    
    
    
    
    1,026
    
    
    
    
    
    
    
    
    
    
    
    1,026Change in other assets
    
    
    
    
    
    
    5,430
    
    
    
    884
    
    
    
    
    
    
    
    6,314Net cash used in investing activities
    
    
    
    
    
    
    (117,625
    )
    
    
    (212,013
    )
    
    
    
    
    
    
    (329,638
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (646,663
    )
    
    
    (2,037
    )
    
    
    (2,080
    )
    
    
    
    
    
    
    (650,780
    )Proceeds from debt borrowings
    
    
    778,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    778,800Debt financing costs incurred
    
    
    (8,200
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,200
    )Distribution to parent for debt financing costs
    
    
    (6,586
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,586
    )Costs paid for partnership interests
    
    
    
    
    
    
    (245
    )
    
    
    (250
    )
    
    
    
    
    
    
    (495
    )Change in intercompany balances with affiliates, net
    
    
    (37,479
    )
    
    
    1,100
    
    
    
    66,487
    
    
    
    (30,108
    )
    
    
    Distribution of minority interests
    
    
    
    
    
    
    
    
    
    
    (4,850
    )
    
    
    
    
    
    
    (4,850
    )Net cash provided by (used in) financing activities
    
    
    79,872
    
    
    
    (1,182
    )
    
    
    59,307
    
    
    
    (30,108
    )
    
    
    107,889Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    (98,570
    )
    
    
    3,155
    
    
    
    
    
    
    
    (95,415
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    94,518
    
    
    
    897
    
    
    
    
    
    
    
    95,415Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    (4,052
    )
    
    $
    4,052
    
    
    $
    
    
    
    $
    
 98




---



##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands)
 For the Year Ended September 30, 2006Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    19,325
    
    
    $
    4,994
    
    
    $
    108,738
    
    
    $
    (93,508
    )
    
    $
    39,549Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    41,456
    
    
    
    30,469
    
    
    
    
    
    
    
    71,925Amortization of loan costs
    
    
    2,960
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,960Minority interests
    
    
    
    
    
    
    3,546
    
    
    
    
    
    
    
    
    
    
    
    3,546Deferred income taxes
    
    
    21,002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,002Loss (gain) on disposal of assets
    
    
    
    
    
    
    (2,209
    )
    
    
    1,310
    
    
    
    
    
    
    
    (899
    )Equity in earnings of affiliates
    
    
    (115,489
    )
    
    
    
    
    
    
    
    
    
    
    115,489
    
    
    
    Changes in operating assets and liabilities:Accounts receivable, net
    
    
    
    
    
    
    (4,428
    )
    
    
    (11,568
    )
    
    
    
    
    
    
    (15,996
    )Inventories, prepaid expenses and other current assets
    
    
    
    
    
    
    (10,385
    )
    
    
    (6,181
    )
    
    
    
    
    
    
    (16,566
    )Accounts payable, other accrued expenses and other
accrued liabilities
    
    
    1,476
    
    
    
    29,247
    
    
    
    20,900
    
    
    
    
    
    
    
    51,623Net cash provided by (used in) operating activities
    
    
    (70,726
    )
    
    
    62,221
    
    
    
    143,668
    
    
    
    21,981
    
    
    
    157,144Cash flows from investing activitiesPurchases of property and equipment
    
    
    
    
    
    
    (49,190
    )
    
    
    (97,738
    )
    
    
    
    
    
    
    (146,928
    )Proceeds from sale of assets
    
    
    
    
    
    
    147
    
    
    
    
    
    
    
    
    
    
    
    147Change in other assets
    
    
    
    
    
    
    (144
    )
    
    
    742
    
    
    
    
    
    
    
    598Net cash used in investing activities
    
    
    
    
    
    
    (49,187
    )
    
    
    (96,996
    )
    
    
    
    
    
    
    (146,183
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (4,402
    )
    
    
    (2,298
    )
    
    
    (1,163
    )
    
    
    
    
    
    
    (7,863
    )Proceeds from sale of partnership interests
    
    
    
    
    
    
    1,105
    
    
    
    4,622
    
    
    
    
    
    
    
    5,727Change in intercompany balances with affiliates, net
    
    
    75,128
    
    
    
    (5,920
    )
    
    
    (47,227
    )
    
    
    (21,981
    )
    
    
    Distribution of minority interests
    
    
    
    
    
    
    
    
    
    
    (2,507
    )
    
    
    
    
    
    
    (2,507
    )Net cash provided by (used in) financing activities
    
    
    70,726
    
    
    
    (7,113
    )
    
    
    (46,275
    )
    
    
    (21,981
    )
    
    
    (4,643
    )Increase in cash and cash equivalents
    
    
    
    
    
    
    5,921
    
    
    
    397
    
    
    
    
    
    
    
    6,318Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    88,597
    
    
    
    500
    
    
    
    
    
    
    
    89,097Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    94,518
    
    
    $
    897
    
    
    $
    
    
    
    $
    95,415
 99




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands)
 For the Year Ended September 30, 2005Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    23,125
    
    
    $
    25,388
    
    
    $
    92,641
    
    
    $
    (100,562
    )
    
    $
    40,592Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    43,073
    
    
    
    27,964
    
    
    
    
    
    
    
    71,037Amortization of loan costs
    
    
    5,789
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,789Minority interests
    
    
    
    
    
    
    2,891
    
    
    
    
    
    
    
    
    
    
    
    2,891Deferred income taxes
    
    
    25,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,600Loss on disposal of assets
    
    
    
    
    
    
    223
    
    
    
    8
    
    
    
    
    
    
    
    231Hurricane-related expenses
    
    
    
    
    
    
    
    
    
    
    4,762
    
    
    
    
    
    
    
    4,762Equity in earnings of affiliates
    
    
    (119,769
    )
    
    
    
    
    
    
    
    
    
    
    119,769
    
    
    
    Changes in operating assets and liabilities:Accounts receivable, net
    
    
    
    
    
    
    2,817
    
    
    
    (3,993
    )
    
    
    
    
    
    
    (1,176
    )Inventories, prepaid expenses and other current assets
    
    
    
    
    
    
    (4,650
    )
    
    
    (2,906
    )
    
    
    
    
    
    
    (7,556
    )Accounts payable, other accrued expenses and other
accrued liabilities
    
    
    4,668
    
    
    
    560
    
    
    
    1,755
    
    
    
    
    
    
    
    6,983Net cash provided by (used in) operating activities
    
    
    (60,587
    )
    
    
    70,302
    
    
    
    120,231
    
    
    
    19,207
    
    
    
    149,153Cash flows from investing activitiesPurchases of property and equipment
    
    
    
    
    
    
    (68,498
    )
    
    
    (73,870
    )
    
    
    
    
    
    
    (142,368
    )Cash paid for acquisitions, including working capital settlement
    
    
    
    
    
    
    (1,359
    )
    
    
    
    
    
    
    
    
    
    
    (1,359
    )Investment in joint venture
    
    
    
    
    
    
    
    
    
    
    (3,732
    )
    
    
    
    
    
    
    (3,732
    )Change in other assets
    
    
    
    
    
    
    (4,367
    )
    
    
    92
    
    
    
    
    
    
    
    (4,275
    )Net cash used in investing activities
    
    
    
    
    
    
    (74,224
    )
    
    
    (77,510
    )
    
    
    
    
    
    
    (151,734
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (7,876
    )
    
    
    (1,742
    )
    
    
    (1,231
    )
    
    
    
    
    
    
    (10,849
    )Proceeds from debt borrowings
    
    
    2,274
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,274Debt financing costs incurred
    
    
    (487
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (487
    )Proceeds from sale of partnership interests
    
    
    
    
    
    
    6,027
    
    
    
    
    
    
    
    
    
    
    
    6,027Change in intercompany balances with affiliates, net
    
    
    66,676
    
    
    
    (9,009
    )
    
    
    (38,460
    )
    
    
    (19,207
    )
    
    
    Distribution of minority interests
    
    
    
    
    
    
    
    
    
    
    (4,092
    )
    
    
    
    
    
    
    (4,092
    )Net cash provided by (used in) financing activities
    
    
    60,587
    
    
    
    (4,724
    )
    
    
    (43,783
    )
    
    
    (19,207
    )
    
    
    (7,127
    )Decrease in cash and cash equivalents
    
    
    
    
    
    
    (8,646
    )
    
    
    (1,062
    )
    
    
    
    
    
    
    (9,708
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    97,243
    
    
    
    1,562
    
    
    
    
    
    
    
    98,805Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    88,597
    
    
    $
    500
    
    
    $
    
    
    
    $
    89,097
 100




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##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
  
 Item 9A. Controls and Procedures
 Evaluations of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 Item 9B. Other Information
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  Name
    
    Age
    
    PositionDavid R. White
    
    
    60
    
    
    Chairman of the Board and Chief Executive OfficerSandra K. McRee
    
    
    51
    
    
    President and Chief Operating OfficerW. Carl Whitmer
    
    
    43
    
    
    Chief Financial OfficerFrank A. Coyle
    
    
    43
    
    
    Secretary and General CounselJames Moake
    
    
    38
    
    
    Operations Chief Financial OfficerJohn M. Doyle
    
    
    47
    
    
    Vice President and Chief Accounting OfficerPaul Jenson
    
    
    59
    
    
    President, Arizona and Nevada MarketsKirk Olsen
    
    
    57
    
    
    President, Utah MarketJames Purcell
    
    
    56
    
    
    President, Florida MarketJim McKinney
    
    
    54
    
    
    President, Texas and Louisiana MarketsSteve King
    
    
    41
    
    
    Chief Financial Officer, Utah MarketShane Wells
    
    
    38
    
    
    Chief Financial Officer, Florida, Texas and Louisiana MarketsPeter Stanos
    
    
    44
    
    
    Vice President, Ethics and Business PracticesJonathan J. Coslet
    
    
    43
    
    
    DirectorDavid Dupree
    
    
    54
    
    
    DirectorKirk E. Gorman
    
    
    57
    
    
    DirectorCurtis S. Lane
    
    
    50
    
    
    DirectorTodd B. Sisitsky
    
    
    36
    
    
    DirectorPaul S. Levy
    
    
    60
    
    
    DirectorJeffrey C. Lightcap
    
    
    48
    
    
    DirectorSharad Mansukani
    
    
    38
    
    
    Director
 101




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##### Table of Contents



David R. White
 Sandra K. McRee
 W. Carl Whitmer
 Frank A. Coyle
 James Moake
 John M. Doyle
 Paul Jenson
 102




---



##### Table of Contents



Kirk Olsen
 James Purcell
 Jim McKinney
 Steve King
 Shane Wells
 Peter Stanos
 Jonathan J. Coslet
 103




---



##### Table of Contents



David Dupree
 Kirk E. Gorman
 Curtis S. Lane
 Todd B. Sisitsky
 Paul S. Levy
 Jeffrey C. Lightcap
 Sharad Mansukani
   104




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##### Table of Contents



Audit Committee Financial Expert
  Code of Ethics
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14. Principal Accountant Fees and Services
  
 PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
  2.
    
    Financial Statement Schedules: Not Applicable3.
    
    Management Contracts and Compensatory Plans and Arrangements
 
    
    Employment Agreement, dated as of May 4, 2004, by and between
IASIS Healthcare Corporation and David R. White (1)
    
    Employment Agreement, dated as of May 4, 2004, by and between
IASIS Healthcare Corporation and Sandra K. McRee (1)
 105




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##### Table of Contents




    
    Employment Agreement, dated as of May 4, 2004, by and between
IASIS Healthcare Corporation and W. Carl Whitmer (1)
    
    Form of Roll-over Option Letter Agreement (1)
    
    IASIS Healthcare Corporation 2004 Stock Option Plan (1)
    
    Form of Management Stockholders Agreement between IAS and each
of David R. White, Sandra K. McRee and W. Carl Whitmer (1)
    
    Form of Management Stockholders Agreement under IASIS
Healthcare Corporation 2004 Stock Option Plan (1)
    
    Form of Stock Option Grant Agreement under IASIS Healthcare
Corporation 2004 Stock Option Plan (1)
    
    Form of Management Stockholders Agreement for Rollover Options (1)
    
    IASIS Corporate Incentive Plan (1)
    
    IASIS Market Executive Incentive Program (1)
    
    Director Compensation and Restricted Share Award Agreement,
dated as of February 14, 2005, between IASIS Healthcare Corporation and Kirk
Gorman (11)
    
    First Amendment to IASIS Healthcare Corporation 2004 Stock
Option Plan (12)
    
    Director Compensation and Restricted Share Award Agreement,
dated as of April 14, 2005, between IASIS Healthcare Corporation and Sharad
Mansukani (13)
    
    IASIS Healthcare Non-Qualified Deferred Compensation Program
(22)
  Exhibit No.
    
    Description2.1
    
    Agreement and Plan of Merger, dated as of May 4, 2004, by and among IASIS
Investment LLC, Titan Merger Corporation and IASIS Healthcare Corporation
(1)2.2
    
    Indemnification Agreement dated as of May 4, 2004, by and among IASIS
Investment LLC, IASIS Healthcare Corporation, and the stockholders and
option holders of IASIS Healthcare Corporation listed on the signature
pages thereof (2)2.3
    
    Asset Sale Agreement dated as of January 16, 2004, by and between NLVH,
Inc. and IASIS Healthcare Corporation (3)2.4
    
    Assignment and Assumption of Asset Sale Agreement dated as of January 16,
2004, by and between IASIS Healthcare Corporation and Lake Mead Hospital,
Inc. (3)2.5
    
    Guaranty of Payment and Performance dated as of January 16, 2004, executed
by IASIS Healthcare Corporation in favor of NLVH, Inc. (3)3.1
    
    Certificate of Formation of IASIS Healthcare LLC, as filed with the
Secretary of State of the State of Delaware on May 11, 2004 (1)3.2
    
    Limited Liability Company Agreement of IASIS Healthcare LLC dated as of
May 11, 2004 (1)4.1
    
    Indenture, dated as of June 22, 2004, among IASIS Healthcare LLC, IASIS
Capital Corporation, the Subsidiary Guarantors and The Bank of New York
Trust Company, N.A., as Trustee (1)4.2
    
    Form of Notation of Subsidiary Guarantee (1)4.3
    
    Form of 8 3/4% Senior Subordinated Exchange Note due 2014 (1)
 106




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##### Table of Contents



Exhibit No.
    
    Description4.4
    
    Supplemental Indenture, dated as of June 30, 2004, by and between IASIS
Finance Texas Holdings, LLC, IASIS Healthcare LLC, IASIS Capital
Corporation, the existing Subsidiary Guarantors and The Bank of New York
Trust Company, N.A., as Trustee (1)4.5
    
    Supplemental Indenture, effective as of August 1, 2005, by and among
Cardiovascular Specialty Centers of Utah, LP, IASIS Healthcare LLC, IASIS
Capital Corporation, the existing Subsidiary Guarantors and The Bank of
New York Trust Company, N.A., as Trustee (15)4.6
    
    Supplemental Indenture, dated as of July 20, 2006, by and among IASIS
Glenwood Regional Medical Center, L.P., IASIS Healthcare LLC, IASIS
Capital Corporation, the existing Subsidiary Guarantors and The Bank of
New York Trust Company, N.A., as Trustee (22)4.7
    
    Supplemental Indenture, dated as of July 27, 2006, by and among The Heart
Center of Central Phoenix, L.P., IASIS Healthcare LLC, IASIS Capital
Corporation, the existing Subsidiary Guarantors and The Bank of New York
Trust Company, N.A., as Trustee (22)10.1
    
    Lease, dated as of July 29, 1977, by and between Sierra Equities, Inc., as
Landlord, and Mesa General Hospital, Inc., as Tenant (4)10.2
    
    Addendum to Lease entered into by and between Sierra Equities, Inc., as
Landlord, and Mesa General Hospital, Inc., as Tenant (4)10.3
    
    Conforming Amendment to Lease, dated as of June 10, 1991, by and between
Sierra Equities, Inc., as Landlord, and Mesa General Hospital, Inc., as
Tenant (4)10.4
    
    Amendment to Hospital Lease, dated as of October 31, 2000, by and between
Sierra Equities, Inc., as Landlord, and Mesa General Hospital, L.P., as
Tenant (4)10.5
    
    Amendment to Lease, dated April 30, 2003, by and between Sierra Equities,
Inc. and Mesa General Hospital, L.P. (5)10.6
    
    Letter Agreement effective May 6, 2005, amending Lease by and between
Sierra Equities Inc. and Mesa General Hospital, L.P. (6)10.7
    
    Amended and Restated Pioneer Hospital Lease, dated as of June 28, 2002, by
and between Health Care Property Investors, Inc. and Pioneer Valley
Hospital, Inc. (7)10.8
    
    Lease Agreement, dated as of October 6, 2003, between The Dover Centre,
LLC and IASIS Healthcare Corporation (8)10.9
    
    Form of Indemnification Agreement (1)10.10
    
    Contract between Arizona Health Care Cost Containment System and Health
Choice Arizona (including Amendment No. 1 thereto), effective as of
October 1, 2003 (5)10.11
    
    Amendment No. 2 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2003 (8)10.12
    
    Amendment No. 3 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2003 (8)10.13
    
    Amendment No. 4 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2003 (8)
 107




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##### Table of Contents



Exhibit No.
    
    Description10.14
    
    Amendment No. 5 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2003 (8)10.15
    
    Amendment No. 6 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2003 (8)10.16
    
    Amendment No. 7 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of April 1, 2004 (1)10.17
    
    Amendment No. 8 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2004 (1)10.18
    
    Amendment No. 9 to Contact between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2004 (9)10.19
    
    Amendment No. 10 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2005(17)10.20
    
    Amendment No. 11 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of September 1, 2005 (14)10.21
    
    Amendment No. 12 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of January 1, 2006 (14)10.22
    
    Amendment No. 13 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2005 (15)10.23
    
    Amendment No. 14 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2005 (15)10.24
    
    Amendment No. 15 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 200610.25
    
    Substitute Agreement between the Arizona Health Care Cost Containment
System Administration and Health Choice Arizona for the implementation of
Executive Order 2006-01 (18)10.26
    
    Amendment No. 16 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2006 (20)10.27
    
    Amendment No. 17 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 200710.28
    
    Purchase and Sale Agreement dated as of December 15, 2003, by and between
Rocky Mountain Medical Center, Inc. and Board of Education of the Granite
School District (10)10.29
    
    Letter Agreement dated as of January 26, 2004 by and among Rocky Mountain
Medical Center, Inc., Board of Education of Granite School District and
Merrill Title Company (10)10.30
    
    Information System Agreement, dated February 23, 2000, between McKesson
Information Solutions LLC and IASIS Healthcare Corporation, as amended
(1)**10.31
    
    Amended and Restated Credit Agreement, dated as of April 27, 2007, by and
among IASIS Healthcare LLC, as Borrower, IASIS Healthcare Corporation, as
Holdings, Bank of America, N.A., as administrative agent, swingline lender
revolving L/C issuer and synthetic L/C issuer and each lender from time to
time party thereto (19)
 108




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##### Table of Contents



Exhibit No.
    
    Description10.32
    
    Joinder Agreement, dated as of June 30, 2004, by and between IASIS Finance
Texas Holdings, LLC and Bank of America, N.A., as Administrative Agent (1)10.33
    
    Employment Agreement, dated as of May 4, 2004, by and between IASIS
Healthcare Corporation and David R. White (1)10.34
    
    Employment Agreement, dated as of May 4, 2004, by and between IASIS
Healthcare Corporation and Sandra K. McRee (1)10.35
    
    Employment Agreement, dated as of May 4, 2004, by and between IASIS
Healthcare Corporation and W. Carl Whitmer (1)10.36
    
    Form of Roll-over Option Letter Agreement (1)10.37
    
    IASIS Healthcare Corporation 2004 Stock Option Plan (1)10.38
    
    Management Services Agreement dated as of June 22, 2004 by and among IASIS
Healthcare LLC, Trimaran Fund II, L.L.C., Trimaran Parallel Fund II, L.P.,
Trimaran Capital L.L.C., CIBC Employee Private Equity Partners (Trimaran),
CIBC MB Inc., JLL Partners Inc., TPG IASIS IV LLC, TPG IASIS III LLC, TPG
IASIS Co-Invest I LLC and TPG IASIS Co-Invest II LLC (1)10.39
    
    Investor Rights Agreement dated as of June 22, 2004, by and between IASIS
Investment LLC and IASIS Healthcare Corporation (1)10.40
    
    Form of Management Stockholders Agreement between IAS and each of David R.
White, Sandra K. McRee and W. Carl Whitmer (1)10.41
    
    Form of Management Stockholders Agreement under IASIS Healthcare
Corporation 2004 Stock Option Plan (1)10.42
    
    Form of Stock Option Grant Agreement under IASIS Healthcare Corporation
2004 Stock Option Plan (1)10.43
    
    Form of Management Stockholders Agreement for Rollover Options (1)10.44
    
    IASIS Corporate Incentive Plan (1)10.45
    
    IASIS Market Executive Incentive Program (1)10.46
    
    Director Compensation and Restricted Share Award Agreement, dated as of
February 14, 2005, between IASIS Healthcare Corporation and Kirk Gorman
(11)10.47
    
    First Amendment to IASIS Healthcare Corporation 2004 Stock Option Plan (12)10.48
    
    Director Compensation and Restricted Share Award Agreement, dated as of
April 14, 2005, between IASIS Healthcare Corporation and Sharad Mansukani
(13)10.49
    
    Asset Purchase Agreement, dated July 20, 2006, by and among Glenwood
Regional Medical Center, Glenwood Health Services, Inc., Hospital Service
District No. 1 of the Parish of Ouachita, State of Louisiana, IASIS
Glenwood Regional Medical Center, L.P. and IASIS Healthcare, LLC (16)
 109




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##### Table of Contents



Exhibit No.
    
    Description10.50
    
    IASIS Healthcare Non-Qualified Deferred Compensation Program (22)10.51
    
    Joinder Agreement, dated as of July 20, 2006, between IASIS Glenwood
Regional Medical Center, L.P. and Bank of America, N.A., as Administrative
Agent (22)10.52
    
    Joinder Agreement, dated as of July 27, 2006, between The Heart Center of
Central Phoenix, L.P. and Bank of America, N.A., as Administrative Agent
(22)10.53
    
    Contribution Agreement, dated as of May 9, 2007, by and among Odessa
Regional Hospital, LP, Alliance Hospital, Ltd. and Sri-Sai Enterprises,
Inc. (21)14
    
    Code of Ethics (8)21
    
    Subsidiaries of IASIS Healthcare Corporation31.1
    
    Certification of Principal Executive Officer Pursuant to Rule 15d-14(a)
under the Securities Exchange Act of 1934, as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Principal Financial Officer Pursuant to Rule 15d-14(a)
under the Securities Exchange Act of 1934, as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
 
 **
    
    Portions of this exhibit have been omitted and filed separately with the Commission pursuant
to a grant of confidential treatment pursuant to Rule 24(b)-2 promulgated under the Securities
Exchange Act of 1934, as amended.(1)
    
    Incorporated by reference to the Companys Registration Statement on Form S-4 (Registration
No. 333-117362).(2)
    
    Incorporated by reference to IASIS Healthcare Corporations Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 2004.(3)
    
    Incorporated by reference to IASIS Healthcare Corporations Current Report on Form 8-K filed
on February 2, 2004.(4)
    
    Incorporated by reference to IASIS Healthcare Corporations Annual Report on Form 10-K for
the fiscal year ended September 30, 2000.(5)
    
    Incorporated by reference to IASIS Healthcare Corporations Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2003.(6)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on May 12, 2005.(7)
    
    Incorporated by reference to IASIS Healthcare Corporations Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2002.(8)
    
    Incorporated by reference to IASIS Healthcare Corporations Annual Report on Form 10-K for
the fiscal year ended September 30, 2003.(9)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended September 30, 2004.(10)
    
    Incorporated by reference to IASIS Healthcare Corporations Quarterly Report on Form 10-Q for
the fiscal quarter ended December 31, 2003.(11)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on February 18,
2005.(12)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on March 22,
2005.(13)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on April 20,
2005.(14)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 2005.(15)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2006.(16)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on July 24, 2006. 110




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##### Table of Contents



(17)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended September 30, 2005.(18)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 2006.(19)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on May 2, 2007.(20)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 2007.(21)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on May 10, 2007.(22)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended September 30, 2006. 111




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##### Table of Contents



SIGNATURES
  IASIS
HEALTHCARE LLCDate: December 21, 2007
    
    By:
    
    /s/ David R. WhiteDavid R. WhiteChairman of the Board and Chief Executive Officer
  Signature
    
    Title
    
    Date/s/ David R. White

David R. White
    
    Chairman of the Board and
Chief Executive Officer
(Principal Executive
Officer)
    
    December 21, 2007/s/ W. Carl Whitmer

W. Carl Whitmer
    
    Chief Financial Officer
(Principal Financial
Officer)
    
    December 21, 2007/s/ John M. Doyle

John M. Doyle
    
    Chief Accounting Officer
(Principal Accounting
Officer)
    
    December 21, 2007Jonathan J. Coslet
    
    Director of IASIS
Healthcare Corporation
(sole member of IASIS
Healthcare LLC)/s/ David Dupree

David Dupree
    
    Director of IASIS
Healthcare Corporation
(sole member of IASIS
Healthcare LLC)
    
    December 21, 2007/s/ Kirk E. Gorman

Kirk E. Gorman
    
    Director of IASIS
Healthcare Corporation
(sole member of IASIS
Healthcare LLC)
    
    December 21, 2007/s/ Curtis Lane

Curtis Lane
    
    Director of IASIS
Healthcare Corporation
(sole member of IASIS
Healthcare LLC)
    
    December 21, 2007Todd B. Sisitsky
    
    Director of IASIS
Healthcare Corporation
(sole member of IASIS
Healthcare LLC)
 112




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##### Table of Contents



Signature
    
    Title
    
    Date/s/ Paul S. Levy

Paul S. Levy
    
    Director of IASIS
Healthcare Corporation
(sole member of IASIS
Healthcare LLC)
    
    December 21, 2007Jeffrey C. Lightcap
    
    Director of IASIS
Healthcare Corporation
(sole member of IASIS
Healthcare LLC)/s/ Sharad Mansukani

Sharad Mansukani
    
    Director of IASIS
Healthcare Corporation
(sole member of IASIS
Healthcare LLC)
    
    December 21, 2007
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##### Table of Contents



SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY
REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT
  114




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description2.1
    
    Agreement and Plan of Merger, dated as of May 4, 2004, by and among IASIS
Investment LLC, Titan Merger Corporation and IASIS Healthcare Corporation
(1)2.2
    
    Indemnification Agreement dated as of May 4, 2004, by and among IASIS
Investment LLC, IASIS Healthcare Corporation, and the stockholders and
option holders of IASIS Healthcare Corporation listed on the signature
pages thereof (2)2.3
    
    Asset Sale Agreement dated as of January 16, 2004, by and between NLVH,
Inc. and IASIS Healthcare Corporation (3)2.4
    
    Assignment and Assumption of Asset Sale Agreement dated as of January 16,
2004, by and between IASIS Healthcare Corporation and Lake Mead Hospital,
Inc. (3)2.5
    
    Guaranty of Payment and Performance dated as of January 16, 2004, executed
by IASIS Healthcare Corporation in favor of NLVH, Inc. (3)3.1
    
    Certificate of Formation of IASIS Healthcare LLC, as filed with the
Secretary of State of the State of Delaware on May 11, 2004 (1)3.2
    
    Limited Liability Company Agreement of IASIS Healthcare LLC dated as of
May 11, 2004 (1)4.1
    
    Indenture, dated as of June 22, 2004, among IASIS Healthcare LLC, IASIS
Capital Corporation, the Subsidiary Guarantors and The Bank of New York
Trust Company, N.A., as Trustee (1)4.2
    
    Form of Notation of Subsidiary Guarantee (1)4.3
    
    Form of 8 3/4% Senior Subordinated Exchange Note due 2014 (1)4.4
    
    Supplemental Indenture, dated as of June 30, 2004, by and between IASIS
Finance Texas Holdings, LLC, IASIS Healthcare LLC, IASIS Capital
Corporation, the existing Subsidiary Guarantors and The Bank of New York
Trust Company, N.A., as Trustee (1)4.5
    
    Supplemental Indenture, effective as of August 1, 2005, by and among
Cardiovascular Specialty Centers of Utah, LP, IASIS Healthcare LLC, IASIS
Capital Corporation, the existing Subsidiary Guarantors and The Bank of
New York Trust Company, N.A., as Trustee (15)4.6
    
    Supplemental Indenture, dated as of July 20, 2006, by and among IASIS
Glenwood Regional Medical Center, L.P., IASIS Healthcare LLC, IASIS
Capital Corporation, the existing Subsidiary Guarantors and The Bank of
New York Trust Company, N.A., as Trustee (22)4.7
    
    Supplemental Indenture, dated as of July 27, 2006, by and among The Heart
Center of Central Phoenix, L.P., IASIS Healthcare LLC, IASIS Capital
Corporation, the existing Subsidiary Guarantors and The Bank of New York
Trust Company, N.A., as Trustee (22)10.1
    
    Lease, dated as of July 29, 1977, by and between Sierra Equities, Inc., as
Landlord, and Mesa General Hospital, Inc., as Tenant (4)10.2
    
    Addendum to Lease entered into by and between Sierra Equities, Inc., as
Landlord, and Mesa General Hospital, Inc., as Tenant (4)
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Exhibit No.
    
    Description10.3
    
    Conforming Amendment to Lease, dated as of June 10, 1991, by and between
Sierra Equities, Inc., as Landlord, and Mesa General Hospital, Inc., as
Tenant (4)10.4
    
    Amendment to Hospital Lease, dated as of October 31, 2000, by and between
Sierra Equities, Inc., as Landlord, and Mesa General Hospital, L.P., as
Tenant (4)10.5
    
    Amendment to Lease, dated April 30, 2003, by and between Sierra Equities,
Inc. and Mesa General Hospital, L.P. (5)10.6
    
    Letter Agreement effective May 6, 2005, amending Lease by and between
Sierra Equities Inc. and Mesa General Hospital, L.P. (6)10.7
    
    Amended and Restated Pioneer Hospital Lease, dated as of June 28, 2002, by
and between Health Care Property Investors, Inc. and Pioneer Valley
Hospital, Inc. (7)10.8
    
    Lease Agreement, dated as of October 6, 2003, between The Dover Centre,
LLC and IASIS Healthcare Corporation (8)10.9
    
    Form of Indemnification Agreement (1)10.10
    
    Contract between Arizona Health Care Cost Containment System and Health
Choice Arizona (including Amendment No. 1 thereto), effective as of
October 1, 2003 (5)10.11
    
    Amendment No. 2 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2003 (8)10.12
    
    Amendment No. 3 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2003 (8)10.13
    
    Amendment No. 4 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2003 (8)10.14
    
    Amendment No. 5 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2003 (8)10.15
    
    Amendment No. 6 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2003 (8)10.16
    
    Amendment No. 7 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of April 1, 2004 (1)10.17
    
    Amendment No. 8 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2004 (1)10.18
    
    Amendment No. 9 to Contact between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2004 (9)10.19
    
    Amendment No. 10 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2005(17)10.20
    
    Amendment No. 11 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of September 1, 2005 (14)
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Exhibit No.
    
    Description10.21
    
    Amendment No. 12 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of January 1, 2006 (14)10.22
    
    Amendment No. 13 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2005 (15)10.23
    
    Amendment No. 14 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2005 (15)10.24
    
    Amendment No. 15 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 200610.25
    
    Substitute Agreement between the Arizona Health Care Cost Containment
System Administration and Health Choice Arizona for the implementation of
Executive Order 2006-01 (18)10.26
    
    Amendment No. 16 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 2006 (20)10.27
    
    Amendment No. 17 to Contract between Arizona Health Care Cost Containment
System and Health Choice Arizona, effective as of October 1, 200710.28
    
    Purchase and Sale Agreement dated as of December 15, 2003, by and between
Rocky Mountain Medical Center, Inc. and Board of Education of the Granite
School District (10)10.29
    
    Letter Agreement dated as of January 26, 2004 by and among Rocky Mountain
Medical Center, Inc., Board of Education of Granite School District and
Merrill Title Company (10)10.30
    
    Information System Agreement, dated February 23, 2000, between McKesson
Information Solutions LLC and IASIS Healthcare Corporation, as amended
(1)**10.31
    
    Amended and Restated Credit Agreement, dated as of April 27, 2007, by and
among IASIS Healthcare LLC, as Borrower, IASIS Healthcare Corporation, as
Holdings, Bank of America, N.A., as administrative agent, swingline lender
revolving L/C issuer and synthetic L/C issuer and each lender from time to
time party thereto (19)10.32
    
    Joinder Agreement, dated as of June 30, 2004, by and between IASIS Finance
Texas Holdings, LLC and Bank of America, N.A., as Administrative Agent (1)10.33
    
    Employment Agreement, dated as of May 4, 2004, by and between IASIS
Healthcare Corporation and David R. White (1)10.34
    
    Employment Agreement, dated as of May 4, 2004, by and between IASIS
Healthcare Corporation and Sandra K. McRee (1)10.35
    
    Employment Agreement, dated as of May 4, 2004, by and between IASIS
Healthcare Corporation and W. Carl Whitmer (1)10.36
    
    Form of Roll-over Option Letter Agreement (1)10.37
    
    IASIS Healthcare Corporation 2004 Stock Option Plan (1)10.38
    
    Management Services Agreement dated as of June 22, 2004 by and among IASIS
Healthcare LLC, Trimaran Fund II, L.L.C., Trimaran Parallel Fund II, L.P.,
Trimaran Capital L.L.C., CIBC Employee Private Equity Partners (Trimaran),
CIBC MB Inc., JLL Partners Inc., TPG IASIS IV LLC, TPG IASIS III LLC, TPG
IASIS Co-Invest I LLC and TPG IASIS Co-Invest II LLC (1)
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Exhibit No.
    
    Description10.39
    
    Investor Rights Agreement dated as of June 22, 2004, by and between IASIS
Investment LLC and IASIS Healthcare Corporation (1)10.40
    
    Form of Management Stockholders Agreement between IAS and each of David R.
White, Sandra K. McRee and W. Carl Whitmer (1)10.41
    
    Form of Management Stockholders Agreement under IASIS Healthcare
Corporation 2004 Stock Option Plan (1)10.42
    
    Form of Stock Option Grant Agreement under IASIS Healthcare Corporation
2004 Stock Option Plan (1)10.43
    
    Form of Management Stockholders Agreement for Rollover Options (1)10.44
    
    IASIS Corporate Incentive Plan (1)10.45
    
    IASIS Market Executive Incentive Program (1)10.46
    
    Director Compensation and Restricted Share Award Agreement, dated as of
February 14, 2005, between IASIS Healthcare Corporation and Kirk Gorman
(11)10.47
    
    First Amendment to IASIS Healthcare Corporation 2004 Stock Option Plan (12)10.48
    
    Director Compensation and Restricted Share Award Agreement, dated as of
April 14, 2005, between IASIS Healthcare Corporation and Sharad Mansukani
(13)10.49
    
    Asset Purchase Agreement, dated July 20, 2006, by and among Glenwood
Regional Medical Center, Glenwood Health Services, Inc., Hospital Service
District No. 1 of the Parish of Ouachita, State of Louisiana, IASIS
Glenwood Regional Medical Center, L.P. and IASIS Healthcare, LLC (16)10.50
    
    IASIS Healthcare Non-Qualified Deferred Compensation Program (22)10.51
    
    Joinder Agreement, dated as of July 20, 2006, between IASIS Glenwood
Regional Medical Center, L.P. and Bank of America, N.A., as Administrative
Agent (22)10.52
    
    Joinder Agreement, dated as of July 27, 2006, between The Heart Center of
Central Phoenix, L.P. and Bank of America, N.A., as Administrative Agent
(22)10.53
    
    Contribution Agreement, dated as of May 9, 2007, by and among Odessa
Regional Hospital, LP, Alliance Hospital, Ltd. and Sri-Sai Enterprises,
Inc. (21)14
    
    Code of Ethics (8)21
    
    Subsidiaries of IASIS Healthcare Corporation31.1
    
    Certification of Principal Executive Officer Pursuant to Rule 15d-14(a)
under the Securities Exchange Act of 1934, as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Principal Financial Officer Pursuant to Rule 15d-14(a)
under the Securities Exchange Act of 1934, as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
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**
    
    Portions of this exhibit have been omitted and filed separately with the Commission pursuant
to a grant of confidential treatment pursuant to Rule 24(b)-2 promulgated under the Securities
Exchange Act of 1934, as amended.(1)
    
    Incorporated by reference to the Companys Registration Statement on Form S-4 (Registration
No. 333-117362).(2)
    
    Incorporated by reference to IASIS Healthcare Corporations Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 2004.(3)
    
    Incorporated by reference to IASIS Healthcare Corporations Current Report on Form 8-K filed
on February 2, 2004.(4)
    
    Incorporated by reference to IASIS Healthcare Corporations Annual Report on Form 10-K for
the fiscal year ended September 30, 2000.(5)
    
    Incorporated by reference to IASIS Healthcare Corporations Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2003.(6)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on May 12, 2005.(7)
    
    Incorporated by reference to IASIS Healthcare Corporations Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2002.(8)
    
    Incorporated by reference to IASIS Healthcare Corporations Annual Report on Form 10-K for
the fiscal year ended September 30, 2003.(9)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended September 30, 2004.(10)
    
    Incorporated by reference to IASIS Healthcare Corporations Quarterly Report on Form 10-Q for
the fiscal quarter ended December 31, 2003.(11)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on February 18,
2005.(12)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on March 22,
2005.(13)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on April 20,
2005.(14)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 2005.(15)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2006.(16)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on July 24, 2006.(17)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended September 30, 2005.(18)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 2006.(19)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on May 2, 2007.(20)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 2007.(21)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on May 10, 2007.(22)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended September 30, 2006. 119